Economic Free Fall Accelerates, Data Show
Friday, February 13, 2009
With Congress preparing to vote on a $789 billion stimulus package, government data yesterday showed that the number of people relying on unemployment benefits has surged to a record 4.8 million.
Revenue has declined for many businesses, and as a result, "companies don't have the cash to keep workers on their payrolls even if they want to keep them," said Mark Vitner, Wachovia's senior economist.
The alarming pace of job losses has put pressure on lawmakers to quickly pass a stimulus bill that includes billions of dollars in infrastructure spending. President Obama stumped for the package yesterday at a factory in Peoria, Ill., operated by heavy equipment maker Caterpillar, which recently cut nearly 20,000 jobs.
The stimulus is part of Obama's two-pronged approach to try to stabilize the economy, which has been in free fall in recent months. The other prong is a plan by the Treasury Department aimed at thawing the credit markets. It also seeks to help homeowners facing foreclosure, including putting a potential moratorium on foreclosures.
Similar moratoriums imposed by Florida and mortgage financiers Fannie Mae and Freddie Mac helped drive down the number of foreclosure filings last month. They fell 10 percent to 274,399, but were still 18 percent higher than in January 2008, according to RealtyTrac, a foreclosure data firm in Irvine, Calif.
Bargain hunters snapping up homes facing foreclosure also helped drive down the number of filings. During the last three months of 2008, 45 percent of all existing-home sales came from distressed properties, according to a report released yesterday by the National Association of Realtors. Such sales helped drag the national median existing single-family home price down to $180,100, 12.4 percent lower than a year earlier.
Analysts said the drop in filings does not mean foreclosures have peaked. They will probably keep rising as job losses mount.
The number of people filing for unemployment benefits for the first time fell last week by 8,000 to 623,000, Labor Department data released yesterday showed. However, the four-week moving average, which is considered a less volatile measure, rose to 607,500, up 24,000 from the previous week's revised average of 583,500. And finding another job is increasingly difficult. The number of people collecting unemployment benefits for more than a week rose 11,000 to 4.81 million during the week ending Jan. 31, the highest figure since record keeping began in 1967.
Rising unemployment and falling home values have also kept consumers out of stores, leading to one of the worst holiday shopping seasons in decades. Manufacturers and retailers are still coping with the aftermath, government data released yesterday show.
The sharp pullback in consumer spending left retailers and their suppliers with mountains of unwanted merchandise. Inventories were down 1.3 percent in December, the Commerce Department reported yesterday. But sales fell faster than inventory, by 3.2 percent. Growing stockpiles and falling demand portend further production and job cuts, analysts said. Yesterday, Japanese consumer electronics maker Pioneer said it plans to shed 10,000 jobs and drop out of the flat-panel television business.
Retailers have attacked excess inventories by relentlessly trying to lure consumers with sales, coupons and other deals. At least some shoppers appear to have caved. Retail sales rose in January by a seasonally adjusted 1 percent, the first increase since May.
The uptick came as a surprise to many economists after retailers said last week that sales at established stores remained weak. Research firm ShopperTrak said yesterday that traffic in shopping malls fell 13 percent in January from a year earlier, and estimated retail sales fell 4 percent.
In fact, when the Commerce Department figures are compared with January 2008, total retail sales plummeted 9.7 percent. Gasoline station sales last month plummeted 35.5 percent, and electronics retailers were down 7.8 percent.
"It's going to be difficult for retailers to maintain this momentum," said Rosalind Wells, chief economist for the National Retail Federation, a trade group. It estimated that retail sales grew 0.5 percent excluding autos, gas and food service compared with December but fell 2.1 percent year-over-year.
The numbers showed that electronics and appliance store sales were up 2.6 percent in January compared with December. Gas stations sales also rose 2.6 percent in the period as fuel prices jumped from $1.687 a gallon in December to $1.788 in January, an increase of nearly 6 percent. Nonstore retailers, including Internet sites, catalogues and direct sellers, grew 2.7 percent.
While many analysts were quick to downplay a one-month bump in sales, others were upbeat about its implications. "This is not the turn around in retail sales, but the rate of decline in consumer spending is beginning to let up," Wachovia's Vitner said. "It should help bolster some folks' confidence . . . that all declines eventually come to end."
Anxiety among consumers has intensified along with the economic crisis. More than 80 percent of Americans report having cut back on spending or changed their saving or investment patterns lately, mainly because of worries about the possibility of future financial problems rather than because of actual financial hardships, according to a national survey released yesterday by the Pew Research Center for the People and the Press.