I am for the stimulus program, I see the Obama Administration signs around various construction jobs, but one thing that bothers me is the job numbers. The unemployment numbers are not coming down, the numbers are going up and I am not sold on the economy bottoming out.
Why is that? Well, I went out of town this holiday weekend. I left from one of the busiest airports in the world, Chicago's O'Hare International Airport. I am here to report that the travel was LIGHT. The plane I was on was half full leaving to my destination, though full on the flight back, but all in all, the airport traffic was one of the lightest I have seen in a very long time.
That says something. It says people don't have the money to travel, even though you can get good deals out there. It also says that if folks are not traveling, it has a roller ball, ripple effect on everything else.
Another indicator is the malls. The one big mall that I have frequented over the years have cut the hours down, drastically. My hairstylist, who works at this large mall, told me that it is hard to book all the stylists at Mario Triccoci, work there has been cut down. Shopping malls are another indicator of how strong the economy is. Case and point, I went to Best Buy to purchase Twilight on a Saturday and I have not been in Best Buy for quite a while, since I purchase most of my goods from the internet, going in that store was a reality check. It was a ghost town. This is an anchor store at a shopping mall, which at one point was crowded EVERY WEEKEND, was like a ghost town. Sure, folks are shopping on the internet, but when people don't have money for a basic lavish necessity as a DVD, times are hard. Yep, the shopping malls are ghost towns.
On the low-income east side of Charlotte, N.C., the 1.1-million-square-foot Eastland Mall recently lost a slew of key tenants, including a Dillard's and, next month, a Sears. Sales per square foot at the venue fell to $210 in 2008 from $288 in 2001.
The Metcalf South Shopping Center in Overland Park, Kan., is languishing after plans to redevelop it into an open-air shopping district fizzled. The stretch of shops that connects the two largest tenants -- a Sears and a Macy's -- stands mostly vacant, patrolled by security guards.
With their maze of walkways and fast-food courts, malls have long been an iconic, if sometimes unsightly, presence in the American retail landscape. A few were made famous by their sheer size, others for the range of shopping and social diversions they provided.
But the long recession is helping to empty out the promenades. Some analysts estimate that the number of so-called "dead malls" -- centers debilitated by anemic sales and high vacancy rates -- will swell to more than 100 by the end of this year.
For many when money is tight people move into the survivor mode of thinking, which means if I don't need it, I won't buy it. So, the smallest of luxury items, like a 13.99 DVD, is put in the I don't need list and if this mode of thinking is out there now, a lot of shopping malls are going through some tough times.
Enters that pesky job number or unemployment number, which is over 600K a month. Americans single most asset of value is their home, period. Americans have seen their home value plummet and the notion that it will pick back up is just a fallacy. It won't, not for a very long time. And since folks are getting the pink slips at record clip, this includes solid home owners, with solid credit, who are now behind on their mortgages.
As job losses rise, growing numbers of American homeowners with once solid credit are falling behind on their mortgages, amplifying a wave of foreclosures.
In the latest phase of the nation’s real estate disaster, the locus of trouble has shifted from subprime loans — those extended to home buyers with troubled credit — to the far more numerous prime loans issued to those with decent financial histories.
With many economists anticipating that the unemployment rate will rise into the double digits from its current 8.9 percent, foreclosures are expected to accelerate. That could exacerbate bank losses, adding pressure to the financial system and the broader economy.
“We’re about to have a big problem,” said Morris A. Davis, a real estate expert at the University of Wisconsin. “Foreclosures were bad last year? It’s going to get worse.”
Economists refer to the current surge of foreclosures as the third wave, distinct from the initial spike when speculators gave up property because of plunging real estate prices, and the secondary shock, when borrowers’ introductory interest rates expired and were reset higher.
“We’re right in the middle of this third wave, and it’s intensifying,” said Mark Zandi, chief economist at Moody’s Economy.com. “That loss of jobs and loss of overtime hours and being forced from a full-time to part-time job is resulting in defaults. They’re coast to coast.”
To be honest, there is only so much at this point that government can do. The shame of this is that the Obama Administration inherited a huge financial anchor on its neck and no matter who was in the driver seat; the reality would be the same. The automotive industry is not helping the job numbers, expect unemployment numbers to escalate.
The reality is this in the end:
The issue here is that even the best credit rating in the world is little protection against the fact that if you’re laid off during a recession your income may drop a huge amount. Foreclosures, in turn, help make the economic situation worse and drive up the unemployment rate.
And that is a dilemma that the Obama Administration is in, they can not wave a magic wand and make it better. It will take time. And for some, time is not on their side.
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