By Daniel Costello

In recent months, Jon and Kate Gosselin have reminded us what Thomas Robert Malthus has been warning about since the 1700s: unbridled population growth can be a very dangerous thing. This week, the Economist has an interesting look at why our worries may be unfounded, as long as TLC goes off the air some day soon.

In a cover story on falling fertility rates around the world, the magazine looks at economic and other benefits to tidbits like this: "sometime in the next few years (if it hasn't happened already) the world will reach a milestone: half of humanity will be having only enough children to replace itself. That is, the fertility rate of half the world will be 2.1 or below." Assuming fertility continues to fall at current rates, the United Nations estimates world's population will rise from 6.8 billion to 9.2 billion in 2050, at which point it will stabilize.

That raises this question: is a stable global population good for the globe or no? It's probably good for the environment of course. And yet without more kids, who is going to pay for the growing ranks of the elderly and rising health care and retirement costs around the world? Take a read and lets us know your take.

By Laura Conaway

Seventy-eight firms surveyed by the National Association for Business Economics say the overall picture is looking up. Demand is rising, and so are profits. The panelists predict the U.S. economy will grow at an annual rate of one to three percent in 2010 -- one percent being really, really low.

And then there's what this might mean for average workers:

The percentage for firms adding jobs doubled from an all-time low of 6 percent in July to 12 percent in October. Respondents expecting their firms to add employees over the coming six months exceeded the number expecting job cuts for the first time since the recession began.

Meanwhile, the Federal Reserve Bank of Dallas reports in its Texas Manufacturing Outlook Survey that October hasn't been so great -- but the future's getting shinier. More firms were cutting labor than hiring, even as seven out of 10 told the central bankers they'd made no changes in staffing.

By Laura Conaway

Don't blame Alan Greenspan, at least not too much. That's one of the unstated conclusions from the International Monetary Fund in its World Economic Outlook for October. The IMF looks at causes and cures of the economic crisis, and finds that "monetary policy was not the smoking gun."

Greenspan, the former chair of the Federal Reserve, kept interest rates low during the first part of this decade. Economists, including ones Planet Money talks to, say Greenspan's policy steered investors away from relatively safe instruments like U.S. Treasurys and into riskier mortgage-backed securities.

The IMF notes that loose monetary policy had an effect, then concludes "it is not likely to have been the main systematic cause of the booms and subsequent busts across the global economy." Central banks did miss the warning signs, the IMF says, and thus the chance to raise rates and stave off a crisis.

After the jump, how long will the crisis drag on?

Continue reading "IMF: Get Ready For A Long Haul" >

By Laura Conaway

The Conference Board, home of the Consumer Confidence Index, says it sees brighter times ahead. Its Leading Economic Index rose in August for the fifth straight month.

The index purports to look ahead by six to nine months. Last month it climbed 0.6 percent to 102.5, the highest level since January 2008. From Conference Board economist Ken Goldstein:

"This suggests that the recession is bottoming out. These numbers are consistent with the view that after a severe downturn, a recovery is very near. But the intensity and pattern of that recovery is more uncertain."

Before the recent run of upticks, the Leading Economic Index had fallen for 20 months in a row -- the longest sustained fall since the 1970s recession. After the jump, what an equation will get you.

Continue reading "'Leading Economic Index' Climbs For Fifth Straight Month" >

By Laura Conaway

Economists in a new Wall Street Journal survey (subs. requ'd.) say the labor market should start adding jobs within the next 12 months but that unemployment will keep growing into 2010. From the WSJ:

"We are in a technical recovery, but risks remain abundant," said Diane Swonk of Mesirow Financial. "It will still take some luck and skill to get Main Street to feel some of the relief Wall Street has felt."

You can say that again. The survey includes 51 economists, 41 of whom say the recession is over and the recovery has begun. Their average prediction for the peak of unemployment is 10.2 percent. It was at 9.7 percent in August, and the economists say it will likely be 9.3 percent at the end of 2010.

The OECD says consumer confidence is still low. The dark blue line is the U.S. (Click to enlarge.) (OECD)

By Laura Conaway

The economy may get better faster than expected, the Organisation for Economic Cooperation and Development says in a new report.

The OECD now predicts that economic growth will fall by 3.7 percent this year across the wealthy, industrialized nations of the G7. It's still not great news, but it's better than 4.1 percent drop projected in June 2009.

The OECD notes that the credit markets have calmed down, though bank lending continues to decline. The housing markets have also begun to stabilize, the report says, global trade has reached a bottom and export orders on the rise.

Among the charts is the pair you see here, tracking the difference between consumer confidence (above) and business confidence (after the jump). The data come from different pools, so you can't make a one-to-one correlation. Still, I'm interested in the steady rise on the business side -- and in what looks like relative optimism.

Continue reading "OECD Says Economy's On The Mend. Who's Feeling Confident?" >

Economist Nouriel Roubini says he's worried about the continued decline in manufacturing. He told a Reuters gathering that the economy won't recover until the end of the year, and then only weakly and with the risk of contracting again.

Roubini's not countenancing talk of green shoots.

"To me it's more like yellow weeds," he said.

