G.O.O.D

Source: Bloomberg.com

The decline in U.S. manufacturing deepened in December as demand for such products as cars, appliances and furniture reached the lowest level since at least 1948, signaling further cutbacks in factory jobs and production this year.

The Institute for Supply Management’s factory index fell to 32.4, below economists’ forecasts and the lowest level since 1980, from 36.2 the prior month. Readings less than 50 signal contraction. The group’s new-orders measure reached the lowest level on record and prices slid the most since 1949.

“Every component suggests that the weakness is going to carry over into 2009,” Mark Vitner, a senior economist at Wachovia Corp. in Charlotte, North Carolina, said in a Bloomberg Television interview. “There’s just not a whole lot of new business coming in,” and companies will have a “painful adjustment” as consumers shun spending.

Today’s figures underscore that, with private demand collapsing, manufacturers’ best hope for new business this year may be President-elect Barack Obama’s plans for an unprecedented stimulus package. Obama has pledged an investment program in roads, schools and the U.S. energy network akin to the 1950s- era interstate highway construction boom.

Stocks advanced on the first day of trading in 2009, following the biggest annual drop for the Standard & Poor’s 500 Index in 71 years, on expectations government stimulus efforts will curtail the recession. The S&P index rose 1.4 percent to 916.16 at 11:08 a.m. in New York. Benchmark 10-year Treasury yields rose to 2.25 percent from 2.22 percent late Dec. 31.

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Source: Bloomberg.com

Sales of single-family houses in the U.S. dropped in November by the most in two decades and resale prices collapsed at a pace reminiscent of the Great Depression, dashing speculation the market was close to a bottom.

Purchases of both new and existing houses dropped 7.6 percent from the prior month, the biggest decline since January 1989, to an annual rate of 4.43 million, government and industry figures showed today. A 13 percent drop in the median resale price from a year earlier was the most since records began in 1968 and was likely the largest since the 1930s, the National Association of Realtors said.

“Housing is still in a freefall,” said Nariman Behravesh, chief economist at IHS Global Insight in Lexington, Massachusetts.

The figures were worse than economists had forecast and signal that the battered housing market that led the economy into a recession may be taking another lurch down. Sliding property values mean more Americans will be under water on their mortgages, destroying household wealth and undermining consumers’ purchasing power.

President-elect Barack Obama plans an unprecedented economic stimulus to restore growth, and pledged on Dec. 13 to limit foreclosures. One tenth of U.S. families who own a home are in financial distress, Obama said.

“We need desperately to get this economy moving,” Vice President-elect Joseph Biden, who is leading the incoming administration’s initiative to bolster the middle class, told reporters before a meeting with Obama’s economic advisers today. Transition officials are “getting very close” to an agreement with lawmakers on the size of the stimulus, Biden said.

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Source: washingtonpost.com

Fueled by rising unemployment and food prices, the number of Americans on food stamps is poised to exceed 30 million for the first time this month, surpassing the historic high set in 2005 after Hurricane Katrina.

The figures will put the spotlight on hunger when Congress begins deliberations on a new economic stimulus package, said legislators and anti-hunger advocates, predicting that any stimulus bill will include a boost in food stamp benefits. Advocates are also optimistic that President-elect Barack Obama, who made campaign promises to end childhood hunger and whose mother once briefly received food stamps, will make the issue a priority next year.

“We soon will have the most food stamps recipients in the history of our country,” said Jim Weill, president of the Food Research and Action Center, a D.C.-based anti-hunger policy organization. “If the economic forecasts come true, we’re likely to see the most hunger that we’ve seen since the 1981 recession and maybe since the 1960s, when these programs were established.”

The Agriculture Department is set to release the new numbers as early as this week. Agency officials declined to confirm the figures but outlined them in a briefing last month for advocates and administrators of state food stamp programs. Breaking the symbolically important 30 million mark comes on the heels of government data showing that 11.9 million people went hungry in the United States at some point last year. That included nearly 700,000 children, up more than 50 percent from the year before.

