From Volume 8, Issue 29 of EIR Online, Published July 21, 2009

U.S. Economic/Financial News

Foreclosures Spike: One in 84 Homes Hit in First Half of 2009

July 16 (EIRNS)—A record 1.53 million properties were in the foreclosure process during the first six months of 2009, 9% over the previous six months and 15% more than the same period of 2008, according to a report released today by RealtyTrac. There were a total of 1.91 million filings resulting in 1 out of every 84 U.S. properties receiving at least one filing in the first half of the year. Banks repossessed 386,800 properties.

Also, there were no "green shoots" of recovery in June, as more than 336,000 homes reported foreclosure filings, the fourth straight 300,000-plus month. Filings were up 33% over last June and nearly 5% compared with May.

Bankrupt States, Army of Jobless; Summers Gloats About 'Stimulus'

July 17 (EIRNS)—While President Obama's principal economic advisor, Larry Summers, in a speech today at the Peterson Institute for International Economics, was telling his audience that the positive effect of the stimulus has already begun to help the U.S. economy, although the "peak" impact on the economy would not occur until the end of 2010, the U.S. Labor Department issued its monthly report. It shows that six U.S. states posted record unemployment rates in June, while Michigan became the first to top 15% in a quarter-century, threatening to deepen budget crises in state capitals across the nation.

The total number of states with at least 10% joblessness rose to 15, the Labor Department reported. Georgia, Nevada, Rhode Island, South Carolina, Florida, and Delaware all reached their highest level of joblessness since records began in 1976.

California suffered the biggest drop in payrolls among all states, at a time when its lawmakers are struggling to narrow a $26 billion budget gap that may send its debt rating below investment grade. California's jobless rate held at a record 11.6% for a second month, after May's level was revised from a previously reported 11.5%. Unemployment in the District of Columbia exceeded 10% for a second month, rising to 10.9%.

"Soaring unemployment, rising deficits and spending like there's no tomorrow has done nothing to help put families back to work; in fact, our economy keeps getting worse," House Minority Leader John Boehner (R-Ohio) said.

Summers Is More Psychotic than Greenspan

July 17 (EIRNS)—It is not often that a disciple outshines his guru, but it has happened in the case of National Economic Council director Larry Summers. It can now be confirmed that Summers is more psychotic than his mentor, former Federal Reserve chairman Alan Greenspan.

At the time the U.S. Department of Labor was issuing state-level record unemployment figures, Summers was telling the Peterson Institute for International Economics that the recession is over. How did he come to that conclusion? Here is his answer: "Take one example as an indicator: Google searches for the term 'economic depression' was [sic] up four-fold from their pre-crisis level. Now, such hits have returned to normal levels."

On job losses: "The economic contraction has caused significant job losses. It is noteworthy, however, that the higher than forecasted job losses do not appear to be primarily the result of weaker-than-expected GDP. Rather it appears that a given level of output is being produced with fewer people working than historical relationships would have led one to predict."

In other words, Summers said, normally in economic downturns, productivity decreases as firms keep workers employed even as the amount of work declines. This has not been a feature of the current "recession." In fact, he said, productivity has increased in this recession.

Then, why the layoffs? Summers says, "perhaps an expectation that the recession would be lengthy has also contributed to this behavior [of the employers]."

State Tax Revenues Plunge in First Quarter

July 18 (EIRNS)—Reflecting the reality of the economic disintegration underway, state tax revenues plunged to their lowest level on record, during the first quarter of 2009, and preliminary data suggest that the second quarter will beat that record. The Albany, N.Y.-based Nelson A. Rockefeller Institute of Government reported, yesterday, that overall, state tax revenues fell 11.7% during the first quarter, as compared to the same period a year ago. Income tax collections were down 17.5% and sales tax revenues fell 8.3%. Corporate tax revenues also fell, by 18.8%. Forty-five states reported declines, up from 35 in the fourth quarter of 2008. Twenty-five of those states saw double-digit declines, as compared to six in the previous quarter.

Preliminary data for April and May indicate a drop in tax revenues of nearly 20% compared to the same period a year ago. Such extraordinary weakness in revenues makes widespread budget shortfalls highly likely this year, says the report.

All rights reserved © 2009 EIRNS