The Federal Reserve just released the latest Beige Book, its survey of economic conditions across the country. The good news is that the downturn seems to be moderating in five of the 12 districts. The bad news is the job market, almost the whole thing:

Labor market conditions continued to be weak across the country, with wages generally remaining flat or falling. Two Districts also mentioned employers' plans to scale back employee benefit programs. The Atlanta, Chicago, and St. Louis Districts reported that some state and local governments faced hiring freezes or outright job cuts. While manufacturing employment levels remained low, some Districts saw signs that job losses may be moderating.

The folks worrying about inflation because of all the federal borrowing may have to wait a minute. The Fed says prices are flat or heading downward at every stage of production.

Hold up, computer programmers. Devin Dwyer

 

The class of 2009 is facing one of the toughest job markets in decades.

Just 19.7 percent of soon-to-be grads who have applied for jobs will actually have one at graduation, says the National Association of Colleges and Employers. And many haven't even started looking for work: Only 59 percent say they've started a job search, compared with 67 percent at this time last year.

If you're on the job hunt, recent grad or not, consider a career as a network data analyst or mental health counselor.

The Bureau of Labor Statistics predicts those jobs and others like them will be among those posting the largest percent increase in hiring over the next 10 years.

Other occupations projected to grow by 30 percent or more in the next decade include computer software engineers, veterinarians, and personal financial advisers.

Federal Reserve Chairman Ben Bernanke went to Capitol Hill today and confirmed the darker side of the rosy scenario. Economic activity could "turn up later this year," he said. And then:

Even after a recovery gets under way, the rate of growth of real economic activity is likely to remain below its longer-run potential for a while, implying that the current slack in resource utilization will increase further. We expect that the recovery will only gradually gain momentum and that economic slack will diminish slowly. In particular, businesses are likely to be cautious about hiring, implying that the unemployment rate could remain high for a time, even after economic growth resumes.

Bernanke's full testimony is up at the Federal Reserve. Calculated Risk runs the factcheck on Bernanke's remarks about real estate -- the chairman does all right.

Here's a new report from S&P on the state of residential mortgage-backed securities. It says that of the $3.7 trillion issued since 2004, what's left is now valued at just $1.7 trillion. And that there could be another $375 billion to come.

Mike Thompson, whom we've had on the podcast, worked on the report. He told the Wall Street Journal:

"There are going to be more defaults, but the worst of the big downward lurches are probably over and the systemic threat from the residential mortgage market is diminished."

The International Monetary Fund yesterday estimated total losses on all kinds of toxic assets globally. It put the number at $4.1 trillion.

Hello, synchronous recession. The International Monetary Fund gives a preview of its semiannual World Economic Outlook today. It's grim:

The duration of a synchronous recession is, on average, nearly 1.5 times as long as the duration of the typical recession. Recoveries are usually sluggish, owing to weak external demand, especially if the United States is also in recession: during the 1975 and 1980 recessions, sharp falls in U.S. imports contributed to a significant contraction in world trade.

Continue reading "IMF Sees Long Recession" >

Whole lot of hollering going on about the travails of retail. The Wall Street Journal reports that analysts predict up to a quarter of all stores are having trouble and may need to declare bankruptcy.

Matthew Yglesias spins through the real implications for your local mall. The short answer is that bankruptcy might allow some stores a second life. The long answer depends on the much broader economy. "When consumer demand goes down, the first response is to discount the merchandise to make sure you can move it," Yglesias writes. "But the second response is to start stocking less inventory and operating fewer stores."

June 2009: That's the average date given by economists for the end of the downturn, in a new survey published by the Wall Street Journal.

Never mind that the headline is "Outlook Darkens as Recession Deepens." I'm living for that June 2009 bit, rightly or wrongly. How about this from the Journal:

"The downturn would be deeper still, in our view, were it not for an ultra-aggressive combination of monetary and fiscal stimulus that will soon move into high gear," Morgan Stanley economists Richard Berner and David Greenlaw said in a research note. "Authorities are pulling out all the stops: Quantitative easing by the Fed and the largest-ever fiscal stimulus package likely will promote stability in the economy late in 2009 and a moderate recovery in 2010."

No matter who wins today's elections, it's likely taxes are going up sometime soon. But how much?

Over at Intrade, you can bet on the future tax rate. Currently, the implied probability of a hike in the top income rate in 2009 is about two-thirds. That's a pretty big consensus and it surprised me.

How do you all interpret these numbers?

U.S. holiday sales could be even worse than Christmas bears have been predicting.

Rating giant Moody's -- of course not the most trusted name on Wall or Main Street after its blind endorsements of many shaky investment vehicles in recent years -- said it has grown more pessimistic about holiday retails sales because it believes spending this year will prove even weaker than many expect. Let's hope for a December surprise.

The U.S. unemployment rate was 6.1percent in September. Everyone expects that number to keep rising, but few agree on how much. The biggest pessimists worry one out of 10 Americans could be out of work in the near future. That would be baaaad.

The jobless rate hit just under 9 percent in the 1974 recession and hit 10.2 percent in 1982. That level is higher than it had been since WWII and has never been surpassed since then.

