patrick.net

The Fed says today that unemployment has "stabilized" even though the number of people
out of work is at an all time high and most of them are not even being counted.
If things are so good why won't they raise the interest rates?
Everything they do is a contradiction.
Besides the millions of layoffs of civil service workers have not even begun yet and that
will send unemployment numbers much higher in the next year.
Today's local newspaper was filled with stories about thousands of teacher and Los Angeles city layoffs for the first time in decades so it doesn't sound like employment is "stabilizing" to me.
Most of the coming laid-off workers will be "homeowners" who will no longer be able to pay their mortgages so there goes the "stabilizing" housing market.

With 40 states near bankruptcy I don't see how lay-offs can be avoided for much longer.
Stability would have to involve some mechanism to avoid these imminent bankruptcies but I have heard of no federal plan to step in and fund all of these states.
Los Angeles is planning to cut about 14,000 city jobs. If that's just "leverage" I will
be very interested in seeing where they get the money to prevent those lay-offs.
Los Angeles County Courts are planning to lay-off hundreds of people, something they have never done before.
Local schools, including high priced areas like San Marino and South Pasadena, are planning about 500 lay-offs. Again I don't see these threats being just a "ploy" for negotiating with teachers unions in view of the serious unemployment situation we already have. This kind of thing incurs the rath of taxpaying parents who recently have been hit with extra school "parcel taxes" so I have to believe they are serious about these lay-off notices.
Besides the actual lay-offs there are already thousands of workers who have had up to 15 percent of their hours cut, so technically they are still "employed" but for a lot less than they were previously making with no idea when or if their pay will ever be restored.
I myself have had a pay reduction since last June.
Does "stability" prevent further reductions in pay for those who still have jobs?
Even if "national" unemployment is stabilized California seems to be far from reaching bottom on unemployment.

Meanwhile today the big headline is 4200 fewer new unemployment filings last week.
But no mention of the 360,000 people who moved onto federal extended unemployment benefits
in the same week.
The Los Angeles Court system is laying off 370 people on April 1 and closing many of the courtrooms for an indefinite period. This has never happened before.
I heard today that Los Angeles City has started it's first round of lay-offs. People have actually been shown the door.
The states are looking for something like 160 billion in federal aid. I don't see how they are going to get
anywhere near that much money with all the fear in congress of increasing deficits in an election year.
I also read the official California Employment projection for 2010-2011 and they are expecting to have to borrow 28 billion dollars just to pay unemployment claims. They must be expecting big layoffs in the near future. A lot more than 5000 jobs lost.
I guess "stability" means being billions in the hole forever.

Well today we get another "unexpected" jump in unemployment claims but all the news stories say everything is picking up, as they have for the past year.
Another 250,000 or so have moved on to extended unemployment.
No mention that there are now 40 million people on foodstamps, up about 20 million in past couple of years.
I keep reading stories about how tens of billions in pensions are going to be disappearing in
the next few months and wonder what that will do to consumer spending.
No amount of hiring will cover these gigantic pension obligations and when a million retirees
are forced back into the workforce that ought cause a noticable increase in unemployment.

More good news. California's state unemployment numbers came out today showing an
"unexpected" increase to 12.6 percent.
The stock market is diving today also.
Obviously total recovery is just around the corner.

Market is down due to goldman sachs, and GE.

Most companies are turning a profit, look at google, 37% increase. JPmorgan. Intel. Amd.

GE appears to have made less, but still doing well. Real estate dragged GE down as well, and it's financial divisions. Not a huge surprise there. Revenue is down 5%. While that is a lot, it's not a doomsday scenario.

Most companies have pared back enough employees to continue making profits, which should slowly turn things around for everyone.

About 100,000 long term unemployed in California will be running out of unemployment
benefits this weekend. They will not be eligible for the extension that Obama just signed.
This number will keep going up and these people have no chance getting a job in the forseeable future
with a huge hole in their employment record.
I don't think the stock market matters at all since it is subject to so much manipulation.
What matters is millions of people who have not had a days work in two years and are
now on food stamps and running out of unemployment money.
These millions will not be able to do any significant spending for months or years even if they do get a job because they will have to save every penny just to get back to where they were years ago.

@pinnacle

SF ace says the economy is slowly turning positive.

You then turn around and point at unemployed. While we need people to be employed, there are still 90% of the population employed, and things are slowly turning around. Like the stock market. We aren't seeing things getting exponentially worse, they aren't crashing down. They're either turning around or slowing down. Many companies are reporting profits now, many large companies.

This points to a recovering economy, we aren't saying it's going to be rosy for everyone and super fast. We're saying it's starting to head in the right direction.

