US unemployment rate surges to worst since 1983

The US Department of Labor announced a surging US unemployment rate of 8.1%.
Further, during the month February, 651,000 people lost their job.
Those two figures were bigger than expected and are really alarming…

In every area, people lose their job. Retail, construction, financial services and factories,… no area is safe from the high jobless rate. The only areas which are showing a little rise in employment are: health, the government and education. The unemployment rate is at the highest level since 1983.

Last week, the president of the US signed a $787bn economic recovery plan. First of all, with this plan Barack Obama hopes to realize a stabilization of the economic situation of today. Further, the plan includes tax cuts and money for public projects to create and save jobs. The administration of Obama tries to do all the possible to break the destructive cycle of job loss in the US and put Americans, who lost their job, back to work.

According to economist, this situation is very serious. Firstly, there weren’t that much jobs lost during the last three months as at the end of the second World War.
Secondly, the jobless rate may put further pressure on high-street commerce and could lead to more liabilities for banks due to the problems of the consumers to repay debts.

According to me, the $787bn economic recovery plan is a good initiative. This plan will certainly result in more jobs for the Americans. But I think, he’s a little bit over-enthusiastic . This plan, will make the situation better, but the real problem will not be solved. The plan doesn’t take on the consequences of the high jobless rate, just like the defaults on mortgages, the defaults on personal loans,…

Source: http://www.guardian.co.uk/business/2009/mar/06/us-unemployment-rate-jobs

US jobless rate highest in 25 years

The nation’s jobless problem is getting worse, the official figures showed these hard times. Layoffs are spreading to almost every sector of the economy and also businesses are faced with falling orders and rising losses. The economy has lost a great deal of million jobs, namely 4.4 million US jobs since the recession began in 2007, more than in any other postwar recession. Most economists say they don’t expect to see much progress over the short term.

US unemployment has reached the highest rate in a quarter of century, namely 8.1 per cent in February. This is the highest level since 1939, so more than 650,000 posts have been shed in three months time. Investors predicted these figures, the US job market is totally scourged in their view.

Economists and policymakers affirm that there isn’t absolutely any bright spot in this dismal news. The consumers in America are suffering severely, so isn’t there a note of optimism? Fortunately president Barack Obama reached a solution, 787 billion dollar stimulus, this bill would create lots of jobs and rescue the economy by this large fiscal boost. The White House predicted in its budget that the joblessness reached the average for 2009, but some claimed that this forecast was too sanguine.

The joblessness have surges very fast of late years as US companies have moved quickly to retrench their workforces. These movements in the labour market bring about problems in the rest of the economy, and so more job losses and the unemployment rises.

This article shows that the economy is indispensable in a country. Joblessness has a lot of consequences for the man in the street, so a solution of the government is absolutely necessary to rescue the US job market. The measures who were drew up by the president are a good option, joblessness doesn’t fit with economy.

Written by Marie Maes

Source: The Financial Times – 6 March 2009
Article: US jobless figure is worst for 25 years
By Alan Beattie in Washington and Alan Rappeport in New York

Is there need to nationalize?

The financial crisis grows weirder by the day. When philosophical conservatives like Alan Greenspan start talking about nationalizing banks, you know you’ve passed into some kind of parallel universe. Why are so many people entertaining an idea that sounds vaguely Marxian?

The answer, I think, is simple. There are some pretty sick banks in America right now, some of which may not be viable in the long run. But putting a giant bank through bankruptcy is unthinkable. (Remember Lehman Brothers). So why not just bite the proverbial bullet and nationalize them?

Mr. Blinder believes in biting the bullet, but it matters which bullet you bite. Like Ben Bernanke, the Federal Reserve chairman, and Timothy Geithner, the Treasury secretary, he is not convinced that nationalization is the only, or even the best, way out.

Because “nationalization” can mean many things, let’s first clarify what the current debate is about. Don’t think Hugo Chavez or even Clement Attlee. Imagine instead that the government acquires a majority interest in — or perhaps 100 percent of — a bank, wipes out the existing shareholders and installs new managers. Then, sometime later, a healthy bank is sold back into private hands, and we all live happily ever after. At least that’s the idea.

Further in the article, Alan Blinders wonders where they need to draw the line. This is a very interesting question in my opinion. First of all, how do you decide whether a bank ‘deserves’ to be overtaken by the government or not. Secondly where do you stop, once you start?

Supposing that we nationalize four banks, this could mean a severe disadvantage for bank five. But we simply cannot ignore the financial problems like the government did with Lehman Brothers. Imagine that more banks go bankrupt, this would mean a huge disaster both for the financial world as for the employees. Like I said in my previous blogs, there is also the fact that the Americans want to hold on to their traditions. They simply refuse to lower the price for gasoline for example. And that is why I fear that American politicians can not sell such a ‘communist action’ as a bank nationalization to the American population.

Source: http://www.nytimes.com/2009/03/08/business/08view.html?_r=1&ref=business

Ford Seeks to Eliminate $10.4 Billion of Its Debt

Again an update about the struggling car industry in the U.S. The second biggest car constructing company in the U.S. after G.M. namely Ford Motor Company said this week that it hoped to eliminate $10.4 billion in debt by giving cash and stock to debt holders as part of a revamping of its sheet balance.

