Recession Over? Fat chance...

[pasadenaDC]

Its been pretty commonplace to call a bottom to the economy and recession the past few months and the pundits are telling us its slow/steady growth from here. While I don't necessarily disagree with any of the analysis, its tough to ignore some of the personal stories from close friends which tell me that we're still a long ways from a normal steady growth economy.

Last night a few of my buddies were hanging out for the Pacquaio-Cotto fight. Typical food, drinks, cigars, BS'ing from the 28-35 y/o crowd. But then the subject of the economy comes up, it gets a bit serious, and here's what we find out.

Friend A - closed his franchise food store, just last week. The store remained profitable through about mid-2008 but it had been bleeding money ever since. 15 blue-collar employees and franchisee are w/o work right now. Friend A is out about 50K liquid for startup fees, 30K negative from neg cash flow months, and is burning through legal fees to end his building lease.

Friend B - is selling her house to downsize because her loan REFI hasn't been approved as she's been getting the run around for several months from different lenders. She had originally purchased on a 5/1 ARM in 2004. The catch is, she has over 125K equity on her place in the OC, gainful employment, an 830 FICO, 6-months cash reserve. So because her bank isn't willing to play ball, she will be downsizing to either a rental (and keep the equity $$$ in the bank) or purchasing a condo. The former is more likely.

Friend C - works for the state of CA and has had his wages cut 15% or the equivalent of 3 furlough days per month. Couple this with a recent divorce and the (highly unfavorable) marriage laws in CA, and he's in a bind right now. The judge ruled that he was on the hook for over 30K of his ex-wife's CC debt due to the fact that she wasn't working at the time of the divorce. Friend C is meeting with a lawyer to file Chapter 7.

From where I sit, its clear to me that 1) the economy is still shedding jobs and the supposed recovery will be a jobless one and 2) credit is still tight for prime borrowers as banks seem more concerned with balance sheets than extending credit. I know I'm stating the obvious here, but color me skeptical with some of the sanguine economic chatter these days. The bad news is hitting close to home.

 

[Moemg]

Both my SO & I are watching our children struggle . My SIL lost his job in August and his Son's business is failing . It is so hard watching them go through this . We try to help as much as we can but It's truly heart wrenching .

 

[ziggy29]

In almost every economic cycle, it "feels" like a recession for quite a long time after the GDP has stopped contracting. It takes a long time to convince employers that a few improved months are more than just a fluke. In the extreme, of course, this can cause a double dip if the jobs don't return eventually.

 

[Mill]

yeah, I for one, have chosen not to participate in the recession...by cutting expenses, L even more BYM, ect...in order to keep the nw rising at the pace i want it to. My company cut the 401(k) match well after the March lows, now extreme budget cuts leave me in a situation where I may lose my per diem and even my job. Best case scenerio for me will be surviving work related issues in 2010, and hoping the economy turns around in 2011.

I have back up plans, and I will do everyting possible to keep from taking a paycut, (whether it be from loss of hours, or less untaxable per diem) but Im finding more and more that no matter how well you plan, sometimes macroeconomic issues really screw things up.

If anything, Ive come to a realization that when youre doing well, you really need to cherish it. Money wont always flow so easily, and when it doesnt, youll be glad you prepared well when it did.

 

[unclemick]

Yep - the previous downturn in the early 90's got my butt kicked out the door(layoff) into ER. Now I was lucky - picked up a jobshopper/aka temp job afer a year and a half out(probably lucky) when a former boss called. The temp work and selling our rental duplex really helped the early ER yrs.

This time in retirement - cut expenses some and stayed the course in my balanced index. No work - after 16 yrs I expect to stay retired.

heh heh heh - Employment will be the last to recover they say.

 

[Zathras]

There will always be someone with 3 friends who are having financial issues even in the middle of a fantastic economy.
Taking that small focused look and expanding it to the nationwide economy is not necessarily valid.
In this case, at best, I would say it is an indicator of the California economy.
In my case, I know people that have started successful businesses, gotten pay raises, bought houses at great deals, etc.
That doesn't mean the economy is doing great any more than your examples means it is doing terrible.
All that said, the economy is in trouble, but it seems to be doing better than it was 6 or 12 months ago. So while 'happy days' may not be here, I do believe it is valid to say at this point it appears that we are past the worst of it.