Food pantries and other charitable organizations are also reporting an increase in demand from those in need. Visits to local pantries are up by 20 to 100 percent over the past six months, and calls to the Capital Area Food Bank’s hunger hotline have jumped 248 percent. Most are from people who have never used food stamps or a pantry before, said Lynn Brantley, the organization’s president and chief executive.

Analysts attribute the jump primarily to rising unemployment, which hit 6.5 percent in October and is predicted to increase to 8 percent by the end of 2009, but rising food costs are also a factor. Although prices have fallen from the levels of this past spring, they remain high. In October, the consumer price index for food and beverages had jumped 6.1 percent over last year. Staples such as eggs and bread rose even faster.

For low-income families, who spend a higher percentage of their monthly budget on food, that rise has been particularly painful. Food stamp benefits are adjusted for inflation only once a year, and as of September, the maximum benefit fell $64 a month short of the cost of the thriftiest, USDA-established diet for a family of four. The annual adjustment in October of 8.5 percent largely brought the benefit in line with food costs again, but the Center on Budget and Policy Priorities, a nonpartisan policy group, estimates that if current inflation persists, by December benefits will again fail to match the cost of the thrifty food plan.

“At a time when we have more people turning to the food stamp program, it is less and less able to meet their basic food needs,” said Stacy Dean, the research center’s director of food assistance policy.

To qualify for the food stamp program, whose name was officially changed last month to the Simplified Nutrition Assistance Program, recipients must have an income below 130 percent of the federal poverty level, or less than $27,564 for a family of four. The benefits, which average $109.93 a month per person, are based on a plan set by the government to represent a low-cost but nutritionally adequate diet. Participants apply locally to receive an electronic card that is used like an ATM card to buy food at most grocery stores and some farmers markets. The maximum benefit for a household of four is $588 a month.

At the Department of Human Services on H Street NE yesterday, the benefits office was busy. D.C. resident Harry Washington, 54, had come to apply for food stamps after losing his job at a Dupont Circle restaurant that closed for renovations last month. Over the past three years, he has received food stamps several times to tide him over between jobs. “This all has been going on awhile. It just depends where you are on the totem pole whether or not you have felt it,” Washington said.

Jaqueline Hawkins was also there to sign up. The 47-year-old broke her hip last November, forcing her to leave her job at a Whole Foods Market. Hawkins received short-term disability, then unemployment benefits. Both have run out. “I came for food stamps because my other options have expired,” she said. Hawkins plans to begin looking for work after Jan. 1.

Benefit applications are up around the Washington area. In the District, the number of applicants in October was 7.5 percent higher than last year’s. In Arlington County, the average number of food stamp applications in the past six months is up 17 percent over applications during the same period last year.

At the Arlington Food Assistance Center, meanwhile, the number of clients has jumped by 25 to 35 percent over last year, said Executive Director Christine Lucas. Lines for food, sometimes with as many as 95 people, begin forming around 7:30 a.m., even though the food pantry does not open until 10.

On a recent morning, one of the early arrivers was Alvaro Ascencio. The 45-year-old, who lost his construction job after 12 years, was hopeful he would find work soon and had turned to the pantry as a stopgap. “If I didn’t know about this, I wouldn’t know what to do,” Ascencio said through an interpreter.

To tackle the problem, supportive lawmakers are pressing to include a temporary bump in food stamp benefits in the next stimulus package. Similar proposals failed to pass twice this year, but there appears to be broad support now for an increase of 10 to 20 percent, advocates and lawmakers said.

Economists say an increase in food stamp benefits would help the economy overall by concentrating relief on those most likely to spend the money quickly, pumping dollars into an economy desperate for demand. According to Mark Zandi, chief economist of the rating agency Moody’s Economy.com, every $1 spent on food stamp benefits generates $1.73 of economic activity, more than extending unemployment benefits or offering state fiscal relief.

“Congress has been focusing on the impact on the financial markets,” said Dean at the Center on Budget and Policy Priorities. “We want them to focus on the supermarkets and help 30 million people.”

