Most economists are quick to note that unemployment is a lagging indicator, and they’re right. But the magnitude of the job losses shouldn’t be dismissed so glibly, given the impact they are having on the banking system. The American Bankers Association reported that 3.22% of consumer loans were delinquent at the end of 2008. That is the highest level since the ABA began tracking overall loan delinquency rates in the mid 1970’s. And that was before 2 million jobs were lost in the first quarter.
An average of 5,945 bankruptcy petitions were filed each day in March, up 9% from February and 38% from a year ago. The soaring job losses since last September are certainly behind the increase in bankruptcies.
The surge in job losses are working their way up the income ladder, with an increasing number of middle income and upper middle income workers being affected. This is pushing many of those who previously were considered prime credit risks over the edge. Two-thirds of mortgages in the U.S. are held by the best credit risk, prime borrowers. According to the American Bankers Association, 5.06% of prime borrowers have missed at least one mortgage payment. Since prime borrowers are such a large group, this represents 1.8 million mortgages. Although the delinquency rate for sub prime mortgages is up to 21.9%, it only accounts for 1.2 million mortgages...
According to RealtyTrac, job losses result in a home foreclosure 10% to 15% of the time. If job losses narrow from the monthly average of 670,000 in the first quarter to 325,000, almost 3 million more jobs will be lost before year end. That will translate into another 300,000-450,000 foreclosures, and an unemployment rate of almost 11%. But what if that estimate of job losses is too optimistic?
New research by the Federal Reserve and Boston University of credit spreads of 900 non-financial companies from 1990-2008 predicted changes in the economy ‘phenomenally’ well. Based on their initial research on low to medium risk corporate bonds with more than 15 years to maturity, the researchers went back to 1973 and found the analysis still worked well. With the massive widening of corporate bond spreads last fall, the researcher’s model predicts the economy will lose another 7.8 million jobs by the end of 2009, and industrial production will fall another 17%. In the spirit of optimism, let’s assume this ‘phenomenal’ model is off by 35%, due to the extreme nature of this credit crisis. That still results in another 5.1 million lost jobs, and an 11% drop in industrial production. In that scenario, the unemployment rate climbs to near 12.5%, the underemployment rate breaches 20%, and another 500,000-750,000 foreclosures result.
An unemployment rate of 12.5%, if memory serves, is a tad higher than the Fed is using in those bank stress tests.
Remember how Reagan got ripped to shreds over the unemployment rate back in ‘83?
Funny how silent those people are now.
dead cat bounce
And the “bizzaro” market will soar on this news
The Brown Clown said that 150k jobs were created.....guess he lied again
The highest since the last time a globalist socialist fascist was president.
It is ON PURPOSE, (Cloven-Piven) it is not an effect of being "stupid"..
"They" are NOT STUPID.. they know exactly what they are doing..
If America does not rise up.. the house of cards will come down..
With Americas "money" backed BY NOTHING.. serious inflation will be the result..
Did I say NOTHING can STOP THEM?.. Oh! yeah I did..
This "COUP" was brilliant not staged by idiots..
Short of gun fire there is nothing to STOP THem..
Some reading of Antonio Gramsci and Saul Alinsky can wise you up..
There is no mystery of How this happened..
I love how the press highlights all the positive news. The economy is worse than ever and getting worse yet there’s good news everywhere. Gee, I wonder what’s different?