Recovery in jeopardy without upturn in job, housing markets

Slowing economy faces major hurdles

by John W. Schoen Senior producer
msnbc.com
As the engine of U.S. economic growth slows, two of its main cylinders — job growth and consumer spending — still aren't firing. Until they kick in, the sluggish recovery will remain in jeopardy.

After a surge in growth late last year fueled by massive government spending, the economic recovery has been losing momentum. On Friday, the Commerce Department reported that Gross Domestic Product, the value of all goods and services produced in the U.S. rose by 2.4 percent in the second quarter .

That’s down from a revised 3.7 percent growth rate in the first three months of the year, and less than the 3 percent growth many economists had been forecasting just a few weeks ago.

Other data point to signs that growth slowed toward the end of the April-June quarter. Housing sales tanked after a government tax credit expired in April, and the job market weakened in June after showing signs of strength earlier in the year. That has many forecasters further ratcheting down expectations for the second half of the year.

“With stimulus spending winding down … it looks like expectations for the third quarter will be reduced,” said Mark Vitner, senior economist at Wells Fargo Securities. “It looks like most folks will be coming in with a forecast for GDP in the current quarter that is under two percent."

Vitner said that would put the economy close to a double-dip recession, in which growth slips back into negative territory after a couple of quarters of expansion.

The hope has been that as the impact fades from the government's $862 billion package of tax cuts and increased public spending, that massive stimulus will carry over to the rest of the economy. Friday’s report offered some optimistic signs that may be happening.

Business investment up

Investment in plant and equipment by businesses picked up by 17 percent in the second quarter, boosted by heavy spending on new equipment and software. Businesses have also reported strong profit growth for the quarter, as heavy cost-cutting sends more money to the bottom line. That kind of gradual improvement could lay the groundwork for a sustainable recovery.

"The longer that we heal, the more likely it is that we'll continue to heal and start to see more robust growth maybe in 2011,"said James Paulsen, chief strategist at Wells Capital Management.

But that won’t happen until businesses move from cost-cutting to hiring. Until millions of new jobs are created to replace the more than 8 million paychecks lost to the recession, consumers won’t be able to restore spending to levels that will keep the economy growing.

“We’re in a classic chicken and egg situation,” said Ed Keon, a portfolio manager at Quantitative Managing Associates. “You need to get a firmer labor market — when companies are hiring and putting some their cash to work — in order to increase consumer confidence. But business people need to see demand before they can go crazy about expanding and hiring more people.”

For the moment, consumers don’t appear to be feeling better about the outlook. Friday’s GDP report showed consumer spending grew by 1.6 percent in the second quarter, down from 1.9 percent in the first quarter.

"Overall, the survey data suggest that the current slowdown in spending is likely going to persist well into 2011," said Richard Curtin, director of the surveys.

Housing mired

Other sectors of the economy have yet to show increased momentum from the government’s stimulus spending. Despite two rounds of a generous home buyer tax credit, the housing industry, which typically leads economic recoveries, remains mired at low levels of demand not seen in decades. Persistently low mortgage rates have also failed to spur the kind of pickup in home sales seen in past economic recoveries.

The financial collapse that caused the recession has also left an aftermath that is not typically seen in most recoveries. Homeowners are still struggling to pay down debt and make up for heavy losses in home equity suffered when the housing bubble burst. Prices in many parts of the country are still falling.

Businesses, uncertain about where the economy is headed, are hoarding cash. Despite an unprecedented Federal Reserve policy holding interest rates near zero, credit is tight.

“The fundamental picture of the economy is quite different than any other business cycle,” said David Ressler, chief economist at Nomura Securities. “We're not going to see a snapback in many sectors; housing is going to crawl back.”

The risk that businesses and consumers most fear is that the economy slides back into recession again, sending unemployment higher and profits lower. So far, most forecasters say the odds of that happening are less than 50-50.

Growth forecasts

Some two-thirds of economists surveyed last month by the National Association of Business Economists said they expect the overall growth rate will top 2 percent in 2010. A separate survey of private economists by Blue Chip Economic Indicators came up with a consensus forecast of 3.1 percent growth in 2011.

But the extraordinary causes of this recession bring extraordinary risks that go beyond the possible double-dip scenario. One of the most disturbing was outlined this week in a paper by James Bullard, president of the St. Louis Fed.

With inflation barely visible in the past few months data, Bullard warned the dangers of deflation — when prices tumble either because of a collapse of spending, a decline in the money supply, or both — pushing the U.S. economy into the kind of long-term, downward price spiral that has plagued Japan for more than a decade.

