Archive for the ‘Economy’ Category

Since the beginning of the economic downturn, the tumbling stock market, a contracting job market and massive home foreclosures have occupied the nation’s attention. But there’s another effect of the ailing economy that’s just beginning to reveal itself: increasing car repossessions and the violent altercations occurring between repossesser and repossessee.

The economic slide and rising job-loss numbers increase the probability that consumers will default on their car loans, since most consumers will likely put a mortgage or rent payment before a car payment. Some analysts expect the number of repossessions to climb by five percent this year — on top of a nine-percent jump in 2007.¹ Others, however, predict a decrease in car repossessions because the number of financed cars has dwindled 32 percent since the recession began.²

But just because the pool of cars scheduled for repossession is shrinking doesn’t mean violent encounters over those cars will evaporate too. In fact, it’s quite the opposite. Car owners today — very aware that a sickly credit industry will make it much harder for them to replace a repossessed car with a new one — are desperate to hold on to the cars they already have.

While confrontation seems a natural aspect of the repossession process, the escalating resistance by some car owners is quickly turning the parties involved into casualties of the recession.

In a nearly unregulated profession, Joe Taylor, a repossession company insurer, warns the Associated Press, “If a guy is just put right on the street without training, the potential for violence is very, very high.”¹

When the dust settled on a dirt road following one such scuffle between 67-year-old retiree Jimmy Tanks and the men sent to repossess his Chrysler Sebring, one man was left dead and another charged with his murder.¹

According to reports, Tanks heard a noise outside his Alabama home late one night in June 2008, grabbed a gun and ran outside to confront the intruders. Who fired first and what happened next is less clear. What is clear is that a gunshot wound to the chest killed Tanks that night. Now, repo man Kenneth Alvin Smith awaits trial on murder charges for the 2:30 a.m. incident.¹

Since Tanks’ death in June 2008, two repo men also employed by Smith’s company have been involved in separate shooting incidents — leaving one wounded and the other dead.

With no end to the recession in sight, we’re only left to wonder if this violent trend will continue, and for how long.

Footnotes
¹ “Violence between repo men, car owners on the rise,” FoxNews.com, Feb. 27, 2009

² “The Recession’s Gotten So Bad, Even the Repo Man’s Singing the Blues,” Phillips, Michael M. Wall Street Journal, March 10, 2009

When it comes to finding ways to save money in a tight economy like this one, nothing — I repeat, nothing — is safe from scrutiny by cost-cutting zealots.

With the overall cost of college tuition, room and board easily exceeding six figures at many private four-year schools, school administrators at some universities have taken the axe to one familiar school item that will, in one fell swoop, save millions of dollars, do the environment a favor and make students feel more at home.

The ubiquitous cafeteria tray is disappearing from schools like Skidmore College, Williams College, Rochester Institute of Technology (RIT) and Cornell, the New York Times reports. In trayless cafeterias nationwide, students simply carry their plates heaped with food, and guess what? No one’s grumbling about it.

Don’t snicker. Aside from potentially helping students avoid putting on the abhorrent “freshman 15″ pounds, Williams College estimates it’s saved 14,000 gallons of water annually since eliminating the trays. Administrators at RIT attribute a food bill that’s 10% lower (despite generally rising food costs) to reduced food waste brought about by going trayless.

School administrators elsewhere claim that students waste less food because they choose more carefully when they can’t load up as easily. Others add that it makes the dining hall ambience less “institutional.”

Someday, years from now, many of us folks over the age of 40 may fondly remember college cafeteria trays (along with those conveyor belts) in the same way we muse about other dining trends that have since lost favor. You know, like the Automat, those cafeterias with the chrome-and-glass-operated machines that dispensed meals in lieu of waitresses.

Reminiscence aside, you’d probably be loony to think that creative cost-savings like this would actually cause school admissions offices to lower tuition bills. But, hey, you never know — maybe one day they’ll rein in some over-the-top new construction projects and pass the savings on to students.

The federal government recently required 19 of the nation’s largest banks to undergo “stress tests” (administered by the banks themselves) to gauge how well the banks would perform under extreme recessionary conditions. We’ve now learned that bank executives have been lobbying Washington to boost their scores before the results are finalized on Friday and released to the public on Monday, USA Today reports.

