The unemployment rate dropped unexpectedly in January to 9.7
percent, while employers shed 20,000 jobs, according to a report that
offered hope the economy will add jobs soon.

The unemployment rate dropped from 10 percent because a survey of
households found the number of employed Americans rose by 541,000, the
Labor Department said Friday. The job losses are calculated from a
separate survey of employers.

The department also revised its past employment estimates to show
that job losses from the Great Recession have been much worse than
previously stated. The economy has shed 8.4 million jobs since the
downturn began in December 2007, up from a previous figure of 7.2
million.

That’s the most jobs lost in any recession, as a percent of total employment, since World War II.

The figure for November was revised higher, however, to show a gain
of 64,000 jobs. That was initially reported as a gain of 4,000.

Source/Full Story: FOXNews.com

For all the cash provided by the European Central Bank to ease the worst seizure in credit markets since World War II, financial institutions in the region are unwilling to lend, using the money instead to invest in the safest, most liquid government securities. Bond investors are offering money like never before as returns on corporate debt reach as much as 70 percent this year, according to Merrill Lynch & Co. indexes.

The result is corporate bond sales in Europe are exceeding the amount raised through bank loans for the first time, with issuance by non-financial companies doubling to a record 337 billion euros this year. Syndicated loans, or debt underwritten by a group of banks which they then sell to investors, fell 46 percent to 279 billion euros, data compiled by Bloomberg show.

European banks, which have lost or written down $561 billion in the credit freeze, are awash with cash after governments approved $5.3 trillion of aid, more than the annual gross domestic product of Germany, European Union data show.

Source/Full Story: Bloomberg.com

Source/Full Story: MarketWatch

Finance ministers and central bankers from the world’s most powerful industrialized and developing countries agreed Saturday to deliver the remainder of a $5 trillion global fiscal stimulus while outlining a compromise on efforts to rein in pay for bankers and toughen oversight of the financial sector.

“Financial markets are stabilizing and the global economy is improving, but we remain cautious about the outlook for growth and jobs,” the officials said in a joint statement following a two-day meeting called to lay the groundwork for a summit meeting of leaders of the Group of 20 nations later this month.

Ahead of the meeting, French and German officials had called for a more in-depth discussion of strategies for unwinding stimulus measures. U.S. and British officials argued that the fragility of the recovery made it more necessary to focus on ensuring emergency support measures remain in place until growth solidly returns.

In the end, G20 officials said the need remained for the “swift and full implementation” of pledges on fiscal and monetary stimulus delivered by G20 leaders earlier this year. But they also said they recognized the need to draw up a “transparent and credible process” for withdrawing the stimulus once a recovery is secured. Read the G20 economic statement.

In a separate statement, G20 ministers offered a broad framework to rein in the banking sector seen at the heart of the global financial crisis that exacerbated the deepest global economic downturn since World War II. Read the G20 banking statement.

Technorati Tags: G20

As the Obama administration wrestles with how to pay for a costly revamp of the health care system and whether to spend more to spark a nearly lifeless economy, it faces shrinking fiscal room to maneuver. With each passing day, the outlook for the government’s finances grows dimmer.

Skyrocketing federal budget deficits increasingly are limiting the government’s ability to take on new financial commitments. Investors also are starting to worry about something once unthinkable: that the U.S. government could default on its debts someday.

The federal budget deficit is the annual sum of what government spends beyond what it collects in revenues. This year’s deficit is on course to balloon to a figure equivalent to 12 percent of the nation’s gross domestic product, the total annual value of all goods and services produced. That’s double the peak Reagan-era deficit, which was the post-World War II high until now.

A June study by the Brookings Institution, a center-left policy research group, found that current increases in spending and continuation of most George W. Bush-era tax cuts will combine to produce a 10-year deficit of $9.1 trillion. That will drive interest payments on the national debt — the total of accumulated annual deficits — to about 3.8 percent of the GDP by 2019.

Interest payments on the debt that high would surpass defense spending as a percentage of the GDP. Taxpayers would get nothing in return. All that spending on interest would go only to holders of government bonds who’d financed the past deficit spending.

“All of these figures are poised to rise further after 2019, implying that the situation is unsustainable,” wrote researchers William Gale and Alan Auerbach, the Brookings authors.

Source/Full Story: McClatchy

The world’s most affluent nations will take decades to work off the biggest buildup in debt since World War II. The political costs may be permanent, laid bare at this week’s Group of Eight summit of leading industrial powers.

Bank bailouts and recession-fighting measures will explode the debt of the advanced economies to at least 114 percent of gross domestic product in 2014, more than triple the 35 percent of the main emerging economies including China, the International Monetary Fund forecasts.