So far, the weak economy has produced the kind of low levels of inflation that the textbooks predict. The risk, Bullard argues, is that the policy the Federal Reserve has been using — targeting low interest rates to stimulate growth — could be steering the central bank toward the very deflation cycle that policymakers are hoping to avoid.

Bullard suggests that the central bank consider returning to a policy known as “quantitative easing” involving massive purchases of government debt to pump more cash into the economy to try to reflate the economy.

In an interview with CNBC Friday, Bullard stressed that he doesn’t see signs yet that deflation is taking hold.

“If the economy continues to recover in the second half of the year and we're growing really rapidly, then this will all go away and we'll all forget about it,” he said. “But that's not the nature of contingency planning. You have to be ready for the opposite case.”

© 2010 msnbc.com Reprints

Many fear job loss, but have no savings for it

45 percent could not cover expenses for more than a month without job
by Allison Linn Senior writer
msnbc.com
updated 7/26/2010 4:29:11 PM ET

Despite being warned for years to save, almost half of Americans face the worst-case scenario if they are laid off: out of work and out of money.

Forty-five percent of Americans surveyed by insurer MetLife said they could not pay their bills for more than a month if they lost a job, and 65 percent said they couldn’t cover their expenses for three months.

Though they lack a financial cushion, many Americans are fearful that they could find themselves out of work. The 2010 MetLife Study of the American Dream, conducted from April 14 to 21 and released Monday, found that 55 percent of Americans are concerned they will lose their job.

As the nation struggles to recover from the worst recession since the Great Depression, those fears are clearly warranted. As of June, 9.5 percent of American workers, or 14.6 million people, were out of work, according to the Bureau of Labor Statistics. About half of those workers, of 6.8 million people, had been jobless for six months or more.

Despite such grim statistics, MetLife researchers saw glimmers of hope in the survey results. Beth Hirschhorn, senior vice president of global brand and marketing services for MetLife, said the figures actually showed an improvement over last year, when 50 percent of Americans said they could not go more than a month without a paycheck.

“The only silver lining is that people have taken notice and they’re making changes,” Hirschhorn said.

In general, she said this year’s study showed that Americans were most action-oriented than a year earlier, and more focused on financial responsibility. Three-quarters of Americans reported that they had cut spending, and more people said that being financially responsible was key to achieving the American dream.

“A year ago more people were talking about what they were going to do,” she said. “Now, we see that they have done things.”

The bank of family

Still, millions of Americans are struggling financially, and the MetLife survey showed that families are taking up the slack. Nearly half of those surveyed said they had given money to a family member so they could pay their bills.

Hirschhorn said the results show that a huge number of Americans are relying on “the national bank of family” just to stay afloat.

“This lending is lifeline lending,” said

William M. Rodgers, professor of public policy at the Heldrich Center for Workforce Development at Rutgers University, said one reason many Americans haven’t been able to save for a potential job loss is because they came into the recession still struggling from the weak economy of 2000 and 2001.

“When we entered this recession back in December of 2007, Americans were probably the most vulnerable they’ve ever been before,” Rodgers said.

Still, Rodgers said he also is seeing evidence that the recession has been a wake-up call.

“It’s forced us, in many ways, to change our priorities. It’s forced us to recognize that we can’t live beyond our means,” he said.

Even though many Americans want to change their spending habits, progress is expected to be slow. That’s because many continue to deal with relatively high debt levels, a weak economy and a feeling that just covering the basic necessities continues to get more expensive.

“They’re trying to dig themselves out of such a deep hole,” Hirschhorn said.

© 2010 msnbc.com Reprints

Social Media's Role in the Job Search

Knowing when traditional tools are better

By Anthony Balderrama, CareerBuilder.com writer

The Internet has significantly changed how we carry out many everyday tasks. We don't have to receive bills in the mail or go to the bank to check our account balances. Hop online and almost everything we want to do is at our fingertips. Online job hunting has replaced flipping through the newspaper want ads to find that elusive open position.

Another significant addition to the Internet is social media. Social networking sites have suddenly put us in touch with long-lost friends or helped us make new ones. They're like class reunions and dating services rolled into one. And now they've become professional tools, too. You can use your online profile to display your work history and skill set.

As great as these advances are, some people fail to understand that new isn't always better. Sometimes older, more traditional methods are better than the newer, flashier ones. It's something that plenty of job seekers need to realize when they're looking for work and professionals should think about when using their profiles to network.

The job seeker's friend ... and foe

When looking for work, the biggest drawback to social media is the virtual paper trail you might leave. Attorney Robin Bond reminds job seekers that how you interact with friends is probably not how you interact with a boss or even co-workers, so make sure your professional side is what people see.