 

[crazy connie]

Many economic indicators say we are improving, commercial RE is still heading down. Jobs are scarce as hens teeth for most of the unemployed. The bills are coming due from the National Debt. Real recovery for all Americans may be a long, long, long way off. People will get jobs in time but with the tax increases needed to support the National Gift Programs it will not feel like a recovery. Just my 2 cents FWIW.

 

[pasadenaDC]

There will always be someone with 3 friends who are having financial issues even in the middle of a fantastic economy.
Taking that small focused look and expanding it to the nationwide economy is not necessarily valid.
In this case, at best, I would say it is an indicator of the California economy.
In my case, I know people that have started successful businesses, gotten pay raises, bought houses at great deals, etc.
That doesn't mean the economy is doing great any more than your examples means it is doing terrible.
All that said, the economy is in trouble, but it seems to be doing better than it was 6 or 12 months ago. So while 'happy days' may not be here, I do believe it is valid to say at this point it appears that we are past the worst of it.

Perhaps I am guilty of fallacy of composition. But given the fact that this is the YD forum and that this downturn has affected young workers more than any other age group... well.. I just thought I'd vent a bit. The under 34 demographic is getting smashed in this recession, but there hasn't been much written up about it. Probably because people get sick of hearing bad news. And the general feeling is that 'young people will recover'.

Btw, does 'doing better' equate to 'less bad'? That's my take on the news these days.

 

[samclem]

There's no doubt that it is rough out there--9-10% unemployment is a lot, and most folks agree that figure significantly understates the job/employment problem. Consumers are tapped out, so the recovery likely won't be rapid. In years past recoveries were often predicated on a perception by consumers that things were on the rebound--when they felt their job was secure and that they'd be getting a raise in the coming year, they immediately loosened the purse strings, even if the spending went onto credit cards. Now, even if they feel optimistic, consumers have to wait to spend money until they've earned it because credit is tight.
In the long term we'll be fine unless the government makes structural changes that permanently hamper US private business productivity. That's my biggest concern now.

 

[tuixiu]

Yeah despite the anecdotal nature of OP's conclusions you can't argue with the unemployment numbers, it's tough out there. Definitely makes one feel fortunate to have a job, even with no raise etc.

Just remember it's all perspective on what we have and take for granted, almost anyone typing on a computer on this forum in their spare time has much to be thankful for.

Best of luck.

 

[Ed_The_Gypsy]

I have heard one opinion that unemployment will reach 11% or more. I believe it.

I also believe that people will continue to default on their house loans.

It ain't over yet. I figure another 12 months, or maybe we will never see a strong upturn, just gradual recovery as more people give up looking for work and 'retire'.

 

[CuppaJoe]

....
Last night a few of my buddies were hanging out for the Pacquaio-Cotto fight. Typical food, drinks, cigars, BS'ing from the 28-35 y/o crowd. But then the subject of the economy comes up, it gets a bit serious, and here's what we find out.

....

Off-topic: Sports bar? At someone's house? You use the word, typical; do you mean there was no down-sizing for watching this sporting event?

 

[wolf]

Just my 2 cents. Live in California. San Francisco Bay Area.

In our local paper. Thousands of students are being turned away from our Colleges. Reason, shortage of teachers and classes.

Reason we are short classes and teachers? California's budget is out of wack. California does not have the money to hire more teachers.

In private practice, ie. If T.V. manufactures had high demand for their products, what would they do? Of course, They would hire more people and make more T,V.'s Result, more profits. and more jobs.

The gov't works differently. Reason, Incompetent Management.

What's the answer? Wish I knew.

 

[bssc]

Just my 2 cents. Live in California. San Francisco Bay Area.

In our local paper. Thousands of students are being turned away from our Colleges. Reason, shortage of teachers and classes.

Reason we are short classes and teachers? California's budget is out of wack. California does not have the money to hire more teachers.

In private practice, ie. If T.V. manufactures had high demand for their products, what would they do? Of course, They would hire more people and make more T,V.'s Result, more profits. and more jobs.

The gov't works differently. Reason, Incompetent Management.

What's the answer? Wish I knew.

I should point out that this would not be a good solution because California loses money on each in state student since they are subsidized. Check out the differences between in state and out of state tuitions (which are supposed to cover all costs). Some states are rejecting more in state students in favor of out of state students. I would say that California's response is perfectly logical given the situation they are in. In fact, they need to follow the lead of other states and reject more California students in favor of higher paying out of state students.