This move of Ford is similar to what G.M. and Chrysler had to do to get new loans from the federal government, but the Ford spokesman said it has no plans to seek federal aid. Ford will reduce its overall borrowing by 40 percent and at this moment Ford is the healthiest of Detroit’s auto constructors. This is because of their debt initiatives and an earlier agreement they made with the U.A.W. (United Automobile Workers) union.

Ford won the concessions from the union because of a good debt restructuring plan.
AlL the offers Ford had to make, were necessary as part of its agreement with U.A.W. to restructure the payments and retire trust. Another part of the contract with the union was to make other cost-saving changes.

I think this is a good action of Ford because they actually try to do something about this situation and not only count on the loans of the government to save the company like G.M. and Chrysler do.

We can see the debt restructuring plan works and I think G.M. and Chrysler have to take an example on Ford and do the same things, or make decision that have the same impact. It’s also good that Ford don’t need government loans and tries to save the company on his own strength.

Source: http://www.nytimes.com/2009/03/05/business/economy/05ford.html?_r=1&ref=business

Obama: Save $40B by cutting waste

President Obama came up with a new plan to help America get out of the economical recession that reigns the country nowadays. He will unveil his plan at a White House ceremony at 10 a.m. EST. The plan has the intention to reform the broken system of government contracting.

Nine days after the summit where Obama discussed a total change in fiscal spending, he explains that with his new plan America can save up to 40 billion dollars a year. The plan contains a lot of measures that will reduce the spending on waste made by the U.S. government. A total new system of working with contractors will make sure that the government will stop wasting American people’s money.

The president said that if we let the government perform a lot of outsourcing services itself, make the contracting process accessible for small businesses, stop needless no-bid and cost-plus contracts and finally, make the oversight stronger to maximize accountability and transparency, we can make it possible to decrease the fiscal incomes by 40 billion dollars each year.

Obama finds it very important that the American people’s money is spent to make their lives better and not to fill the pockets of contractors or to maintain projects that don’t work. The president will also praise the Defense Secretary for the efforts he’s doing to reform the Pentagon spending policy but he will also tell him that he won’t accept him spending billions of dollars on waste expenditures.

Once again I am very pleased with the efforts Obama is doing for his country. He keeps on showing himself very motivated to help America out of this economical recession and according to me, he will definitely succeed.

He is doing a lot of research to find ways that would help solve the bad economical circumstances that rule the United States of America. Finding errors in the government contracting policy is something that according to me, a president like George Bush, would probably not have come up with.
Obama is definitely the man that will save America from this bad economical period.

Source: http://money.cnn.com/

House prices fall at record rate

Nowadays the financial crisis is a fact, not only Europe but also America, actually the whole world is scourged and suffers severely. This crisis has a gigantic impact on several sectors, for instance the banks, the companies,...and even it has an influence on the real estate.

In the US there is a remarkable trend for some time, a slumping sale and the foreclosures are rising. This cause the decrease in prices, so home prices in the US decreased at a record speed last year. More exactly a fall of 18.5 per cent in the Case-Shiller index, it was the biggest fall in December 2008 since the measure 21 years ago. Phoenix, Las Vegas and Minneapolis are the states who are confronted with the sharpest monthly declines. In the meantime consumer confidence sinks to a low level. These declines cause US households additional charges, $370 billion per month which is incredibly high.

The White House reached to a solution, namely a foreclosure prevention plan, because of the importance of the political issue concerning the housing market. The Republicans also desire that the government contribute his mite by subsiding mortgages to help homeowners.

The home price index has also fallen 26.7 per cent, since the peak of the housing market in July 2006. The situation of the prices is alarming for the US consumers, they are much worried because it is still continuing.

My opinion predicts that there will be a house price crash with profound effects on the economy. The house prices and the financial crisis are related, stable prices became a must. The government has to minimize and avoid the effects of fluctuations in prices, otherwise the consumers are again the victim.

Written by Marie Maes

Source: The Financial Times
Article: House price fall is biggest in 21 years – 25 February 2009
By Alan Rappeport

Obama sees $1.75 trillion deficit

President B. Obama has forecast a $1.75 trillion deficit in the budget of 2009. The main goals of that budget are overhauling the healthcare system and shoring up the U.S. economy. The budget reflects the delicate balance Obama has to make between making sure there is enough money to rebuild the economy and avoid excessive pressure on long-term finances. The first fundamental mission is to restore the health of the economy with public works spending, tax cuts and bail out the troubled financial industry.

The budget also includes money for healthcare reforms and for green energy to fight the global warming.

President Obama also said that he would halve the more than $1 trillion deficit president Bush left behind. Tax increases on wealthier Americans, eliminate subsidies for cotton storage and a troop drawdown from Iraq will help to bring the deficit down to $533 billion by 2013, this is also what Obama wants to reach.

It’s going to be a big challenge for Obama to sell this budget to the Congress because he also cuts in the farm subsidies and such programs are popular in the Congress.

I think it’s going to be really difficult for Obama to get this budget true the Congress because when he cuts into popular programs he can expect a lot of opposition. Although this is a good budget, first of all it’s meant to help the economy what I think is the most important issue at this moment and secondly; finally somebody wants to do something about the inefficient healthcare system in the U.S.

It’s also very good he wants to invest in green energy because it’s a great problem in the U.S. that the people consume a lot of energy.
Also the ways of saving money are good, this means the end of the war in Iraq and President Obama wants to do something about the very high incomes of some persons.

Source: http://money.cnn.com/2009/02/26/news/economy/Obama_budget.reut/index.htm