U.S. Economic/Financial News

Foreclosures Top 1 Million in Third Quarter

Dec. 22 (EIRNS)—Over 1 million families lost their homes in the third quarter—the first time this measure has reached that ominous marker, according to the Offices of Thrift Supervision and Comptroller of the Currency. Also, the percentage of prime (not sub-prime) borrowers whose loans were delinquent by 60 days or more, doubled, compared to the third quarter of 2008. This is the sixth straight quarter that this measure of banks' home loan portfolios has deteriorated.

As for the relatively few homeowners who succeeded in getting "modifications" to lower their mortgage payments, more than half are now back in default.

Is this Obama economic advisor Larry Summers' idea of a recovery?

Unemployment Benefits Exhaustion: Build-Up to January Explosion

Dec. 22 (EIRNS)—A study by the U.S. Department of Labor finds that 25 states have exhausted their unemployment reserves, and have borrowed an estimated $24 billion to cover the gaps. The study estimates that a total of 40 states will have exhausted their state funds by the end of next year, leading to an expected deficit of $90 billion.

Typically, unemployment benefits are funded by a dedicated tax on employers (national average is about 0.6%), based on the size of their payrolls. Firms that conduct mass layoffs are supposed to pay more, but, as noted by the Washington Post, this tax is often neglected, and has been pared down by years of efforts by anti-tax Republicans. As the economic base continues to erode, those revenues, like so many others, have dried up, weakening the social safety net. To fill the gap, many states have borrowed money from the Federal government, some states to the extent of hundreds of millions of dollars.

Bloomberg News reports that bond ratings of New Jersey towns and cities "are being reduced faster than in any other state," as property values have slid 11% and Gov. Jon Corzine has chopped municipal aid, in an attempt to deal with a $1 billion budget deficit. The downgrades in New Jersey, noted an analyst, "may be the start of a national trend."

Commercial Real Estate Collapse Looming for 2010

Dec. 26 (EIRNS)—The most common factor behind the majority of the 140 bank failures in 2009 was non-performing commercial real estate mortgages, and the picture is not likely to improve in 2010. Moody's reported on Dec. 21 that its Commercial Property Index fell 1.5% from September to October, to the lowest level since August 2002. Prices were down 36% from a year earlier and are 44% below the peak of October 2007, according to Bloomberg News. The price collapse is attributed to rising unemployment and office vacancies. Foresight Analytics of Oakland California estimates that $1.4 trillion of commercial real estate debt is scheduled to mature over the next five years, and 53% of that is "underwater," that is, the properties are worth less than is owed on them.

Meanwhile, the default rate on commercial real estate loans is rising. On Dec. 1, Real Estate Econometrics reported that default rates doubled to 3.4% in the third quarter, as vacancies rose and rents declined. Defaults were 1.37% in the first quarter and 2.88% in the second. Sam Chandan, the firm's chief economist, said, "Mortgages originated in 2006 and 2007 are experiencing the most significant shortfalls in current cash flow relative to current debt service obligations." On Dec. 10, Moody's reported that the delinquency rate on commercial mortgage-backed securities rose to 4.47%, almost six times the rate one year ago of 0.75%.

Work for Black Teenagers Has Just About Disappeared

Dec. 24 (EIRNS)—The urgent need for economist Lyndon LaRouche's new "CCC" policy is double-underlined by the government's own statistical report: Almost no black teenagers are working.

The "employment-to-population ratio" among black Americans 16-19 years old, is just 13%. If those teenagers in juvenile detention or other institutions were included, the percentile who are employed—full-time or part-time—would drop to about 10%.

The same employment ratio for white teenagers is 28%, showing that this not primarily a matter of black teens being in school.

The degree of unemployment among the whole black population, is indicated in a Washington Post story on Dec. 24, headlined "Despair in Milwaukee Is Deep." Official black unemployment in that city for the past year is 22%; but the Census Bureau's Community Survey shows, by the employment/population ratio, that just under half of black men there are not working at all. Food pantry requests have multiplied by four from last year. Green jobs? There were 30 created by the "stimulus" act, with hundreds of applicants for them.

Referring to the Congressional Black Caucus's confrontation with the Obama White House over black unemployment, homelessness, and hunger, Rep. Gwen Moore (D-Wisc.) told the Post: "We wanted to punctuate what we see as a serious risk in allowing the entire minority community to entirely collapse."

Nationally, in November, the employment/population ratio for all Americans had fallen rapidly to 58.5%; but for black Americans it was only 52.6%; it had fallen by 3.5% in one year. Of 28,404,000 black Americans 16+ years old and not institutionalized, just 14,940,000 were employed at all (full- or part-time). Since the total black 16+ years population is about 30 million, including the incarcerated and institutionalized, less than half of their number are employed at all.