U.S. Economic/Financial News
2011 College Grads Can't Afford Housing
May 14 (EIRNS)85% of this year's graduating class will be forced to move back to the family home, reports a study conducted by Twentysomething Inc., a consulting firm specializing in young adults. 2011 graduates also face record amounts of student-loan debt: an average of $27,200 for those who borrowed money to finish school, Mark Kantrowitz found. "This is our country and this is our future and we're failing them," says Andrew Sum, a Northeastern economics professor.
Sum also details the lack of decent jobs for current graduates. Using data from the U.S. Bureau of Labor Statistics, Sum showed that as many as 50% of college graduates under the age of 25 are underutilized, meaning they're either working no job at all, working a part-time job, or working outside of the college labor marketfor instance as a waiter or bartender.
Bloomberg Announces Massive Layoffs of NYC Teachers
May 8 (EIRNS)New York City's Mayor Michael Bloomberg announced massive cuts and layoffs for the city school system on May 5. Bloomberg announced plans to eliminate 4,278 teachers, and to eliminate another 1,500 teaching slots through retirement/attrition. This is the first time that there have been serious layoffs of New York City teachers since the 1970s, when Felix Rohatyn was decimating the city through his Big MAC Schachtian austerity. The layoffs and cuts in the school budget were announced by Bloomberg in his overall budget presentation. He blamed the cuts on New York State, which has cut back funding of New York City schools, from 45% of the total budget last year to 39% this year.
U.S. Rail Starved While China Accelerates Its Grid
May 9 (EIRNS)Two billion dollars is being hailed by media outlets as an "unprecedented investment" that Transportation Secretary Ray LaHood said today "will help ensure America is equipped to win the future with the fastest, safest, and most efficient transportation network in the world." Where did this investment money for 22 intercity rail projects come from? As AFP notes, "the funds became available after Florida's Republican governor killed a White House-backed plan for a high-speed link between Tampa and Orlando on the grounds that the state would end up facing huge operating costs."
Vice President Joe Biden says the redeployed funds will "put thousands of Americans to work, save hundreds of thousands of hours for American travelers every year, and boost U.S. manufacturing by investing hundreds of millions of dollars in next-generation, American-made locomotives and railcars."
The Transportation Department selected 15 states and Amtrak to receive $2.02 billion for the projects, part of a plan to connect 80% of the nation's population to high-speed rail within 25 years.
Sen. Frank Lautenberg (D-N.J.) said at a Penn Station news conference that the New York portions of the improvements will take between six and eight years. Development across the United States was "piecemeal," he said. He noted that China is investing three times as much as the United States in infrastructure. That may be an understatement.
China's Ministry of Railways affirms that during the country's 12th Five-Year Plan, railway construction will continue to accelerate. This year, Ministry of Railways set their scale of investment at 745.5 billion yuan ($114 billion), of which 600 billion yuan is investment in capital construction. That's in the Railways Ministry alone.
Under the new Five-Year Plan, 30,000 kilometers of lines will be put in production; railway investments will total 2.8 trillion yuan and nationwide railway operational mileage will reach about 120,000 kilometers, according to People's Daily.
U.S. Housing Market Disaster Worsening, Hitting Fannie Mae Bailout
May 9 (EIRNS)"Really staggering declines" in home prices in the United States occurred in the first quarter, reported Zillow, Inc. chief economist Stan Humphries on May 9. The total drop in median price for existing homes for the quarter was 3%, comparable to several quarters in 2008, and Humphries forecasts a 9% drop in values for all of 2011. Other housing economists such as Robert Shiller are now forecasting a drop in the range of 10-12%, on top of the 30% drop from late 2006 through the end of 2010.
This year is seeing a drop in foreclosure repossessions of homes because of the "foreclosuregate" mortgage fraud scandal against the banks; combined with a 20% increase in foreclosure initiations, meaning that the shadow inventory of foreclosed homes looming in the next several years ahead is growing further. Already in the first quarter, 40% of all home sales were "distressed sales," either foreclosed homes or "short sales" by households underwater on their mortgages. "Strategic defaults," by strapped households who decide to use the mortgage money to make other ends meet while waiting out foreclosure, have grown into the millions.
Zillow finds that 16 million households are now underwater on their mortgages (28% of all; and this has risen from 22% in one year, and will be over one-third at end of 2011). Some $10 trillion of equity wealth has been lost.
This is pushing the size of the Fannie/Freddie bailout upwards. Fannie Mae's new "request," which Treasury will give them, is $8.6 billion now, for their first quarter losses (bringing the F&F bailout total to date close to $200 billion); but CEO Michael Williams already says, "We expect our credit-related losses to remain elevated in 2011 as we continue to be negatively impacted by the prolonged decline in home prices." Since they "own" virtually all of the mortgages issued in past 30 months, Fannie and Freddie are now absorbing the entire losses of the securitized mortgage sector, at taxpayer's expenserather than write the mortgages down, as LaRouche's Homeowners and Bank Protection Act (HBPA) specified.