I don't think that government is any more incompetent than any private enterprise, as Dilbert would attest. It is just that government is more transparent and accountable than the private sector. You only hear about private incompetence when things go really wrong.

 

[ERD50]

I don't think that government is any more incompetent than any private enterprise, as Dilbert would attest. It is just that government is more transparent and accountable than the private sector. You only hear about private incompetence when things go really wrong.

Yes, there are plenty of problems in the private sector also. Corporations are run be people, and people have faults, and often place short-term goals ahead of long-term thinking.

However, if a private business becomes so incompetent, they will go out of business (unless the govt steps in, and at that point it really isn't a private business anymore). But government departments can stay in business, regardless their competency, as long as politicians find a way to divert tax money into them.

I would argue your transparency/accountability line. Private businesses are accountable to their shareholders, and customers, and are transparent to the degree that we have GAPP. Occasionally, fraud overcomes those, but I think some would argue that fraud is more rampant in government than in private business, especially those of us from Illinois

-ERD50

 

[FUEGO]

As counterpoint, I'll offer my experiences at my current employer.

We have shrunk our headcount by roughly half over the last year from firings, layoffs, furloughs and attrition (ie not replacing those who left). We are in one of the hardest hit sectors (residential and commercial real estate development drove our business). As a result, the employer has slashed virtually all benefits, reduced salaries, etc.

October rolls around, and four people (1/6 of our company) leave suddenly. All to different jobs, some in different sectors of the economy. All received substantial pay increases (10-20% I believe). All received full benefits at the new places of employment. Bottom line, there are jobs out there to those willing to be flexible and active in marketing themselves. A good number of those laid off from our company are fairly indifferent to being unemployed since they get paid enough to not work that it makes not working more lucrative than working given the ample free time to relax, travel, spend time with children etc. I can only think of one person that claims to be having a hard time, but I don't know him that well so that may just be his way of appearing to be normal (and I don't think he had a penny saved pre-layoff).

Just a different take on the current state of the economy.

 

[Milton]

The under 34 demographic is getting smashed in this recession ...

As CuppaJoe says, they don't seem to be doing too badly if they have enough disposable cash to afford the "typical food, drinks, cigars".

... but there hasn't been much written up about it. Probably because people get sick of hearing bad news. And the general feeling is that 'young people will recover'.

In the early 1990's, jobs were scarce and it was difficult to find work ... many were convinced that they would never be able to afford to marry, have children, or own a home [see "A life without high points"; "Generation hopeless"; "A lost generation"]. However, everyone survived, and most have managed to make a life for themselves.

 

[harley]

I don't think that government is any more incompetent than any private enterprise, as Dilbert would attest. It is just that government is more transparent and accountable than the private sector. You only hear about private incompetence when things go really wrong.

I disagree with this statement in so many ways I can hardly think of how to start. First, as ERD50 says, companies will go out of business if they spend significantly more than they make. And they can't just raise prices (taxes) and threaten their customers with jail if they don't pay up. There is a slight similarity with government in that a really bad private executive can destroy a company and then leave the job before it becomes apparent. But you don't usually get a series of them making things worse and worse without there being some form of consequence.

I'm not really defending private industry. And I'm not putting down government workers. However, most government policy makers (ie. elected officials) have little concept of fiscal responsibility or social reality, and make decisions based on short term personal gain without much regard to the long term needs of the people(company). Hmmm..I think I just accidently proved your point.

 

[pasadenaDC]

As CuppaJoe says, they don't seem to be doing too badly if they have enough disposable cash to afford the "typical food, drinks, cigars".

In the early 1990's, jobs were scarce and it was difficult to find work ... many were convinced that they would never be able to afford to marry, have children, or own a home [see "A life without high points"; "Generation hopeless"; "A lost generation"]. However, everyone survived, and most have managed to make a life for themselves.

You caught me. Per usual, we had $2 cigars, Bud Light, and split 3 Pizza Mia $5 pizzas and hot wings about 10 ways.... Haha

Since the syntax police is out in full force today... the use of the word 'typical' is what a small group of guys (including myself) like to do when we get together every couple months or so. Hardly luxurious if this what is being implied.

 

[CuppaJoe]

You caught me. Per usual, we had $2 cigars, Bud Light, and split 3 Pizza Mia $5 pizzas and hot wings about 10 ways.... Haha

....

