Latest Stats Confirm Battered Economy
Reports Show Recessionary Unemployment, Declining Spending And Decreased Production
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Unlocking The Credit Markets
The Fed and Treasury Dept. are putting $800 billion into the credit markets, $600 billion into mortgages, and $200 billion to unlock consumer credit. Wyatt Andrews reports.
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The Credit Crunch Continues
As the Fed hopes to cure the credit crunch, will consumers who stopped spending this summer by the largest amount in 28 years feel the rush to start buying again? Kelly Wallace reports.
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Team Obama Sets Economy Plan
President-elect Barack Obama is setting the tone for his economic plans, reports Dean Reynolds. Nobel Laureate Paul Krugman speaks to Maggie Rodriguez about the economy.
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In-Depth
Meltdown Primer
Questions and answers regarding various aspects of the current economic crisis.
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Timeline
Financial Meltdown
Track major events that lead to one of the most tumultuous times in Wall Street's history.
The Labor Department reported that initial requests for unemployment benefits fell to a seasonally adjusted 529,000 from the previous week's upwardly revised figure of 543,000. But claims remain at recessionary levels. The four-week average, which smooths out fluctuations, rose to 518,000, its highest level since January 1983, when the economy was emerging from a steep recession.
One minor bright spot showed the number of people continuing to claim unemployment insurance dropped unexpectedly to 3.96 million, from the previous week's 4.02 million, which was the highest level in 25 years. The labor market has grown by about half since 1983.
Meanwhile, the Commerce Department reported that consumer spending plunged by 1 percent in October, even worse than the 0.9 percent decline that had been expected. Consumer spending accounts for two-thirds of total economic activity.
Orders to U.S. factories for big-ticket manufactured goods also plunged last month by the largest amount in two years. Orders for durable goods dropped by 6.2 percent, more than double the decline economists expected. The Commerce Department report showed widespread declines throughout manufacturing led by decreases in autos and airplanes.
The department also reported that new home sales decreased 5.3 percent last month to a seasonally adjusted annual sales pace of 433,000 homes, the lowest level since January 1991, another period when the country was undergoing a steep housing downturn.
The median price of a new home sold in October fell to $218,000, down 7 percent from a year ago, and the lowest since September 2004.
The Dow Jones industrial average gained around 30 points in midday trading Wednesday. The stock market is coming off of three sessions of gains, so a possible giveback, especially with disappointing data, might be expected.
With the economy showing further signs that it is headed into a steep swoon, the administration and the Federal Reserve rolled out two new programs Tuesday that would provide up to $800 billion in an effort to get more loans flowing in such critical areas as mortgage lending, credit cards, auto loans and small business loans.
Credit markets liked the new efforts, but private economists said the new moves were not likely to be the last changes in the government's vast rescue program, which has already undergone significant alterations since it was passed by Congress on Oct. 3.
Analysts believe more work will need to be done because of their expectations that the economy's vital signs will continue to worsen as the country slips into what many believe could be the worst recession since the early 1980s.
There is also a big unknown concerning how consumers will respond if credit markets do loosen - will they reverse the trend of decreasing spending, which has dropped to the lowest level in 28 years.
"Consumers are nervous," Gerri Detweiler, a credit advisor at Credit.com told CBS News. "We borrowed ourselves into a corner and a lot of people are waking up and realizing that that isn't sustainable."
The unemployment rate has hit a 14-year high of 6.5 percent, putting pressure on personal incomes. The government reported Tuesday that the overall economy, as measured by the gross domestic product, shrank at an annual rate of 0.5 percent in the July-September quarter, reflecting the fact that consumer spending fell at the fastest pace in 28 years.
We are in the early stages of one of the worst recessions in the postwar period, even factoring in a massive stimulus program.
Nariman Behravesheconomist, IHS Global Insight
"We are in the early stages of one of the worst recessions in the postwar period, even factoring in a massive stimulus program," Behravesh.
