Economic Roundup: Activity low, joblessness high
Auto industry bailout vote tops this week’s news
By Tom Stundza -- Purchasing, 12/8/2008 4:32:00 PM
Key economic issues this week will be highlighted by Congressional reviews of a large, controversial support package for the domestic auto industry and proposals from the Treasury for more direct aid for the mortgage markets. Also, the new administration may detail its proposed fiscal-stimulus package now that the Federal Reserve's latest Beige Book survey confirmed that economic activity is weakening nationwide--with few sectors spared from the deepening downturn.
New signs of deterioration in the U.S. job market--533,000 lost jobs in November--added impetus to appeals by Detroit's automakers for a bailout. Top lawmakers on Capitol Hill have coalesced around the idea Friday night of providing a small down payment to keep the industry afloat until early 2009. However, solons also have put General Motors and Chrysler under pressure to take tough restructuring measures -- including the possible replacement of GM chief Rick Wagoner.
Speaker Nancy Pelosi issued a statement saying that Congress is considering emergency, short-term funding for the auto industry. All funding, she said, would be “tightly targeted with vigorous supervision and guaranteed taxpayer protection.” So, Congress is expected to hold a vote on the short-term rescue plan for American automakers in a special session this week. Senior Congressional aides say an estimated $15 million in relief money most likely would come from $25 billion in federally subsidized loans intended for developing fuel-efficient cars.
The U.S. entered a recession in December 2007, according to the official recession watchers at the National Bureau of Economic Research. The NBER economists declared the “official end” of the expansion that began in November 2001 and lasted 73 months. The big question now is “how long will this recession last?” Few economists want to even guess but Federal Reserve Chairman Ben Bernanke last week called on the government to ramp up efforts to stem soaring home foreclosures, which are feeding into the country's deep economic troubles.
Through late November, nearly every area of the U.S. reported sales declines, drops in manufacturing activity, weakening real estate markets, tighter lending and deteriorating labor markets, according to the Fed's survey of regional economic activity. Most sectors that had been bright spots until recently -- such as agriculture and energy -- also softened as commodity prices have declined.
In economic reports to be reported this week, the October trade balance will see a sharp improvement, according to HIS Global Insight economist Nigel Gault, who says the trade deficit will narrow sharply to $51.0 billion in October, from $56.5 billion in September. Also, November producer prices will see another steep decline—with diminished pipeline pressures. Gault sees collapsing energy prices will drive the producer price index down by 2.4% in November.
As most economists say November retail sales will show a sharp 3%-3.5% decline, they also believe mid-December consumer sentiment will continue to deteriorate to deep recessionary levels. U.S. retailers reported some of the weakest sales figures in years for November, which included the post-Thanksgiving Day Black Friday kickoff to the holiday shopping season.
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