Numbers...

I was just reading Warren Brussee's blog at http://wbrussee.wordpress.com/ He points to some troubling economic indicators that suggest the recession will deepen significantly next year. Here are just a few highlights.

HOUSING Our economy is not going to settle down until the housing bubble is completely deflated. The Standard & Poor’s/Case-Shiller housing index showed a 17% drop in home prices in the last year. However, to get down to its historical inflation-adjusted level, homes must drop an additional 22%.

Foreclosure filings are up 71% from a year ago, and we are just beginning to see the effect of option mortgage resets, which will go on for another three years. On option mortgages, buyers can pay less than the interest on the mortgage, so that the amount of the mortgage actually is increasing as the value of the home is going down. Since much of what we have seen in foreclosures was only related to sub prime mortgages, we are only half way through the foreclosure explosion due to adjustable rate mortgages. And with 30-year mortgages at 6.5%, few people can afford to switch to fixed rate mortgages.

SPENDING Consumer spending dropped in July, August, and September at the highest rate in 28 years. Since the consumer is responsible for 70% of the GDP, this bodes poorly for the future economy. Consumers are out of additional debt sources and are having to adjust to living within their incomes. Consumer confidence posted its steepest monthly drop on record in October

CREDIT CARD DEFAULTS Lenders wrote off $21 billion in bad credit card loans for the first half of this year, which is 5.5% of outstanding credit card debt. In response, credit card companies are tightening credit, further exacerbating the slowing of the economy

UNEMPLOYMENT RATE The unemployment rate is 6.1%. But in the last week, here are a few company announcements of coming layoffs! Whirlpool 5,000 jobs. Qwest 1,200. American Express 7,000. Goldman Sachs 3,260. Chrysler 1,825. Xerox 3,000. Yahoo 1,500. Merck 7,200. National City 4,000. ArvinMeritor 1,250. And those are just the ones I happened to notice! So the unemployment number is destined to jump sharply in the coming months.

He concludes that this whole mess will take years to sort out and that we are far from climbing out of it (in fact we are just beginning the downward spiral). The stock market will have its ups and downs, but the effect of the financial crisis on our jobs, our mortgages, our economic future will be largely negative for the next few years. Brussee predicts that we will emerge from the crisis sometime in 2012 or 2013.