The Wall Street Journal says that Bank of America and Citigroup were among those banks that were told they have insufficient capital reserves.

There’s a lot at stake for the banks. If it’s determined that their capital reserves are too low, government regulators intend to make them buck up.

“The government could convert its stake in them to common shares, force them to raise money from investors or eventually release more funds from the Treasury Department’s $700 billion financial bailout,” USA Today said.  The idea is to make sure that banks have enough money to absorb ballooning losses from bad loans.

“They don’t want to do any of this,” Karen Shaw Petrou, managing partner at Federal Financial Analytics, told the paper, “because banks think they can make smarter business decisions when the government doesn’t intervene.” She added, “It’s disastrous for shareholders.”

Those banks that regulators decide do possess sufficient capital reserves aren’t exactly free and clear to do their own thing. They may or may not be allowed to repay the billions of dollars they received in taxpayer-funded bailouts. Most of the largest banks want to do so, mainly to avoid being hamstrung by executive compensation limits.

The actual usefulness of the stress test is already doubtful, for a variety of reasons. When the stress tests were devised a few months back, the Financial Times reports that an “adverse scenario” was defined as one where unemployment rose gradually to peak at 10.4% in late 2010.  Unemployment, as it turns out, has increased more rapidly than was projected, calling into question the relevance of what could already be an obsolete formula.

Even if you ignore the problems with the original adverse-scenario model, if banks succeed in tinkering with their scores, they’ll have succeeded in circumventing the purpose of the stress tests and turned them into a meaningless exercise. They’re kicking and screaming all the way, but since they have only themselves to blame for getting into this mess, I, for one, have little sympathy for them.

What’s your take?

American families aren’t yet willing to give up the family vacation, no matter how tight their finances, and state parks and campgrounds are being rediscovered.

Whether it’s a humble tent, cozy cabin or super-deluxe RV, vacationers are forgoing pricey resorts for the simple pleasures of communal showers and roasting hot dogs over an open fire. As the Maryland State Park Superintendant put it, “It’s extremely affordable when compared to the Magic Kingdom.”

In 2008, Kampgrounds of America reported a 21% increase in the first-time camping rate, while tent camping rose 16% at its 500 campgrounds nationwide.

The Baltimore Sun reports that this could be a very good year for the camping industry. Still, to lure more families who aren’t diehard campers, some private campgrounds are adding restaurants, fitness centers, free Wi-Fi, cable TV hookups, dog-walking services, movie nights and golf carts as transport.

Even state campgrounds are loosening their pet policy restrictions.

How about it? Will you be packing a sleeping bag this summer?

The Pleasance

If you’ve ever watched construction of new strip malls, residential subdivisions or industrial development, you know that one thing’s pretty certain: Once developed, most properties stay that way — forever.

But in cities like Flint, Michigan, which are coping with widespread blight brought about by massive foreclosures, streets, blocks and even whole neighborhoods of now-vacant properties may be razed, returning portions of this 34-square-mile city to something approximating “Flint Forest,” according to a fascinating New York Times story.

Turning back the hands of time could be a better alternative, city officials say, than watching empty homes become litter and dumping magnets taken over by drug dealers, prostitutes, squatters and opportunists who’ll strip anything of value from the homes.

Flint city officials are considering demolishing houses on selected streets even before they’re foreclosed on. There are about 75 neighborhoods throughout the city. The idea is to consolidate residential and retail centers inside city limits to a more viable size, centered around the heart of the city and potentially saving the city millions of dollars on police and fire departments and garbage collection.

The city of Flint is having a rough time of it, reeling from police and fire layoffs and a $15 million budget deficit. Some public schools will likely close. Roughly a third of the city’s population lives in poverty, the Times reports. The head of the local land bank says about 900 foreclosed homes in Flint have been acquired.

The concept of “planned shrinkage,” the Times says, became possible after the state changed its laws so that once properties become foreclosed on, they fall under the jurisdiction of county land banks. Other cities, like Little Rock and Indianapolis, have done the same thing.

