The Greek economy is set to shrink by more than expected this year, the government said on Wednesday, as it braced for nationwide strikes protesting its plans for bringing the country’s budget deficit under control.

Greece, grappling with a ballooning deficit and a 300 billion euro (272 billion pound) debt pile, told the European Union that 2010 gross domestic product (GDP) would “most likely” shrink by more than the 0.3 percent currently forecast.

It also said the drop may exceed an alternative, more pessimistic, scenario published in Greece’s Stability and Growth Programme in January envisaging a 0.8 percent contraction.

Economists and ratings agencies have warned that a sharper than expected slowdown in the economy is one of the biggest threats to Greece’s commitment to cut its budget deficit to 2.8 percent of GDP by 2012 from close to 13 percent last year.

Source/Full Story: Reuters

Even as the American economy shows tentative signs of a rebound, the human toll of the recession continues to mount, with millions of Americans remaining out of work, out of savings and nearing the end of their unemployment benefits.

Economists fear that the nascent recovery will leave more people behind than in past recessions, failing to create jobs in sufficient numbers to absorb the record-setting ranks of the long-term unemployed.

Call them the new poor: people long accustomed to the comforts of middle-class life who are now relying on public assistance for the first time in their lives — potentially for years to come.

Yet the social safety net is already showing severe strains. Roughly 2.7 million jobless people will lose their unemployment check before the end of April unless Congress approves the Obama administration’s proposal to extend the payments, according to the Labor Department.

Source/Full Story: NYTimes.com

“The situation is fairly poor for a lot of states around the country. In fact, most states,” Vermont Governor Jim Douglas, who is chairman of the association, said at a press conference at its annual meeting.

“What we’re finding out from a fiscal standpoint is that the worst is yet to come,” Douglas said.

In a survey conducted last week of 45 of the 50 states, the group found that states have $18.8 billion of budget gaps yet to be closed in fiscal 2010. This comes after they have already imposed measures to eliminate budget imbalances totaling $87 billion in the fiscal year, which for most started last summer.

In the budgets they are drafting for fiscal 2011, states foresee shortfalls of $53.6 billion and for fiscal 2012 $61.6 billion.

“Economists have declared the national recession over. But for those who are still unemployed, for those who have lost their homes, it’s clear that as a nation we have a long way to go,” said Douglas, who added that states’ revenues have plummeted for four quarters in a row.

Source/Full Story: Reuters

In surprise news which sent the pound sliding on Thursday, official figures showed that the Government borrowed £4.3 billion last month.

It was the first time since 1993 that the public finances had gone into the red in January – a month in which tax revenues usually push the Exchequer into the black.

Economists said that the scale of the shortfall in the budget could this year mount to above £180 billion – higher than even the Chancellor’s forecast of a record £178 billion.

Such a deficit would, at 12.8 per cent of British gross domestic product, be even greater than the deficit faced in Greece, which is facing a full-scale fiscal crisis and may need to be bailed out by fellow euro nations or the International Monetary Fund.

The public borrowing figures coincided with further bad news from the housing market, as the Council of Mortgage Lenders reported that mortgage lending dropped last month by 32 per cent, hitting the lowest monthly total in a decade.

The Bank of England also reported a decline in lending to businesses, indicating that the economic slowdown is far from over.

Source/Full Story: Telegraph

A majority of companies in the Standard & Poor’s 500 stock index increased cash to a combined $1.19 trillion while simultaneously reducing spending, keeping a jobs recovery on hold.

Caterpillar Inc., Eaton Corp., Walgreen Co. and General Electric Co. are among 260 companies that ended last quarter with $522 billion more than a year earlier after cutting capital spending by 42 percent. Economists say the dearth of investment is keeping the jobless rate at about 10 percent as the U.S. emerges from its worst recession since the 1930s.

“It’s not clear we are going to see the type of growth following this recession that we’ve seen in previous recessions,” Sandy Cutler, Eaton’s chief executive officer, said in an interview yesterday. That view “is leading people to be cautious as to their rate of reinvestment, and right in parallel with that, in terms of hiring additional employees.”

Source/Full Story: Bloomberg.com

Sales of previously occupied homes took the largest monthly drop in more than 40 years last month, sinking more dramatically than expected after lawmakers gave buyers additional time to use a tax credit.