The run-up in debt has hastened a power shift that is sapping the industrial world’s authority to impose its economic doctrine, currency arrangements or greenhouse-gas reduction strategies. Even some G-8 officials acknowledge that the group has lost its grip amid the global recession they spawned.

The eight-nation forum that starts tomorrow in L’Aquila, Italy is “a lot less relevant given its makeup and given developments in the world,” French Finance Minister Christine Lagarde said July 5. “Big players, like emerging economies, India, China or Mexico, are invited, but they’re given only a jump seat outside of the main summit.”

The industrial world is beset by the harshest economic conditions in a lifetime: a projected U.S. budget deficit of 13.6 percent of GDP in 2009, unmatched since World War II; an annualized 14.2 percent contraction in Japanese GDP in the first quarter, also the worst since the war; in the first three months of 2009, German exports had their steepest quarterly decline since 1970 when the data were first compiled.

Source/Full Story: Bloomberg.com

Stocks of developing nations fell, dragging the MSCI Emerging Markets Index down 10 percent from its 2009 peak, and oil approached a similar decline, on concern the recovery will be weaker than economists forecast. The yen rose for a third day against the dollar.

The emerging-markets index of 22 countries lost 2 percent, the most in four days, as of 10:34 a.m. in London. Russian stocks, which entered a bear market yesterday after the Micex index sank more than 20 percent, dropped 0.6 percent. Crude fell as much as 1.7 percent to $66.37 a barrel in New York, approaching the 10 percent decline that would mark a so-called correction from this year’s high.

Oil and gasoline futures fell after the World Bank forecast yesterday that the first global recession since World War II will be deeper than it predicted in March. U.S. wealth may take 15 years to rebound, Edmund Phelps, a professor at Columbia University and the winner of the 2006 Nobel Prize for economics, said in a Bloomberg Television interview.

“After the World Bank report yesterday we see more concern about the return of negative growth dynamics,” said Michael Ganske, head of emerging-market research at Commerzbank AG in London. “Investors realize that all the discussions of a sharp, V-shaped recovery are not going to materialize.”

The yen strengthened against all 16 most-traded currencies as investors pulled out of higher-yielding assets. The Japanese currency advanced 0.7 percent against the dollar and 0.5 percent versus the euro.

Source/Full Story: Bloomberg.com

The best protection for anyone in these matters is to avoid debt entirely.  Debt is a curse.  Debt is bondage…slavery.  There is no protection once you are enslaved by the Corporate State.

President Barack Obama said a new agency he proposed this week as part of an overhaul of U.S. financial regulations will protect consumers from deceptive lending practices.

The Consumer Financial Protection Agency would oversee products from mortgages to credit cards and require companies to plainly state the terms of financial products while banning “the most unfair practices,” Obama said in his weekly address on the radio and Internet.

“We’re going to level the playing field for consumers,” he said.

Obama proposed on June 17 changes to government oversight of the financial industry that he said would correct a “cascade of mistakes” that helped cause the first global recession since World War II.

The changes, much of which must be approved by Congress, would add an additional layer of regulation for the biggest financial firms. Obama’s plan would make the Federal Reserve the overseer of companies deemed too big to fail and bring hedge and private equity funds under federal scrutiny.

“This crisis may have started on Wall Street,” Obama said in his radio address. “But its impacts have been felt by ordinary Americans who rely on credit cards, home loans, and other financial instruments.”

Obama said some consumers bear responsibility for the financial crisis by taking on too much debt and loans they could not afford. More people, though, were misled by financial companies, he said.

Source/Full Story: Bloomberg.com

Underscoring the risk that hopes for a quick turnaround may be premature, the World Bank said Thursday that it expected the global economy to shrink nearly 3 percent in 2009, far deeper than the 1.7 percent contraction it predicted slightly more than two months ago.

Although the bank said that it expected growth in developed countries to resume next year, emerging-market countries could feel the effects of “aftershocks” for several years, as the full impact of the worst downturn since World War II became apparent.

“It’s quite clear that even if the developed world starts on a path of recovery, for many developing countries, it will take longer,” the World Bank’s president, Robert B. Zoellick, said Thursday. “Financial markets seem to have broken the fall but there are clear fragilities and risks remain.”

“Some of these fragile developing economies don’t have any cushion,” he added.

The gloomy outlook is likely to top the agenda this weekend as finance ministers gather for a Group of 8 meeting in Lecce, Italy, and assess progress since the broader G-20 summit meeting with President Obama and other world leaders in London in early April.

Source/Full Story: NYTimes.com

Rahm Emanuel was only giving voice to widespread political wisdom when he said that a crisis should never be “wasted.” Crises enable vastly accelerated political agendas and initiatives scarcely conceivable under calmer circumstances. So it goes now.