No tatputu, a 100% increase in delinquent home mortgages is not "things are looking up"... No longer losing jobs is not looking up, it is merely not getting any worse....

azrob00 says

No tatputu, a 100% increase in delinquent home mortgages is not “things are looking up”… No longer losing jobs is not looking up, it is merely not getting any worse

True--every economic report isn't positive, they rarely are. You have to look at all the reports and try to judge what they are telling you. And right now, most people think they are indicating an economy in recovery.

most people never saw the problem coming. In fact, when I first talked to a large realtor's group about the impending storm, in 2006 I was booed off the stage. So what "most people" think, is of very little interest to me. However, what Shiller thinks, what Meredith Whitney thinks, people who have a track record of understanding this crisis, I pay attention to. Both are predicting further home price drops for the reasons i've outlined before: increasing delinquncies, foreclosures mostly delayed but not prevented by attempted modifications, ending first time buyer credit which has stolen future sales to make the market look better right now, and interest rates that have nowhere to go but up, with a job market that at very best, will merely be a little bit better a year from now...

Home prices may drop further--especially in the usual places. CA, NV, AZ, FL. I was talking about the economy in general--not just home prices.

SF ace says

This country has an unbelievable amount of social safety net. It never occurred to me that unemployment will run out as UI is always something I figured our government will extend and extend, but I guess there is a limit on that too, i think around 2 years. Perhaps the people that fall off on the Unemployment payroll can get on welfare. Admittedly, I have not a clue what is out there beyond the basics.

The "social safety net" of which you speak is woefully inadequate to support people. Families do get some assistance, but mostly the amounts are very low. Single people either don't qualify or receive substantially less than they need to live. There are limits on length of time you can collect. I, too, am surprised at the amounts that UI has paid out. Even tho it's not enough to support someone in the manner that they were used to, at least it was something. Without it, we'll have more homeless people.

Most people didn't plan on being out of work for this long, and I doubt that it's by choice for many of them. I should mention that California pays more than most states when it comes to welfare-type programs, so the experience that people have in California isn't the same as if they lived elsewhere.

I'll toss some more of my points in here. Do I think the economy is recovering? I don't have a strong enough knowledge to know for sure, so what I base my assumptions on are outside the box thinking on the subject. People behave more or less in a similar fashion to all problems. I'll use a car accident. If you're skidding into a car, and you're going to rear end it, do you 1) say !@#$ it, and floor it to get it over with 2) I can't stop this, so I'll just take my foot off the brake to save my brakes 3) keep applying the breaks and swear a bit 4) take the foot off the brakes, get on the gas to steer yourself out of the situation and then get back on the brakes to avoid whatever the person in front just stopped for? Most people will got for #3.

Do I know where the economy is going? no. But I'm pretty sure #1 and #2 aren't in the picture. Which leaves people are doing what they can to stop the drop, have responded quickly and probably more forcefully than necessary (hiring freezes, slashing jobs, etc). Most companies are in decent shape now. Obviously NOT construction, but many others are doing fine. Good earning from Intel/AMD show that they're buying new equipment. Maybe we don't like to trust the banking right now, fine. GE is doing pretty well, still turning a profit. Still paying dividends. Not fantastic, but definitely not ship sinking material.

Will we have more homeless as UI runs out? Some.. but again rule #3/4 apply here. So yes, but... I'm guessing as stories of homeless people start ramping up (not necessarily numbers, just good media stories), the remaining people will start scattering and looking for alternatives. More house shares, leaning on friends or family. Yes some people will be screwed, but to be screwed you really need to have alienated all friends, all family, have no strong skill sets to even get a job wall mart or elsewhere, or be in a situation where everyone around you is in the same situation and can't help you. I'm going to stereo type and say those people were in rough shape before, especially if all of their friends/family are on the brink as well, and are probably used to being in poor situations for the most part (These are the poor or border line poor before all this). There will always be a few new ones and a few who don't fit that mold, but I'm talking majorities here. There will be rich who go homeless, but in most cases people will do something and will fall into rule #3 or #4.

Is housing going to plummet? There seem to be 3 types of sellers out there. 2006 priced sellers, sellers who realize the market tanked and took off 20% from their 2006 prices, and those who repriced for this market and are selling. The first 2 still need to reduce pricing, the 3rd is probably at or near bottom, even with more foreclosures happening.

If prices drop too much further, people will stop selling for the time being. Banks will realize that holding is better than flooding an already saturated market, paying taxes is probably better than saturating the market.

Construction, we always need construction. Many large companies are going to prepare for economic recovery, and will start building again, they've slashed budgets, things have started stabilizing (stabilizing up/down, the trend line for whatever they do can be predicted).

When do you shut down your business and renovate 1) when times are booming and you're making money hand over fist 2) when you've got a lull and will lose less money by having construction going on, and when construction rates are at their lowest? How does this bode for construction? Well many will have jobs, but many will lose them, because there won't be a glut of work. So construction will be slashed, BUT it will still exist, and will still continue. The #1's of the world are probably out of business now, the ones who took their businesses possible off line during booming times and paid high premiums for expansion. Most people expand during a recession, because it's the best time to do it.