The report reflects a sharp drop in demand after buyers stopped scrambling to qualify for a tax credit of up to $8,000 for first-time homeowners. It had been due to expire on Nov. 30. But Congress extended the deadline until April 30 and expanded it with a new $6,500 credit for existing homeowners who move.

“It’s ‘exit stage left’ for first-time homebuyers,” wrote Guy LeBas, an analyst with Janney Montgomery Scott.

December’s sales fell 16.7 percent to a seasonally adjusted annual rate of 5.45 million, from an unchanged pace of 6.54 million in November, the National Association of Realtors said Monday. Sales had been expected to fall by about 10 percent, according to economists surveyed by Thomson Reuters.

The report “places a large question mark over whether the recovery can be sustained when the extended tax credit expires,” wrote Paul Dales, U.S. economist with Capital Economics.

Source/Full Story: huffingtonpost.com

Retail sales unexpectedly fell in December, leaving 2009 with the biggest yearly sales drop on record and highlighting the formidable hurdles facing the economy as it struggles to recover from the recession.

A second disappointing economic report yesterday showed that the number of newly laid-off workers requesting unemployment benefits rose more than expected last week.

While many economists were puzzled by the decline in retail sales, they cautioned that the December figures do not necessarily signal a big consumer pullback and could be a blip.

Source/Full Story: Philadelphia Inquirer

Europe’s unemployment rate unexpectedly increased to the highest in more than 11 years in November as companies cut costs in the wake of the worst recession in more than six decades.

Unemployment in the euro area rose to 10 percent from a revised 9.9 percent in October, the European Union statistics office in Luxembourg said today. That’s the highest since August 1998. Economists forecast a November rate of 9.9 percent after the 9.8 percent initially reported for October, a Bloomberg survey showed. The euro-area economy expanded 0.4 percent in the third quarter from the previous three months, according to a separate report.

European companies are cutting jobs and paring wages to shore up earnings battered by the global slump. While economic confidence has risen to a level last seen before the 2008 demise of Lehman Brothers Holdings Inc., a surge in energy costs and a stronger euro threaten to damp the recovery.

“We’ll probably see further gains in unemployment over the coming months, with the jobless rate peaking at 10.7 percent in the second half,” said Juergen Michels, chief euro-region economist at Citigroup Inc. in London. “That’s obviously bad news to consumers, which will be hurt by job cuts, lower wage growth and rising energy costs.”

The euro pared its gains against the dollar after the data and traded at $1.4317 at 10:31 a.m. in London, up less than 0.1 percent on the day. The yield on the German 10-year benchmark bond rose 0.2 basis point to 3.38 percent.

Source/Full Story: BusinessWeek

The stock market’s moving up and some economists are declaring an end to the recession. So, why are people still so pessimistic?

A new national survey says the reality has sunk in that true financial recovery for most people won’t come soon. As a result, consumers aren’t very interested in spending money, they’ve concluded retirement is even further away and they’re increasingly skeptical that Social Security will be there when they need it.

The survey by Sun Life Financial Inc. shows 77 percent of adults between 18 and 66 say they’re cutting spending, that’s a 10 percent increase from a similar survey completed earlier this year.

Of those cutting spending, nearly eight in ten are spending less on entertainment and eating out, and more than half have put off a home improvement project or buying a car.

What’s more, the bad news for retailers is that 60 percent said they will spend less on holiday shopping.

Source/Full Story:  msnbc.com

Even with an economic revival, many U.S. jobs lost during the recession may be gone forever and a weak employment market could linger for years.

That could add up to a “new normal” of higher joblessness and lower standards of living for many Americans, some economists are suggesting.

The words “it’s different this time” are always suspect. But economists and policy makers say the job-creating dynamics of previous recoveries can’t be counted on now.

Here’s why:

• The auto and construction industries helped lead the nation out of past recessions. But the carnage among Detroit’s automakers and the surplus of new and foreclosed homes and empty commercial properties make it unlikely these two industries will be engines of growth anytime soon.

• The job market is caught in a vicious circle: Without more jobs, U.S. consumers will have a hard time increasing their spending; but without that spending, businesses might see little reason to start hiring.

• Many small and midsize businesses are still struggling to obtain bank loans, impeding their expansion plans and constraining overall economic growth.

• Higher-income households are spending less because of big losses on their homes, retirement plans and other investments. Lower-income households are cutting back because they can’t borrow like they once did.