Here we stand more than a year into a grave economic crisis with a projected budget deficit of 13% of GDP. That’s more than twice the size of the next largest deficit since World War II. And this projected deficit is the culmination of a year when the federal government, at taxpayers’ expense, acquired enormous stakes in the banking, auto, mortgage, health-care and insurance industries.

With the crisis, the ill-conceived government reactions, and the ensuing economic downturn, the unfunded liabilities of federal programs — such as Social Security, civil-service and military pensions, the Pension Benefit Guarantee Corporation, Medicare and Medicaid — are over the $100 trillion mark. With U.S. GDP and federal tax receipts at about $14 trillion and $2.4 trillion respectively, such a debt all but guarantees higher interest rates, massive tax increases, and partial default on government promises.

But as bad as the fiscal picture is, panic-driven monetary policies portend to have even more dire consequences. We can expect rapidly rising prices and much, much higher interest rates over the next four or five years, and a concomitant deleterious impact on output and employment not unlike the late 1970s.

Source/Full Story: WSJ.com

Europe’s economy contracted at the fastest pace in at least 13 years in the first quarter as companies cut output and jobs to survive the worst global slump in more than six decades.

Gross domestic product in the 16-member euro region dropped 2.5 percent from the fourth quarter, when it fell 1.6 percent, the European Union’s statistics office in Luxembourg said today. That’s the biggest drop since the euro-area GDP data were first compiled in 1995 and exceeded the 2 percent decline economists expected in a Bloomberg News survey. Inflation held at 0.6 percent in April, a separate report showed.

The deepest global recession since World War II is curbing European exports and eroding consumer demand, forcing companies to cut spending and jobs. The German and Italian economies also contracted by the most on record in the first quarter. Hong Kong’s economy shrank at the fastest pace since at least 1990, prompting the government to forecast a full-year contraction of as much as 6.5 percent.

“The first quarter will hopefully remain the weakest overall,” said Christoph Weil, an economist at Commerzbank AG in Frankfurt. “The economy may continue to shrink through the third before we see some kind of stabilization.”

From a year earlier, the euro-area economy shrank 4.6 percent, also the biggest drop on record, today’s report showed. The statistics office is scheduled to publish a breakdown of first-quarter GDP on June 3. The European Commission on May 4 cut its outlook to project a contraction of 4 percent this year and 0.1 percent in 2010.

Source/Full Story: Bloomberg.com

In a bleaker assessment than those of most private forecasters, the World Bank predicted Sunday that the global economy would shrink in 2009 for the first time since World War II.

The bank did not provide a specific estimate, but bank officials said its economists would be publishing one in the next several weeks.

Until now, even extremely pessimistic forecasters have predicted that the global economy would eke out a tiny expansion but had warned that even a growth rate of 5 percent in China would be a disastrous slowdown, given the enormous pressure there to create jobs for the country’s rural population.

The World Bank also warned that global trade would contract for the first time since 1982, and that the decline would be the biggest since the 1930s.

In a report prepared for a meeting next week of finance ministers from the 20 industrialized and large developing countries, the World Bank said the economic crisis that started with junk mortgages in the United States was causing havoc for poorer countries around the world, not only stifling their growth but also choking off their access to credit as well.

The bank said the financial disruptions were all but certain to overwhelm the ability of institutions like it and the International Monetary Fund to provide a buffer.

Source:  International Herald Tribune

Source: Bloomberg.com

Advanced economies are already in a “depression” and the financial crisis may deepen unless the banking system is fixed, International Monetary Fund Managing Director Dominique Strauss-Kahn said.

“The worst cannot be ruled out,” Strauss-Kahn said in Kuala Lumpur, where he was attending a gathering of central bankers from Southeast Asia. “There’s a lot of downside risk.”

Ten days ago, the IMF cut its world-growth estimate for this year to 0.5 percent, the weakest pace since World War II. Stimulus packages alone won’t succeed in dragging the global economy out of recession unless confidence is restored in the banking system, Strauss-Kahn said today.

“All this will work if, and only if, the different countries are likely to do what they have to do in terms of restructuring the banking sector,” he said. “And today it’s not done.”

The U.S. economy has lost 3.57 million jobs since a recession started in December 2007, its biggest employment slump of any economic contraction in the postwar period as companies from Macy’s Inc. to Caterpillar Inc. cut costs. The U.K. economy will shrink this year by the most since 1946, the IMF forecasts.

“There is hope that the fiscal and monetary stimulus measures being implemented around the world can help turn things around,” said David Cohen, Singapore-based director of Asian economic forecasting at Action Economics. “But there is still the risk it can be short-circuited by further financial turmoil.”

