Business & Finance
Business and Finance
Business and Finance
Mon, July 12, 2010
Sun, July 11, 2010
Fri, July 9, 2010 
CHICAGO--([ BUSINESS WIRE ])--Zacks.com Analyst Blog features: Wells Fargo (NYSE: [ WFC ]), Fannie Mae (NYSE: [ FNM ]), MGIC (NYSE: [ MTG ]), Wal-Mart (NYSE: [ WMT ]) and Big Lots (NYSE: [ BIG ]).
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Here are highlights from Thursdaya™s Analyst Blog:
Initial Jobless Claims Retreat
Extended claims fell by 344,000 in the last week to 4.577 million (combining the two largest programs).That is up from 3.289 million a year ago. Thus the total number of people getting help fell by 568,000 in the last week and is now for the first time below the year-ago level of 9.856 million.
Good news, right? Not by a long shot. It would be good news if there were any evidence that the people falling off the unemployment benefit rolls were actually finding work. There is none.What we are seeing is the effects of the inability to break the filibuster and to extend the unemployment benefits. The filibuster is supported by every GOP Senator outside of Maine, plus Ben Nelson (D-NE) of the "Cornhusker Kickback" fame.Nebraska happens to have one of the lowest unemployment rates in the country.
This cutting off of benefits is not just a humanitarian disaster: it is extremely poor economics as well. The economy is suffering from not having enough demand.We have all sorts of idle resources, both human and physical.There is simply not enough money flowing through the system to make use of those resources.
People who have been out of work for more than six months have probably already depleted their savings and run up their credit card balances.Now they will be left with no financial resources at all. No money = no demand.Extended benefits put money into the hands of those who will spend it quickly. While there is some variation by state, the general rule is that unemployment will provide 60% of pre unemployment income up to a cap of about $400 a week.
In other words, the top benefit works out to be about $20,800 a year.Even in low-cost areas of the country, it is hard to raise a family on that sort of income. With five people looking for work for each job opening, it is not likely that the main reason for the high level of unemployment is that people are simply content to sit around all day doing nothing and live large on their princely $400 a week.
By this point, they have probably already cut back.They will have pulled little Jane out of karate and little Jimmy from his piano lessons. That means less income for the karate and piano teachers.Now with benefits cut off its is not just those extras that get cut, it is the electric bill and the gas bill.
Since one out of four houses are now underwater, it is very difficult for many of these people to tap the equity in their houses (there is none) which in previous downturns might have seen them through a rough patch. The rational response is simply to stop paying the mortgage, and live rent and mortgage free until the sheriff shows up at the door.That, however, eventually means more foreclosures, and when the bank sells the home, lower housing prices. It is also not going to be good for any of the companies in the mortgage complex, ranging from Wells Fargo (NYSE: [ WFC ]) to Fannie Mae (NYSE: [ FNM ], aka the taxpayers) to MGIC (NYSE: [ MTG ]).
With no income, they will not be able to go to Wal-Mart (NYSE: [ WMT ]) or Big Lots (NYSE: [ BIG ]) to get even essential supplies and food.They will have to turn to the local food banks, which are already very stressed in many areas of the country. The reduced demand from these people will lead to even more unemployment.That is why the non-partisan CBO scores extended benefits as one of the most effective stimulus programs on a dollar spent per job created/saved basis.
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