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Dave Lindorff: Forget the Happy Talk, A Longer, Deeper Recession May be Ahead, Financial Executives Warn

Submitted by BuzzFlash on Tue, 12/22/2009 - 10:21am.

If you Google "recession easing," you will find articles all the way back to April quoting Federal Reserve Chairman Ben Bernanke as saying that the recession is easing, and that the economy is "improving modestly." Newspapers too, on their own, have written rosy-tinged stories about how things are bad but getting better.

Spins get put on every hint of good news, as when last month "only" 11,000 jobs were lost (a story that was quickly followed by an "unexpected" jump in new unemployment claims by 474,000 in early December.)

What didn't get widely reported was a report by the Association of Financial Professionals, a trade association that includes CFOs, treasurers, comptrollers, and risk managers of mid-sized and large corporations, which asked over 1000 of these executives the question: "When do you expect your company to begin hiring again?"

The answer tells you all you need to know about the depth of the current economic crisis, and blows all the media and government happy talk out of the water.

This Outlook Survey by the APF, which was funded by Wells Fargo Bank, shows that 26% of executives expect to see their company payrolls continue to shrink in 2010, while 46% more expect employment to stay at current low levels. Put another way, only 25% of companies surveyed expect to return to pre-recession hiring levels in 2011, while 32% don't expect a hiring rebound until 2012. And fully 30% "do not expect their organizations ever to return their payrolls to pre-recessionary levels."

And here's another troubling bit of news. The same survey respondents say that their companies' access to credit -- the willingness of banks to lend -- has barely budged. In fact only one in six reported that they had found credit a little easier to obtain in the last 6 months, while one in five actually reported that it had become harder to obtain credit. So much for the Obama Administration's and the Federal Reserve's vaunted efforts to throw so much money -- literally trillions of dollars -- at the banks that they would start lending.

More than half of the executives responding to the survey said that if credit doesn't become more accessible by mid-2010, their firms will have to take steps to conserve cash -- steps that could include cutting capital spending (68%), freezing or cutting hiring (62%), cutting inventory (25%), delaying payments to suppliers (23%), tightening credit offered to customers (23%), and drawing down existing credit lines (22%). Note that all of these steps are things that would put a further drag on the economy and could push it into a second downward spiral.

Remember this survey the next time you read that President Obama or Fed Chief Bernanke or Treasury Secretary Timothy Geithner says the economy is coming back, or that the unemployment situation, while bad, is about to start turning around.

The executives who are making business plans for their companies, and who are looking at the cash flowing out and the empty order books, aren't so sanguine about the future. And if those hiring plans are correct, this is a recession from which the economy simply is not going to recover, at least for many working people whose jobs are never coming back.

DAVE LINDORFF is a Philadelphia-based journalist. His latest book is "The Case for Impeachment" (St. Martin's Press, 2006). His work is available at www.thiscantbehappening.net.




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A word no one will utter.

Submitted by kathy2 on Wed, 12/23/2009 - 11:15am.

How can the recession have ended in the face of unemployment and still frozen credit?  Two years ago when the recession was finally declared, it had been painfully obvious for sometime to middle and working class America that the country was on an economic slide as it's now obvious not much improvement has been made.  I don't pretend to know much about economics, but a bad economy has been observable for well over two years; and according to Economics 101, any recession lasting more than two years is known as a depression.  

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Double Dip Depression

Submitted by Z1 on Wed, 12/23/2009 - 7:53am.

If the government had truly been intrested in kick starting the economy, instead of Congress throwing 787 billion dollars and the Fed throwing how many trillions at the banks, they could of taken all that money and cut every blue collar and unemployed worker in America a check for say, oh, 300 thousand each and turn them loose.

The people spending that money on paying their mortgages, repaires to their homes, buying cars, refrigerators, stoves, washers, dryers and clothes for themselves and their children would have done more to stimulate our economy than any bright idea coming  from the clusterf**ks in the White House or Treasury.

This would of also through the proverbial back door  have saved the banks that were finacially sound enough to be saved, and the ones like BoA or Citigroup could have been taken out back, shot and put out of our misery!

But no, as usuall, Republican or Democrat we use the old tried and untrue method of throwing the tax payers money at the super rich and then stand there scratching our heads when it doesn't work! Not that the super rich don't appreciate it! Hell, otherwise they might have to do some real work!

Of course, that would have only been a temporary stimulus, we definitely need to do away with all this BS free trade and supply side economics or we will just be living this all over again in another 5 to 10 years from now (And propbably worse then). Then FORCE all of our jobs back to this country!

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And what of Main Street?

Submitted by Kevin Schmidt S... on Tue, 12/22/2009 - 2:51pm.

Foreclosures are at an all time high and are getting worse. This could have been easily avoided if some of the Wall Street bailout money went to Main Street. But it didn't.

In 2010 millions of 3, 5 and 7 year Adjustable Rate Mortgages ARMs will adjust upwards. Most of the unlucky home owners are underwater by over 25% and cannot refinance under any circumstances. Many will not be able to afford the higher mortgage payments and many more will not see the benefit of paying higher payments regardless if they can or cannot afford to make them.

So even though most were A rated at origination, a large percentage of these adjusting ARM loans will fall into default, and thus exasperate the worst housing market since the Great Depression.  That's why they call these ARM loans "ticking time bombs".

Yes, in 2010 the economy will explode... into a full blow fascist inspired Great Depression 2.0.

Hello China? Wanna buy a house? Or how about a whole subdivision?

Hello Saudi Arabia? ...

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It's the Tinker Bell approach to economic recovery...

Submitted by luckyjean on Tue, 12/22/2009 - 1:30pm.

...that is, if we all just clap our hands and believe hard enough, it'll come back to life...right?

Or call it the "Herbert Hoover" approach. After the crash of '29, Hoover put on a brave face and kept insisting that everything would be fine, hoping that the brief panic would pass. Everything wasn't fine, however.

Maybe they think we'll get so optimistic we'll just reach way down in our pockets for that "extra money" and go out and spend it...except there isn't any "extra money"...

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