Something similar to this happened in my own hometown, albeit on a much smaller scale. An abandoned gas station sat in the heart of town, right on Main Street, for years. As I remember, the underground storage tanks had leaked; the property may have been a Superfund site. It became a real eyesore. I’m not familiar with the details of how the property changed hands, but the publisher of our local newspaper purchased it. He turned a few acres with a grungy garage and weeds springing up through broken asphalt into a manicured public park with a bocce court, gazebo, gurgling fountain and walking paths. Local landscapers donated their time, trees and shrubs. Fittingly, what had become known to town officials as a nuisance is now called “The Pleasance.”

Is tearing down unkempt properties a viable option to control blight? Could doing so on a large scale, like in the city of Flint, transform magnets for crime into public spaces that enhance city life instead of detracting from it?

Manpower’s quarterly Employment Outlook Survey indicates that employers are forecasting largely flat job growth through the second quarter of 2009.

Manpower surveyed 31,800 employers, 15% of whom plan to expand their staffing levels between April and June, while a nearly equal amount, 14%, anticipate cutting their payrolls. However, the majority of those surveyed, 67%, said they expect no changes in staffing levels through early summer, according to the Manpower report.  (Roughly 4% of those queried remain undecided about hiring plans.)

The numbers, said Manpower CEO Jeffrey A. Joerres, illustrate employers’ delicate balancing act in seeking to churn out a profit without dismantling their workforce infrastructure.

Not surprisingly, the national survey also revealed that employers in nearly all industry sectors say they’ll be reducing their payrolls compared to the previous quarter. These sectors include mining, durable and nondurable goods manufacturing, wholesale and retail trade, information, financial activities, professional and business services, education and health services, other services and government. 

Employers in transportation and utilities, on the other hand, plan to keep hiring levels relatively stable for the second quarter. And while Americans may be scaling back their vacation plans, they still intend to travel somewhere, and as a result, leisure and hospitality employers anticipate more hiring activity. Employers in the battered construction sector are still projecting a negative outlook for this quarter, although it should be less painful than the previous quarter.

By geographic region, hiring in the Northeast is expected to be the most robust while employers in the Midwest and West are feeling less positive. Employers in the South, a heavily concentrated manufacturing region, project the weakest hiring pace during this period.  

Does Manpower’s employer survey hold any surprises for you? How is your employer’s business doing these days?

Amish church leaders in northern Indiana have relented in shunning one modern amenity — unemployment checks — to help unemployed members of their community survive.

It’s no longer possible for many Amish to earn a living through farming, due to rising land prices. Up to half of Amish men in Indiana now work in factories, according to a Los Angeles Times story.

Amish religious beliefs normally frown on such things as electricity, insurance and automobiles (the local Wal-Mart in northern Indiana has a hitching post for horse and buggies), but repeated rounds of factory layoffs have forced elders to relax the rules. The unemployment rate in Elkhart and LaGrange counties, where Amish populations are centered, has reached about 19%, the Times reported.

Although furniture-making has always been a mainstay occupation for the Amish, local shops aren’t able to hire all of the available workers because the demand for furniture like Amish-made tables, which retail for between $750 and $2,200, is off, too.

It’s been said that this recession is unique in that it’s cut a wide swath through every segment of the population, hurting those at every income level, in every occupation and of every age.

How vulnerable is the industry that you work in?

Contrary to popular opinion, a recent MarketWatch story reports that so-called “sin” industries like tobacco companies, casinos and distillers haven’t been faring well in this recession. A few stock funds that espouse Catholic values, on the other hand, have done better.

It’s often been said that during tough economic times, liquor sales and gambling continue to thrive because consumers turn to them for cheap entertainment or escape from their problems. Read more »

Protests against big-government spending and the use of higher taxes to fund ballooning state and federal budgets are scheduled to take place today in cities nationwide.

The Tax Day Tea Party website lets visitors view what tea party activities are going on in their state. A quick check of what was in the works for my home state of Connecticut revealed that four “tea party tax revolts” were scheduled in scattered cities. A random sampling of a half-dozen other states indicated multiple tax revolts in every state I checked, to be held on street corners, parks, federal buildings, courthouses, town greens and libraries. Read more »

A story in the Wednesday issue of Tennessean reported that the bad economy is sending more people to the therapist’s couch. Anxiety, panic attacks, insomnia and other emotional problems are on the upswing as worries about job stability and bills take their toll.

According to a 2008 survey by The American Psychological Association, 80% of Americans say the economy is stressing them out. And that applies even to workers who still have jobs. Read more »