"Use separate sites for business and personal contacts," Bond advises. "If you were having a party, it's unlikely you'd invite all your party pals to the same event where you were entertaining your boss and work colleagues." For that reason, take advantage of professional networking sites like LinkedIn and BrightFuse for displaying your skills to potential business contacts and employers.

Keep the more irreverent profiles on a separate site and out of the hands of employers. Even then, Bond cautions against posting potentially damaging photographs because it is the Internet and nothing is entirely private.

"If you think your mom would be embarrassed by something you post, then think twice about posting it," he says.

Naturally, the visibility that could ruin your career could also be what gives you one in the first place. David Gammel, author of "Online and On Mission: Practical Web Strategy for Breakthrough Results," sees the value in social media's prominence when used for good.

"If you have posted lots of content under your identity that enhances your qualifications, it will show up high in search results and benefit how you are perceived," Gammel says. "If that content is unprofessional or otherwise at odds with the job you are pursuing, it may stop you in your tracks."

Although social media are an asset, they have yet to become the definitive way to land a position, he says.

"The best way to find a new job is still through a personal referral from someone who trusts you to someone who trusts them," Gammel says. "Social media might be used for communicating, but it won't create that trust. Good old-fashioned relationships will do that."

Remember the 'network' in social network

For professionals who already have a job, and for those who are considering a career move, social media can supplement traditional networking methods. They don't replace them, but they offer new opportunities alongside them.

"I think the biggest problem is that people treat social media and 'the real world' as if they are two separate modes of contact all too often," says Sam Ford, director of customer insights for communications agency Peppercom Inc. "The best answer is to use a combination of the two when searching for jobs, building relationships with potential employers, building out your network, etc. In my own network and in dealing with job prospects, I've found that a combination of the two makes all the difference in the world."

That amalgamation can add another dimension to an otherwise dull online experience.

"I find myself wanting to connect with people on Twitter [and] accepting LinkedIn connections particularly if we've had a strong face-to-face or phone conversation in the past," Ford says. He found that the online component enriches the relationship and wouldn't have occurred had they never interacted in a traditional way first.

Ultimately, what job seekers and professionals interested in networking need to remember is that business doesn't exist only online or face-to-face. Technology is part of everyday business and there are people behind those Tweets and profiles, so you should remember to make both new and traditional methods part of your networking practices.

Anthony Balderrama is a writer and blogger for CareerBuilder.com and its job blog, The Work Buzz. He researches and writes about job search strategy, career management, hiring trends and workplace issues. Follow him on Twitter at twitter.com/abalderrama.

Copyright 2009 CareerBuilder.com All rights reserved. The information contained in this article may not be published, broadcast or otherwise distributed without prior written authority.

Best States for Business (and jobs)-

From the Professional Insurance Agents(PIA) newsletter, July 19,2010 edition


Texas Tops List

CNBC does an annual survey of the best states for

business. Texas tops this year’s survey. Here are the

top-10 states:

1. Texas

2. Virginia

3. Colorado

4. North Carolina

5. Massachusetts

6. Iowa

7. South Dakota

8. Minnesota & Utah — tie

9. Georgia

Last year’s winner was Virginia. The two states swap the top spot every year. Texas was

top in 2008. Virginia was number one the first year of the survey in 2007.

These are the categories used to select the top states:

• Cost of Doing Business — 450 point

• Workforce — 350 points

• Quality of Life — 350 points

• Economy — 314 points

• Transportation & infrastructure — 300 points

• Technology & innovation — 250 points

• Education — 175 points

• Business friendliness — 175 points

• Access to capital — 50 points

• Cost of living — 25 points

According to the survey Alaska is bottom state for business. A high cost of living, high

cost of doing business and lack of infrastructure are the reasons.

Here is the bottom four:

1. Alaska

2. Rhode Island

3. Hawaii

4. Nevada

California and Hawaii are the most expensive states to live in and New York has the

highest cost of doing business.

Here is how the nine PIA Western Alliance states did in the survey:

15. Washington

18. Arizona

23. Oregon

26. Idaho

32. California — tied with Arkansas

36. Montana

38. New Mexico

47. Nevada

50. Alaska

Oregon is getting poorer.....and so is the people.

Basically, Oregon is getting poorer

The state has been falling behind many others in per capita income for decades

By Tim Fought
The Associated Press
Appeared in print: Sunday, Jul 18, 2010

PORTLAND — Behind the state’s budget crisis this summer lies a brutal economic truth: Relative to the rest of America, Oregon is getting poorer.

Oregon has been getting poorer, in relative terms, for decades, and the Great Recession has brought the state to a low point.

Oregon now ranks 32nd among the states in per capita personal income, and Oregonians earnings are slightly more than 90 percent of the national average.