There's hope for your generation, after all.

 

[Zathras]

It was more, for me, the term 'typical'. If basic spending habits haven't changed, is it really that bad?

 

[bssc]

I disagree with this statement in so many ways I can hardly think of how to start. First, as ERD50 says, companies will go out of business if they spend significantly more than they make. And they can't just raise prices (taxes) and threaten their customers with jail if they don't pay up. There is a slight similarity with government in that a really bad private executive can destroy a company and then leave the job before it becomes apparent. But you don't usually get a series of them making things worse and worse without there being some form of consequence.

Well, if it that was simple, Arizona would have a balanced budget. While theoretically government could raise taxes, there are non market constraints that prohibit this from happening, namely the power of the vote. And while governments may not change much, administrations go out of business. The latest was that of NJ Governor Jim Corzine who was voted out for reasons that included not lowering taxes.

In Arizona, the legislature understands that if they raise taxes, they will be voted out so they don't have the freedom to raise taxes (prices) since they know the consequences of an angry electorate. It is probably easier to vote out a politician that an CEO since a politician doesn't get million of shares to vote the way that a CEO does. And politicians do not get $210 million golden parachutes the way that Robert Nardelli did from Home Depot (Of course, since rental cars aren't rented by voters, the tax rate is up to 20% now).

But as the politicians start cutting public benefits to reduce the expense side of the ledger, they start angering one sector after another. They cut education and teachers started complaining. They shut down interstate rest stops and truckers started complaining. It is not an easy situation and I do not envy them. Obviously, one way is to increase fees at state parks where people get a immediate benefit from their expense but unfortunately most government activities are not that easy to correlate.

I'm not really defending private industry. And I'm not putting down government workers. However, most government policy makers (ie. elected officials) have little concept of fiscal responsibility or social reality, and make decisions based on short term personal gain without much regard to the long term needs of the people(company). Hmmm..I think I just accidently proved your point.

I don't think that this is something that can be proved or not. I think that the issue is whose social reality should the government reflect, which is a moving target. Most government projects are there because someone lobbied hard enough to get the bills passed. My big issue with the government is that our representatives of the people and, as we have discussed on the board, the American people enjoy short term pleasures and are not into saving. My biggest gripe is that said voters tend to vote for tax increases for things like the local ball park. I owe a share of BOB, now Chase Field. All I can say is that you can't worry about either the corporations or the government too much.

 

[FinanceDude]

Just my 2 cents. Live in California. San Francisco Bay Area.

In our local paper. Thousands of students are being turned away from our Colleges. Reason, shortage of teachers and classes.

Reason we are short classes and teachers? California's budget is out of wack. California does not have the money to hire more teachers.

In private practice, ie. If T.V. manufactures had high demand for their products, what would they do? Of course, They would hire more people and make more T,V.'s Result, more profits. and more jobs.

The gov't works differently. Reason, Incompetent Management.

What's the answer? Wish I knew.

Not a good analogy to compare private enterprise to GOVT enterprise. CA has a HUGE budget deficit to deal with. CA would have to raise taxes a LOT to pay off their current problems, much less fund new ones.

In the end, the taxpayer does NOT have unlimited resources, despite what the govt would believe or have you think........

 

[haha]

Just my 2 cents. Live in California. San Francisco Bay Area.

In our local paper. Thousands of students are being turned away from our Colleges. Reason, shortage of teachers and classes.

Reason we are short classes and teachers? California's budget is out of wack. California does not have the money to hire more teachers.

In private practice, ie. If T.V. manufactures had high demand for their products, what would they do? Of course, They would hire more people and make more T,V.'s Result, more profits. and more jobs.

The gov't works differently. Reason, Incompetent Management.

What's the answer? Wish I knew.

You are forgetting something. The TV manufacturer expects to create positive cash flow with each new hire, because he will have positive cash flow from making the TVs. Not so with education. The California universtity and college systems lose money on every student, so they expect to lose more money with a new hire.

Long term we clearly have to do a better job of educating our workforce, but the system from kindergarten on up is hopelessly corrupt and inefficient. So, many voters are to the point of saying "To hell with it!"

Do I like my tax money being spent on medieval history or women's studies departments?

Guess.

Ha

 

[harley]

Do I like my tax money being spent on medieval history or women's studies departments?

I've been studying women for ~40 years. I keep flunking the tests and having to repeat the course.