While I was working on their computer systems for the week, I did keep a casual eye on the news. The big story last week was Barack Obama's inauguration. Barack Obama is now the 44th president of the United States. The Obama administration has now begun. In his inaugural address, Obama is still a very charismatic and powerful speaker. But with the serious economic and foreign policy problems that the U.S. is now facing, I hope that Obama is just as strong of a manager and executive to guide this country through these problems, and bring the U.S. back to prosperity. It is going to be a challenge for this new president.
For this week, I want to look into some of the economic challenges that Barack Obama faces with this Janauary economic headliners. With only a week into his administration, President Obama is facing a continuing downward spiral of the U.S. economy, even as Obama attempts to sell his $800 billion stimulus plan to Congress. So for now, it is time to get into some more January economic headliners:
Consumer confidence sinks to a new low: Americans are watching the economic situation, and they do not like what they see with the plunging home values, more job losses, corporate incompetence, and Wall Street corruption. The U.S. economic news just keeps getting worst each day. It is no wonder that consumer confidence has plunged to its lowest level since 1967. From MSNBC News;
WASHINGTON - Americans' mood about the economy darkened further in January, sending a widely watched barometer of consumer sentiment to a new low, a private research group said Tuesday, as people worry about their jobs and watch their retirement funds dwindle.
The Conference Board said its Consumer Confidence Index edged down to 37.7 from a revised 38.6 in December, lower than the reading of 39 that economists surveyed by Thomson Reuters had expected. In recent months the index has hit its lowest troughs since it began in 1967, and is hovering at less than half its level of January 2007, when it was 87.3.
"It appears that consumers have begun the new year with the same degree of pessimism that they exhibited in the final months of 2008," Lynn Franco, director of The Conference Board Consumer Research Center, said in a statement. "Looking ahead, consumers remain quite pessimistic about the state of the economy and about their earnings."
The Present Situation Index, which measures how shoppers feel now about the economy, declined slightly to 29.9 from 30.2 last month. The Expectations Index,which measures shoppers' outlook over the next six months, decreased to 43.0 from 44.2.
Franco added that until she sees considerable improvement in shoppers' outlook for the economy, she can't say that "the worst of times are behind us."
When Americans are this pessimistic about the overall state of the U.S. economy, they are not going to be spending money in shopping. It gets worst if these Americans have lost their jobs due to company layoffs, lost their homes due to foreclosures, or have even seen their 401K retirement savings vanish--they are certainly not going on any shopping sprees in the near future. Consumer spending accounts for two-thirds of the U.S. economic activity. But with the serious problems in the housing market, and the job market, American consumers are not going to be in a mood to spend. This means retailers are seeing slow sales, and are slashing inventory. This means American companies are also seeing slow sales on products, and are cutting back on production and laying off workers. And as more American workers become unemployed, they cut on spending, continuing this downward cycle.
The job layoffs continue: This is from MSNBC News;
A slew of American heavyweight companies, including Caterpillar, Pfizer, Sprint Nextel, Home Depot and General Motors, announced cuts Monday adding up to 45,000 jobs lost. What's more, a group of business economists predicted many more job losses in the year ahead.
Caterpillar had by far the worst news of the group. The world's largest heavy equipment maker announced Monday it was slashing up to 5,000 jobs on top of several earlier actions. The latest cuts of support and management employees will be made globally by the end of March. An additional 2,500 workers already have accepted buyout offers, and ties have been severed with about 8,000 contract workers worldwide. In addition, about 4,000 full-time factory workers already have been let go.
In all, the almost 20,000 jobs being lost equal about 18 percent of the company's work force.
Ailing automaker General Motors Corp. also said it would slash 2,000 jobs at plants in Michigan and Ohio as the recession slams sales of its vehicles.
Sprint Nextel Corp. said it would be eliminating about 8,000 positions in the first quarter as it seeks to cut annual costs by $1.2 billion. Home Depot said it would reduce about two percent of its associates, or about 7,000 jobs. And Pfizer, fresh from agreeing to buy rival Wyeth for $68 billion, announced cost cuts that will include slashing about 8,000 jobs.
According to the National Association for Business Economics, business forecasters were reporting that "Job losses accelerated in the fourth quarter, producing the worst survey result in 17 years. Some 44% of firms cut payrolls, while only 14% added workers. Looking ahead, 39% of companies plan to reduce payrolls over the next six months, while 17% plan to increase employment. Only the services sector continues to create jobs." The services sector are mainly the low-paying retail jobs. Firms are probably cutting out high-wage, high skilled jobs, forcing Americans into the lower-wage, service sector and retail jobs. It is no wonder that Americans are cutting back on spending. And we continue into the downward spiral of Americans cutting back on spending, forcing companies to cut back on production, laying off workers, causing even more Americans to cut back on even more spending. And let us not forget that American consumers are not going to purchase a big-screen HDTV while working in a minimum-wage retail job.
Wall Street's dark side: This MSNBC News story really shows what happens when you gut the regulatory oversight on companies and individuals, allowing greed and criminality into the financial system;
Four men accused of varying degrees of defrauding investors out of millions — or even billions — were either arrested, investigated, surrendered to authorities or sentenced to prison.
It was a stunning refrain of alleged deception while the country struggles with the deepest recession since the Great Depression in a week that has seen major employers announce thousands of job cuts and consumer confidence fall to a record low.
At the top of the list: Bernard Madoff, the former money manager and Wall Street luminary accused of running a $50 billion Ponzi scheme. The regulator in charge of ferreting out fraudulent schemes on Wall Street, the Securities and Exchange Commission, was grilled by Congress Tuesday over its failure to detect Madoff's alleged wrongdoing.
Linda Thomsen, the SEC’s enforcement director, said the agency needs to improve its internal processes for pursuing cases. She said the agency also needs authority to regulate parts of the financial system that escape oversight and needs funding to carry out more investigations.
"While we always do our utmost to do more with less, if we had more resources, we could clearly do more,” Thomsen said in testimony prepared for a Senate Banking Committee hearing. The hearing is Congress’ first opportunity to question federal regulators about the Madoff scandal.
Even as that hearing was going on, federal authorities were accusing the owner of a New York investment firm of running a smaller but still devastating $370 million Ponzi scheme, luring in clients with promises of astronomical returns while secretly blowing tens of millions of dollars on bad trades and conspicuous spending.
Granted, there are certainly going to be some Americans that are willing to fall for these "Ponzi schemes." But with eight years of the Bush administration's deregulation of the financial industry, and the GOP's mantra that the free market will regulate the financial industry itself, has introduced such corruption and greed into the free market. It is not just the Ponzi schemes here--look at the speculation of collateralized debt obligations, based on over-valued subprime housing mortgages, that Wall Street banks were buying and selling, and how the subprime mortgage crash have nearly forced Wall Street to nearly go into bankruptcy. This is a near bankruptcy that the American taxpayer is holding the bag as they bail out Wall Street.
The economic news just keeps getting gloomier. I don't know if Obama's stimulus plan will work, or not, but something has to be done to fix the serious problems this U.S. economy now faces. There are serious problems with the housing market, the increasing number of Americans losing their homes, the high supply of foreclosed homes in the market along with the construction of new homes in a deep freeze. There is the wreak of the financial market, with Wall Street banks getting billions of government bailout money to do as they please, and not to help struggling American homeowners to stay in their homes. There is the huge number of job losses by companies struggling to cut production against falling demand, with those same unemployed Americans cutting back on their own spending and revealing a very pessimistic consumer confidence. We are going to be in for a very rough year.
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