Housing could be in the doldrums for quite awhile, but it's not going to tank. People aren't flipping coins and coming up with options #1 and #2 anymore, they're into options #3 and #4 now. They might still crash, but they aren't accelerating into the accident to make it happen sooner.

The economy is massive. Banking has some issues. Construction has some issues. Housing definitely has some issues. Everyone else who has a job now, is likely to keep their jobs. Meaning 85-90% of people are employed. That is still a lot of employed people, no matter how you look at it. That is still a lot of people that have money and who are buying stuff, and keeping the economy going.

Like recovering from the flu - it takes a while before you reach full strength.

Ehhh, never before in American history have we had the size of government (when you combine federal and state/local) as we have now (blame both parties over the past few decades).
Entitlements are only growing. Social security, which was originally paid for an average of 3-5 years (based on life expectancy at birth) is closer to 13 years now. Taxes are only growing. Our country is fast resembling more of a France or a Japan (especially Japan, given they went through a similar bubble and burst).
Quite frankly, there's a difference in a future of 1% economic growth like these countries typically experience and the 2.5-3% we experienced in the past.
Sam Zell is optimistic because he thinks the political situation will change: http://www.reuters.com/article/idUSN1417311920100414
I, for one, don't think there'll be much difference. Both parties are tax and spend, they just like to tax and spend different things.

pkennedy, you touched on the construction issue. So do you think building a house on a piece of land is cheaper now, because companies are struggling to get $$ in?

Well once again unemployment claims are up by 25,000 despite the endless series of
news reports claiming we are "recovering". Also the congress is going to add yet another six months to unemployment benefits which means they will now stretch for two and a half years which should not be necessary in a true "recovery".
The number of trustees sales in today's newpaper is also way up.
Five people I know who still had jobs have gotten lay off notices in the past week.
Everyone I know is getting poorer and not spending a dime that isn't absolutely necessary so I don't see where they keep getting the reports of mythical "consumer optimism".

If they didn't extend unemployment again, we'd have rioting in the streets. The only thing stopping us from seeing soup kitchen lines around the block like they saw during the Great Depression is that unemployment benefit extension. It's one social safety net that's working at the moment. It's working to keep the peace.

Construction, we always need construction. Many large companies are going to prepare for economic recovery, and will start building again, they’ve slashed budgets, things have started stabilizing (stabilizing up/down, the trend line for whatever they do can be predicted).

Many, if not all, large and small small companies lease (rent) their facilities. They dont do construction. Its the various local commercial Reits that have done the construction in the hopes of leasing out. But as you can see in SV we have 20% vacancy rate, highest in 20 years with prices falling on current inventory. Cheaper to rent than to make your own.

thomas.wong1986 says

Many, if not all, large and small small companies lease (rent) their facilities. They dont do construction. Its the various local commercial Reits that have done the construction in the hopes of leasing out. But as you can see in SV we have 20% vacancy rate, highest in 20 years with prices falling on current inventory. Cheaper to rent than to make your own.

That is complete BS. You lease office space, you build factories. My company is spending ~60MM this year alone on construction, and it's small and privately owned..

tatupu70 says

That is complete BS. You lease office space, you build factories. My company is spending ~60MM this year alone on construction, and it’s small and privately owned..

Nada! many former manufacturing sites around silicon valley were infact converted into office space. In both cases they were operating leases where title never passed..rentals. Typically ran at 5 year renewals. Some who actually purchased land/building over the years and gone over their heads in costs have gone under. I never seen anyone company want to commit long term to any location. There is a greater need to be flexiable and have a way out when downturns happen and take advantage of cheaper rates.
Cisco from East Palo Alto to Santa Clara to Milpitas... they all move eventually.

Its much cheaper to have a Contract Mfg (Solectron, Flextronics) handle production which is the case with many in the valley. You dont deal with Mfg equip depreciation, high property tax, higher staffing costs, not to mention all the other costs with owning facilities. This has been going on for 20-30 years now.

Construction isn't just about building a building. It's about renovating your restaurant. It's about adding space into a place you're currently in. What retailer is going to shut down during boom times to build, needing to pay higher costs for building due to demand and lose sales when things are going gang busters? They wait for a lull in the economy then build out, unless they absolutely have to build out. Like a business just takes off and not expanding will cost them far more than waiting.

Does Macy's make the renovations at Valley Fair or does Westfield Group?

thomas.wong1986 says

Does Macy’s make the renovations at Valley Fair or does Westfield Group?

Does Dupont lease their chemical plant?

Is the westfield group going to make renovations when they're fully rented out, or when there is slack time?

Macys would be in charge of renovating internally for sure, and would they shut down their stores during the christmas rush to do this? No. How about a good strong year? no...