To revive the economy, President-elect Barack Obama has said a top priority will be working with Congress to enact a stimulus package with the goal of creating 2.5 million new jobs over the next two years. Analysts believe such an effort will require spending between $500 billion to $700 billion, a figure that would be on top of all the money being spent to stabilize the financial system.
In the latest efforts to stabilize the financial system, the Federal Reserve announced Tuesday that it will buy $200 billion in securities backed by different types of debt including credit card loans, auto loans, student loans and loans to small businesses. That market essentially froze in October, with investors taking $240 billion out of the credit system, reports CBS News correspondent Wyatt Andrews.
These types of loans as a result have become harder to obtain and have carried higher interest rates. A survey released Nov. 3 by the Federal Reserve found that a sizable percentages of banks had "continued to tighten their lending standards and terms on all major loan categories over the previous three months."
"What this does is hopefully jumpstarts that market, allows investors to invest in these securities," Timothy Ryan, of the Securities Industry and Financial Markets Association, told CBS News.
But while these moves are intended to stabilize banks and thaw the frozen flow of credit, USC business professor Lawrence Harris told CBS News correspondent Larry Miller, "There's simply no sense extending credit to people if they can’t pay off the credit they already have."
The Fed also announced that it will spend $500 billion to buy mortgage-backed securities guaranteed by mortgage giants Fannie Mae and Freddie Mac and another $100 billion to directly purchase mortgages held by Fannie, Freddie and the Federal Home Loan Banks.
This would greatly expand an initial modest effort announced in September with the goal of creating increased demand for mortgage-related assets. The hope is that this will drive down the price of mortgages and make home loans more available.
Analysts predict the Fed program could send mortgage rates down by as much as one-half to a full percentage point in coming months, helping to spur demand in the beleaguered housing market, which is suffering its worst downturn in decades.
The latest federal moves raised U.S. commitments to contain the financial crisis to nearly $7 trillion - though no one thinks the government will actually spend anything like that figure.
In the case of the Federal Reserve, the amount covers huge loans that financial institutions will have to pay back. In the case of the Treasury rescue effort, the government will at some point sell the stock it owns back to the banks, presumably when the banking system is doing better and the stock will be worth more.
© MMVIII, CBS Interactive Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.



http://www.youtube.com/watch?v=O_TjBNjc9Bo&feature=related
Both parties need to be concerned about this.. and not just one party is to blame.. Those who say different are part of the problem and not part of the solution.. ALL PARTIES NEED TO WORK TOGETHER TO FIX THIS.. AND AMERICANS NEED TO START BUYING MORE AMERICAN MADE PRODUCTS...
I have been reading up on the economic crisis and here are my two cents: (1) the government is way too over involved. Chapter 11, although no one wants to be there, is one very good way to start over. The problem is that way too many firms do not want to subject themselves to its strict conditions. (2) there are no effective oversight controls over what has been done the the monies supplied the private sector. Part of these funds have been used for dividends, part has been used for expansion and other unintended uses. (3) There is no effective oversight because the folks doing the oversight have been given very few resources to do the job.
Bottom line - We are making a bad economic crisis worse by thowing money at it to the exclusion of other non money cures.
Posted by FloydZeppd at 08:29 AM : Nov 26, 2008
Sorry Zepp already there!
My husband and I always buy American made, but let me tell you it is very difficult to find these products. Everything is made in China, Indonesia, India, Pakistan etc; the list goes on and on..........
Posted by Doctxt at 10:45 AM : Nov 26, 2008 another board you insist in posting in all cap letters , its considered rude and shouting . We all think we are the smartest ones in the room.. no need to be a putz on top of it . its annoying .
Bottom line - We are making a bad economic crisis worse by thowing money at it to the exclusion of other non money cures.
Posted by ramos937 at 10:42 AM : Nov 26, 2008
I have to say no matter what party you are in we need efffective oversight of these funds .. Warren Buffet injected 5 billion $ into goldman sachs he gets stock and a guaranteed 10% dividend every yr . The US taxpayer guarantees Citi Bank 45 billion dollars , more than the stock market value of the entire company that day , and we get 8% of their stock and we are on the hook for an additional 300 billion dollars of paper if it goes south . Paulson is giving away the treasury of course its ours , not his .