These are the lowest figures for Oregon since the federal government started keeping the measurement — about the same time the stock market crashed in 1929. It’s not that Oregonians haven’t been able to raise incomes over the years.

Adjusted for inflation, Oregon’s per capita income is higher today: $35,000 in 2009, compared with, for example, $21,000 four decades earlier.

But the rest of the country has done better, raising incomes faster on average. So, Oregon is falling behind.

That makes the painful cuts in schools and government expected in coming months just the public symbol of how Oregonians at large are adjusting to a long-term slide relative to other Americans in income.

"That stubborn number is the root of all problems,” said Ryan Deckert, a former legislator who leads the Oregon Business Association. “We’re poorer, our families are poorer, our people are poorer, our public institutions are poorer.”

Economists say the relative measure is significant because as Oregonians’ income drops in relation to that of the rest of the country, it falls behind other states in its ability to pay for consumer goods and government services. That’s especially true with expenses that rise rapidly, such as health care.

“If you can’t generate income to keep up with those prices, clearly you have a challenge,” said economist Tim Duy of the University of Oregon.

Per capita personal income doesn’t get so much public attention as other economic numbers, such as the rates of unemployment or interest. It’s a broad measure, tracking wages, salaries, transfer payments such as Social Security, and business-related sources such as dividends, interest and rental payments. It doesn’t include corporate income.

People who track the state over the long term watch the figure closely and, in recent years, with increasing worry.

Before it was abolished in a round of budget cutting last year, the Oregon Progress Board called it the top economic “area of concern” among dozens of benchmarks it tracked.

This summer, a panel of close advisers to Gov. Ted Kulongoski said the figure was fundamental to its conclusions: Oregonians could no longer afford their state government, there was little prospect that economic growth would allow them to regain their purchasing power, and a wrenching “reset” would be required, slashing government expense well beyond the 9 percent in cuts the governor called for last month.

In a sense, this slide is an old story in Oregon.

In 2009, according to the U.S. Bureau of Economic Analysis, per capita personal income was slightly more than 90 percent of the national average.

Decades before that, in 1943, when Oregon was churning out lumber, ships and crops to fight World War II, Oregonians had income that was 124 percent of the national average, the high point, according to a report prepared by state Department of Employment economist Charles Johnson in 2009 and titled “Oregonians are Losing Ground to the Average American.”

Even though the state’s standing relative to the rest of the nation declined, good jobs in the forests and mills sustained a sense of well-being in Oregon, “but that all changed in 1980,” said John Tapogna, the president of the prominent Oregon economic consulting firm ECONorthwest.

That’s about the time the Federal Reserve under Paul Volcker choked off inflation by squeezing the money supply, initiating a hard recession that was extra hard on Oregon. That’s also the last time per capita personal income in the state was equal to the national average.

Since then, the growth of the silicon forest, led by giants such as Intel and Tektronix, gave the state a flush of high-tech income. The state’s relative ranking in incomes rose. But the flush has faded, and the slide in income relative to the nation’s has resumed.

“Once that tech boom went away, we didn’t have much coming in behind it,” Duy said.

Duy said many have put their hopes in the idea that Oregon’s “livability” — mountains, seacoast, outdoor recreation and so forth — would attract enough brainpower to generate the economic activity that will raise incomes.

Oregon State University economist Patrick Emerson said the wealth of natural resources can be a curse for some economies that don’t put enough money back into the economy in education and other sources of future wealth.

“I don’t want to push this too far, for there are lots of factors,” he said in an e-mail exchange, “but easy money from resources can often make societies complacent.”

“Those states and countries that initially had resource wealth and are now wealthy for other reasons usually did a very good job transforming that wealth into investments in human capital, physical capital and infrastructure.” he said. “Oregon did this fairly well, but not as well as perhaps it should have.”

Job search efforts

Since becoming unemployed in July of last year I have tried many things to get noticed. The first thing I did was to create my personal website, http://www.hiresherry.com/. My website gives employers a snap shot of me and my resume can be viewed online. I've been advertising my website on my car. This got me noticed by the news media where KVAL did a story on my job search efforts. I have also been featured on the radio on KPNW's Wake Up Call with Holloway and Lunden. This additional publicity has definitely generated more traffic to my website. I have also created a Facebook page and Twitter account.  I also recently began advertising in an online newsletter for my industry. This advertisement got me 2 interview requests. The positions are out of the Eugene area, but it's been a while since I received an interview request so I gladly accepted the requests. I drove up to Portland on Thursday of this week and interviewed. I have a second interview scheduled for next week with one of the companies. Although the position is in Portland I have hope that it will all work out. While I'd like to stay in Eugene, at this point, after being unemployed for almost 1 year (July 28) I feel I must accept a Portland position if it is offered to me.