In 2009, the new Congress will also have to deal with renewing the Child Nutrition and WIC Reauthorization Act, which includes school breakfast and lunch programs and the Women, Infants and Children program that provides money for specific foods such as milk and infant formula. The act is due to expire in September 2009, and Sen. Tom Harkin (D-Iowa), who chairs the Agriculture Committee, has long been keen to expand eligibility and strengthen mandates for nutritious food in these government-funded programs.

Technorati Tags: unemployment, food prices

Source: Bloomberg.com

The Federal Reserve’s new $800 billion effort to combat the financial crisis is designed to make credit more accessible to shaken consumers who aren’t sure they want more debt.

Households and lenders may not respond much because of the wealth destruction from plunging property and stock values, and the deepening economic slump, economists say. That means banks may end up returning the Fed’s new liquidity through deposits at the central bank.

“We are sort of spitting in the wind,” said Michael Darda, chief economist at MKM Partners LP in Greenwich, Connecticut. “Banks won’t be throwing a lot of loans out there when they fear — rationally — those loans may not be paid back.”

Policy makers aim to kick-start markets for loans to students, car buyers, credit-card borrowers and small businesses with a new $200 billion program. Backed in part by the Treasury, the Fed will become a new buyer in the market for consumer loans at a time when many traditional holders of the assets, such as off-balance sheet bank units, have collapsed or been dissolved.

The announcement of the new efforts yesterday came amid rising criticism that officials were excessively focused on saving Wall Street firms, with the Citigroup Inc. rescue Nov. 23 the latest example. President-elect Barack Obama said repeatedly in the past two days he’ll compose a plan to help “Main Street” as well as the financial industry.

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Perhaps many of us can rely on “wages” from the government and in exchange we can repair broken roads and maybe paint government buildings, pick up trash along the highway, and construct windmills.  This is similar to what the Germans did when Hitler took office and the people were happy and thankful to have the work.

Source: CNN.com

…During the presidential campaign, Obama proposed a $175 billion stimulus package over a two-year period, but some of his economic advisers have said recently that the package would need to be much larger.

Asked if Obama would scale up the package, given the economic conditions, Obama’s incoming senior adviser, David Axelrod, said he thinks Obama is “going to do what’s necessary.”

“I’m not going to throw a figure out here. What he said is, he wants a plan big enough to deal with the large challenges we face. And I think there’s a growing consensus across the spectrum among economists that we’re going to have to do something big,” Axelrod said Sunday on ABC’s “This Week.”

Obama on Saturday offered an outline of his economic recovery plan to create 2.5 million jobs by 2011, saying American workers will rebuild the nation’s roads and bridges, modernize its schools and create more sources of alternative energy.

Details of the plan are still being worked out by his economic team, Obama said, but he hopes to sign the two-year, nationwide plan shortly after taking office January 20.

Obama noted he will need support from both Democrats and Republicans to pass such a plan, and said he welcomes suggestions from both sides of the aisle…

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Source: globeandmail.com

Sounding presidential, Senator Barack Obama said Wednesday he would order a surge of U.S. troops – perhaps 15,000 or more – to Afghanistan as soon as he reached the White House.

“We’re confronting an urgent crisis in Afghanistan,” Mr. Obama, the Democratic contender and now clear front-runner to replace George W. Bush, said Wednesday.

“It’s time to heed the call … for more troops. That’s why I’d send at least two or three additional brigades to Afghanistan,” he said in his most hawkish promise to date.

A U.S. army brigade includes about 5,000 soldiers along with tanks, armoured personnel carriers and helicopter gunships.

Seeking to deflect attacks that he is dangerously inexperienced in foreign policy, Mr. Obama huddled with a high-profile panel of experts before a news conference aimed at showcasing his command of global affairs.

“The terrorists who attacked us on 9/11 are still at large and plotting,” he said, echoing Mr. Bush’s oft-repeated refrain.

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