Full Story

Technorati Tags: depression, International Monetary Fund, Dominique Strauss-Kahn

Source: Bloomberg.com

Economists slashed forecasts for U.S. growth in 2009 and projected Federal Reserve policy makers won’t be able to start raising interest rates until 2010, according to a monthly Bloomberg News survey.

The world’s largest economy will contract 1.5 percent this year, a half percentage point more than projected last month, according to the median of 59 forecasts in the survey taken from Jan. 5 to Jan. 12. The slump will push inflation below what some Fed officials consider price stability, the survey showed.

“It’s very hard to get anything into place to change the course of the economy in the first half of this year,” said Bruce Kasman, chief economist at JPMorgan Chase & Co. in New York. “We’re in the middle of something very deep here.”

How quickly the U.S. will pull out of the slide may depend on the $775 billion stimulus package that President-elect Barack Obama is pushing lawmakers to enact next month. The projections indicate he’ll be seeking to halt what may be the longest recession since World War II.

“This is a once-in-a-century crisis, and we’re about to see a once-in-a-century response,” said Ian Morris, chief U.S. economist at HSBC Securities USA Inc. in New York. “We could be in for a wild ride” depending on the timing and size of the stimulus, he said.

Full Story

Technorati Tags: Recession, Depression

Source: Bloomberg.com

Drivers rattled by the worst U.S. labor market since World War II are hanging on to old autos longer instead of buying new models, threatening to crimp sales again in 2009 after demand plummeted to a 16-year low.

Used vehicles being traded in at dealerships averaged 6.3 years of age after the Wall Street meltdown in late 2008, about 6 months older than before the crisis, according to forecaster J.D. Power & Associates in Troy, Michigan.

“The bankruptcy of Lehman Brothers in September and other financial catastrophes have completely broken consumer confidence,” said Chief Executive Officer Mike Jackson of AutoNation Inc., the biggest U.S. new-car retailer. “People are losing money in ways never thought possible. They’re shook up.”

Yesterday’s unemployment report deepened the industry gloom before next week’s Detroit auto show, with 2008 U.S. job losses marking the biggest annual drop in payrolls in 63 years. General Motors Corp. and Chrysler LLC, which just won $13.4 billion in U.S. loans, are at risk of collapse should sales fall further.

“The key statistic affecting car sales now is job loss,” said Ken Goldstein, an economist for the Conference Board. The New York-based research group’s index of consumer confidence fell to the lowest in 40 years of record keeping in December.

U.S. industrywide sales plunged 18 percent last year to 13.2 million, heralding a possible 2009 slide for automakers including GM, Chrysler and Ford Motor Co. GM reiterated Jan. 5 it expects a U.S. market of 10.5 million to 12 million units.

Full Story

Technorati Tags: labor market, auto sales

Source: CNSNews.com

The total value of the bailouts undertaken by the federal government in 2008 now exceeds the combined cost of every major war the United States has ever engaged in, according to a comparison of war costs calculated by the Congressional Research Service (CRS) and the value of the bailouts as calculated by Bloomberg News or Bianco Research.

According to CRS, all major U.S. wars (including such events as the American Revolution, the War of 1812, the Civil War, the Spanish American War, World War I, World War II, Korea, Vietnam, Iraq and Afghanistan, but not the invasion of Panama or the Kosovo War), cost a total of $7.2 trillion in inflation-adjusted 2008 dollars.

According to Bloomberg, the federal government has made commitments worth a total of $8.5 trillion in the bailouts of 2008. That includes actual expenditures as well as loan and asset guarantees.

Bianco Research puts the total value of the bailouts at $8.7 trillion.

The $296 billion spent on World War II, America’s most expensive war, would be $4.1 trillion adjusted to today’s dollars, according to the CRS report from June.

The adjusted cost of the Civil War would be $60.4 billion for both the Union and the Confederacy combined. The inflation-adjusted cost of the Vietnam War would be $686 billion. The cost of the current Iraq war up to last June was $648 billion, while the adjusted cost for Afghanistan to that point was $171 billion.

The total cost of the American Revolution was a relatively inexpensive $1.8 billion.

“World War II was financed by savings, the American people’s savings, when Americans bought war bonds,” said Olivier Garret, CEO of Casey Research, who analyzed the value of the bailout compared to the major U.S. wars and other major historical government expenses. “Today, families are in debt and government is in debt.”

A Bianco Research report cited in Politico puts the number for the total value of bailouts at $8.7 trillion and also affirms the value to be higher than the cost of all American wars and historic initiatives. A spokesman with Bianco Research could not be reached for comment as this story went to press.

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Technorati Tags: bailout, TARP