WITHOUT MONEY IN THE PEOPLES HANDS, BUSINESSES CANT EXPAND, CANT MAKE PROFIT, CANT PAY OFF THEIR LOANS, CANT MAKE NEW GOODS. BY GIVING MONEY TO BANKS OFFICIALS ARE ESSENTIALLY PUTTING PEOPLE FURTHER IN DEBT DUE TO INTEREST THAT THEY WILL EVENTUALLY HAVE TO PAY.
GIVE MONEY DIRECTLY TO THE PEOPLE AND WE WILL FIX THE PROBLEM: IF PEOPLE PUT MONEY IN THEIR SAVINGS ACCOUNTS THAT HELPS OUT BANKS, IF WE CHOOSE TO BUY GOODS THAT WILL HELP OUT COMPANIES, IF WE CHOOSE TO INVEST IT THAT WILL HELP OUT BOTH COMPANIES AND BANKS.
By the way, what will that 800 billion do to inflation?
Get your head out of your butts congress, the people whom you are "representing" need help too.
Unfortunately the real problem with our economy is our greed. from the people who over extended themselves with their mortgages to the oil companies, insurance industries and other corporations that rip us off to Bush''s war trying to grab the Iraqi oil. How do you stop greed? Is there a formula for that?
Especially when "American" conglomerates shut their doors here, and re-open overseas employing slaves and prisoners to create their products to be sold in America.
Posted by IwasHungry68 at 02:17 PM : Nov 26, 2008
We need a LEADER who would encourage and reward companies to build products in this country.
I don''t see it happening any time soon!
Bush and Cheney should be dragged out and strung up.
Thanks boosh. And to think people voted mcsame.
Posted by mycommentspg at 03:58 PM : Nov 26, 2008
Congress does not SET Economic Policy! Have you people at long last any self respect! We elected a LYING Incompetent Dud for a President 8 years ago. He took on a Budget that was balanced and a Surplus in the Treasury. He decided to go BACK to TRICKLE DOWN and here we are. Now given his PARTY sat on their hands while he blew that Balanced Budget and continued to give them budgets, one after the other, that showed NOTHING but deficits and THEY just continued to borrow but let''s put the blame for this God Awful mess right were it belongs!!
Posted by jamster31 at 12:42 PM : Nov 26, 2008
BULL!! THIS is absolute BULL! The REASON we have to have BONDS to fund the Bail Out is because the REPUBLICAN CONGRESS and GEORGE W. BUSH took a balanced budget and surplus, turned it into RECORD Debt and Record Deficits!! I mean how much failure do you freaks have to see before you start to accept the fact that YOU backed an INCOMPETENT MORON and a WORST Party to run our Government. HOW LONG??
I don''''t see it happening any time soon!
Posted by KEVINKKLOSTE at 03:02 PM : Nov 26, 2008
NO! We need a leader who will NEGOTIATE Trade Agreements that are FAIR for American Workers. The one''s we''ve had for the last 8 years negotiated agreements that force American Workers to compete with 30 Cents a DAY in Wages. The one''s we had INSISTED on talking away any regulations on Corporations! The one''s we had Demanded we return to "Trickle Down" when it had NEVER, not the first time, EVER worked. Let''s get serious here... we have this mess because the Fascist Republican''s supported Big Business OVER the American Worker!!
But it''s okay for the government to keep doing it.
They will stop moving out.
Posted by rharrin1 at 11:23 PM : Nov 26, 2008
Nice idea, but Big Money says no. Bye-bye idea.
CONSUMERS not Washington have the power to CHANGE the economy.
With consumer spending making up more than 65% of the economy, it''s time to boycott ALL foreign made goods!
Every day another US factory moves to China!
Taking with it tens of thousands of AMERICAN jobs!
And in return we are given shoddy,poisoned and over priced imports!
Stop this madness before it''s too late.
Washington will NEVER do ANYTHING to help the American people.
They are on the payroll of US companies who are moving to China.
WE DON''T WANT MORE DEBT!!