That the recovery in jobs will be long and drawn out is something on which economists and policy makers can basically agree, even as their proposals for remedies vary widely.

Source/Full Story: Yahoo! News

The US economy is recovering from the shock of last year’s banking collapse, but could continue to need financial assistance for an indefinite period into the future, the Treasury Department stated in a report released Monday.

The report (PDF), entitled “The Next Phase of Government Financial Stabilization and Rehabilitation Policies,” states that “although we are rolling back emergency support programs that are no longer needed, significant parts of the financial system remain impaired. Unanticipated events could intensify pressure on the financial system. In this context, it is prudent to maintain capacity to address unforeseen developments.”

The report said, as quoted by The Hill: “In those markets where conditions have improved, it is unclear whether the improvements achieved to date will persist without a period of continued government support.”

Given the usually subdued and diplomatic language used in government reports on the economy, such a declaration will likely be read by many economists as an indication that there could be trouble ahead for the economy.

Source/Full Story:: Raw Story

Unemployment has jumped to its highest level since mid-1995, pushing the jobless rate up to nearly 8%, official data showed today.

The Office for National Statistics (ONS) said the jobless total on the broad International Labour Office measure rose by 210,000 in the three months to July, taking the total to 2.47 million. That rise was broadly in line with those of recent months and economists said there was little to suggest that the rises in unemployment were slowing.

The narrower claimant count measure, which only picks up those claiming unemployment benefit, rose by 24,400 in August to 1.6 million, the highest since May 1997, and a rate of 5%, the worst since September of that year. That increase was in line with those of the previous two months too.

The ONS also reported that average earnings growth slowed sharply to just 1.7% in the three months to July versus the same period last year, down from 2.5% in the three months to June.

TUC General Secretary Brendan Barber said: “There are now over a million people out of work for more than six months, one in three of them under 25. There are no signs of recovery here.

Source/Full Story:: guardian.co.uk
Technorati Tags: Unemployment

Oh really. Well I guess the party should be at Ben’s house, shouldn’t it?  Does consumer spending account for 2 thirds of the US GPD?  Businessweek doesn’t think so, but even so it seems only logical that the average citizen won’t start recovering until employment recovers.  In that regard Benny is a bit more cautious in his statements.

Federal Reserve Board Chairman Ben Bernanke said Tuesday that the recession has ended – at least based on the numbers. “From a technical point [of view], the recession is very likely over at this point,” Bernanke told a conference at the Brookings Institution. Bernanke said there is a “risk” that labor markets will remain weak through 2010 because growth will be too anemic to create jobs. Bernanke noted that many economists now expect the labor market to recover slowly. But he said this was only a forecast and might be wrong.

Source/Full Story:: Bernanke: Recession is over – MarketWatch

The country’s growing unemployment is overtaking subprime mortgages as the main driver of foreclosures, according to bankers and economists, threatening to send even higher the number of borrowers who will lose their homes and making the foreclosure crisis far more complicated to unwind.

Economists estimate that 1.8 million borrowers will lose their homes this year, up from 1.4 million last year, according to Moody’s Economy.com. And the government, which has already committed billions of dollars to foreclosure-prevention efforts, has found it far more difficult to help people who have lost their paychecks than those whose mortgage payments became unaffordable because of an interest-rate increase.

“It’s a much harder nut to crack, unemployment,” said Mark A. Calabria, director of financial regulation studies at the Cato Institute. “It’s much easier to bash lenders than to create jobs.”

Source/Full Story: msnbc.com

Economic output shrank by 5.6pc in the 12 months to the middle of the year, according to official figures which shattered hopes that the recovery has already begun.

The Office for National Statistics said that Britain’s gross domestic product (GDP) contracted by 0.8pc in the second quarter, following the unprecedented 2.4pc fall in the first three months of the year. Economists had expected GDP – the broadest measure of the country’s economic performance – to shrink by 0.3pc.

According to calculations by Martin Weale of the National Institute for Economic and Social Research the profile of the current recession is now almost identical to the decline in Britain’s output between 1929 and 1931. The 5.6pc contraction over the past year almost matches the 5.8pc fall in the year preceding the second quarter of 1931, during which Credit Anstalt in Austria collapsed, triggering a second wave of economic seizure across Europe.

Source/Full Story:: Telegraph
Technorati Tags: Great Depression