When business reporters write about the economy, the questions they invariably ask their sources are, Have we hit bottom yet? Is there any good news out there? and When will we be back to normal? They are inevitably disappointed with the answers, which turns out to be the same for each question. Who knows?
Was there good news last week? Certainly. It was terrific to see the Dow rise above 9,000 points for the first time since January. Ford Motor Co. made a $2 billion quarterly profit. And the National Association of Realtors said that, across the country, by its estimates, home sales actually rose 0.2 percent.
But Ford’s profit was driven not so much by car sales as by asset divestiture. The Dow is manic-depressive. And the Realtor numbers, when non-MLS sales are factored in, are likely overly optimistic. At best, the national market is flat.
Where the economy is headed is not so much a factor of big picture activity as it is small dollar spending. For our weakling economy to recuperate, consumers have to open their wallets. They have to employ an economic Vitamin D – the dollar – to build up our business base. But to do that, they’ve got to be confident. And there’s an awful lot of things going on that are working on that confidence like Kryptonite works on Superman.
Bankruptcy filings in Massachusetts, for example, are soaring. An analysis by Banker & Tradesman showed Chapter 7 personal bankruptcy petitions up 58 percent in the second quarter of the year, from the same period last year. What is especially pernicious is that consumers who turn to the U.S. Bankruptcy Court have two prime options: Chapter 13, in which they lay out a plan to repay their debts over time, or Chapter 7, in which they assert that their only hope is to have their debts wiped away. Not only wasn’t there an increase in Chapter 13 flings, they actually went down.
Clearly, Massachusetts consumers are saying that they are overwhelmed with so much debt, they have no hope of digging out, even over time.
Those morbid numbers were followed by a report at the end of last week about foreclosure activity in the Bay State. The number of properties actually lost in foreclosure for the first half of 2009 is down from the same period in 2008. But the rate of foreclosure petition filings – the first step in the takings process – rose nearly 6 percent in the first half.
Even more troubling were the June foreclosure numbers specifically. June’s foreclosure deeds rose over May’s numbers. And petitions to foreclose in June bolted to 2,835, more than eight times higher than the 350 petitions in June 2008 and 21.7 percent higher than the 2,329 filings in May. The number of petitions to foreclose in June was the highest it’s been in the previous 13 months.
On top of all that, initial jobless claims also rose last week, and numbers for previous weeks were adjusted upwards as better data came in.
Consumers are out of work. For those who are still employed, many have seen their income decrease, either by wage cut or temporary furloughs. Their debt levels are crushing them. And their ability to afford their own homes is being decimated.
Some economists say we are at the beginnings of a recovery. Some subscribe to the “twin peaks” theory: The economy rose, and fell. It is rising again, but will fall just as hard once more.
What’s rising is not consumer confidence, but consumer agita. And it’s rising faster than all the other economic indicators put together. “Up, up…and away” is supposed to be a battle cry of hope, not a forecast of soaring despair. But it’s going to take some superhuman effort to finally get this economy back on track.