Giving trillions of OUR dollars to bail out Wall Street billionaires does NOTHING to help the American people!
Washington is simply making good on the Wall Street bribes that put them in power!!
BOYCOTT CHINA!
BUY DOMESTIC ONLY!
Posted by DeckardBR at 11:55 PM : Nov 26, 2008
Why? Because the Greedy say NO means what to me. We have just trashed, tossed out the "Trickle Down" Republican''s haven''t we. Now we can send the Democrats, who are much more in line with the Working Guys attitude, a message. Get it right or we''ll find someone else.
We''ve been telling you for the last 8 years that the economy was terrible.
Only idiots believed that ''debt growth'' was actually ''economic growth'' or instead of wage increases you could apply for ''home-equity credit-lines''.
I''ve got news for CBS and the rest of the media:
DEBT GROWTH IS NOT ECONOMIC GROWTH!!!!!!
HOME-EQUITY CREDIT LINES CANNOT REPLACE A GOOD SALARY!!!
DEBT IS NOT WEALTH!!!!!!
DEBT IS NOT PROSPERITY!!!!!!!
QUIT SAYING THAT AMERICA IS PROSPEROUS WHEN WE ARE FLAT BROKE!!!!!!1
Yes, American ingenuity will create new technologies and innovations, as we have always done!
And then they''ll promptly have those innovations produced in China using cheap labor.
Posted by incog-nito
I challenge you to take a tour at any American university and conduct a survey on how many Americans compared to foreign students attend schools of engineering, medicine and technical science, there you would find an exodus of intellectual outsourcing. Especially when labor is cheaper abroad. So who is greedy? Labor or management?
The same thing happened during the Vietnam War with people planting veggies in their back yards instead of flowers. People even planted veggies in vacant lots, with the permission of the owner who usually got a "cut" of the produce.
Today, people have forgotten how to plant anything as we are too busy looking to drill for oil, and there are no vacant lots left anywhere because landowners would rather sell the land to developers who put up strip malls and let the stores stand empty!
We are truly a nation that has lost its way and you can blame most of it on 25 years of Republican influence together with the influence of Corporate America and its obssession with PROFIT!
SIG HEIL, GREED IS GOOD!!!, BUSH!!!
Today,
I''M A DEBT-MONKEY!!!!!
WOOO HOOO!!!!
I KEEP AMERICA STRONG AND VIBRANT!!!!!!
I GO TO THE MALL EVERY CHANCE I GET AND WORK THE DEBT-FARMS SO MY MASTER CAN HARVEST A HEFTY ''YIELD''!!!!
I AM AMERICA''S DEBT-MONKEY AND I AM AN AMERICAN D*MNIT!!!
WOOO HOOO!!!!1
* The Treasury Secretary is authorized to purchase up to $700 billion in mortgage-related assets at any one time. That means $700 billion is only the very beginning of what will hit us.
* Financial institutions are "designated as financial agents of the Government." This is the New Deal to end all New Deals.
* Then there''s this: "Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency." Translation: the Secretary can buy up whatever junk debt he wants to, burden the American people with it, and be subject to no one in the process.
There goes your country.
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by wardoglrs
November 29, 2008 5:05 AM PST
- Whenever a Great Bipartisan Consensus is announced, and a compliant media assures everyone that the wondrous actions of our wise leaders are being taken for our own good, you can know with absolute certainty that disaster is about to strike.
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See all 44 CommentsThe events of the past week are no exception.
The bailout package that is about to be rammed down Congress'' throat is not just economically foolish. It is downright sinister. It makes a mockery of our Constitution, which our leaders should never again bother pretending is still in effect. It promises the American people a never-ending nightmare of ever-greater debt liabilities they will have to shoulder. Two weeks ago, financial analyst Jim Rogers said the bailout of Fannie Mae and Freddie Mac made America more communist than China! "This is welfare for the rich," he said. "This is socialism for the rich. It''s bailing out the financiers, the banks, the Wall Streeters."
That describes the current bailout package to a T. And we''re being told it''s unavoidable.