Here's a breakdown of how the jobless rate could really climb, industry by industry. Hard to believe how upbeat the economy looked just a year ago.

A couple of listeners mentioned this news from economist Nouriel Roubini, as found on Bloomberg:

"We've reached a situation of sheer panic,'" said Roubini, who predicted the financial crisis in 2006. "Don't be surprised if policy makers need to close down markets for a week or two in coming days."

I'll see if I can find Roubini for the podcast today. UPDATE: Roubini's traveling at this exact moment. I'll see if we can get someone in his office to help us.

(David Kestenbaum files on hedge funds.)

Federal Reserve Chair Ben Bernanke says we're in for it, and we'll get over it. From the Financial Times, "Bernanke Warns of Slow Recovery":

"I am not suggesting the way forward will be easy, but I strongly believe that we now have the tools we need to respond with the necessary force to these challenges."

Boy, it sure feels good to have the stock market going back up, right? Not so fast. Former Federal Reserve Chair Paul Volcker pops up today, forecasting a "considerable recession":

"I've seen a lot of crisis, but I've not seen anything quite like this one," Volcker said in a speech in Singapore. "I don't think we can escape damage to the real economy. I think we almost inevitably face a considerable recession."

(H/T: Calculated Risk)

Nouriel Roubini, chairman of Roubini Global Economics and professor at New York University Stern School of Business, believes we are on the verge of the "mother of all bank runs." He predicts an international savaging of bank reserves that would crash the entire financial system:

The next step of this panic could become the mother of all bank runs, i.e. a run on the trillion dollar plus of the cross border short-term interbank liabilities of the US banking and financial system as foreign banks as starting to worry about the safety of their liquid exposures to US financial institutions; such a silent cross border bank run has already started as foreign banks are worried about the solvency of US banks and are starting to reduce their exposure. And if this run accelerates -- as it may now -- a total meltdown of the US financial system could occur. We are thus now in a generalized panic mode and back to the risk of a systemic meltdown of the entire financial system. And US and foreign policy authorities seem to be clueless about what needs to be done next. Maybe they should today start with a coordinated 100 bps reduction in policy rates in all the major economies in the world to show that they are starting to seriously recognize and address this rapidly worsening financial crisis."

Think he's right, or wrong?

All things considered, the beleaguered financial sector wasn't so cruel to the job market last month. The caveat is that many economists believe it could be months before the full effect of the credit market crisis is felt.

Employment consulting firm Challenger, Gray & Christmas estimates business owners are expecting layoffs at a 7.2% higher clip compared to a month ago. That's up 33% compared to the same month last year.

Reports like these also may be evidence that we should be bracing for a period of much higher unemployment -- no matter whether Congress passes the porked-up bailout bill.

Janet Hildreth of San Francisco told the paper she expects to lay off half her 40-person staff this week because she can't get access to credit despite her stellar credit history.

"I'm mad at the banks," said Hildreth, 47. "Because of all the deadbeats, they're coming after me. But they're contributing to the problem by denying credit . . . to people who've never been late."

Continue reading "More Layoffs On The Horizon?" >

And finally some good news -- if it can be called that.

Health insurance premiums rose a moderate 5% in 2008, according to a closely watched annual survey by the Kaiser Family Foundation released Wednesday.

The health insurance cost increase was the same as last year, but far below the 14% climb five years ago.

Overall, premiums for families increased to $12,680 and coverage for individuals jumped to $4,704. (Employers typically pay about 75% of those costs.)

One other finding of note: the number of American workers in high-deductible health plans -- the "consumer directed" plans introduced by the Bush administration a few years ago to much fanfare but low enrollment -- climbed from 12% to 18%.

The plans offer skimpier coverage but do come with significantly lower costs, and apparently more consumers finally are snapping them up.

Note to Wall Street: Don't expect Christmas to cheer you up this year.

The National Retail Federation said Tuesday it is predicting holiday sales will grow at their slowest pace in six years as consumers fret about their jobs, Wall Street and the economy.

According to the trade association, retail sales during November and December - excluding auto, gas and restaurant spending - are expected to rise just 2.2, to $470.4 billion, a much slower pace than the average annual increase of 4.4% over the past decade. That would make 2008 the worst holiday season for retailers since 2002, when sales increased only 1.3%.

The group cited financial pressures such as the faltering housing market, rising unemployment and high food and energy costs.

"Current financial pressures and a lack of confidence in the economy will force shoppers to be very conservative with their holiday spending," said NRF Chief Economist Rosalind Wells. "We expect consumers to be frugal this season and less willing to splurge on discretionary items."

Mortgage rates are falling, now that the federal government is rescuing Fannie Mae and Freddie Mac. The average 30-year loan is now .3 percent cheaper, and may get cheaper still.

That's not the only number heading south. The estimable minds over at Calculated Risk say the value of homes -- and for buyers, the sale price -- should continue to slide. Calculated Risk sees a correction of another 15 to 30 percent on the way. Why? Simple supply and demand. Over the last six years, the site says:

[m]onths of supply increased to 11.2 months. A normal range is 5 to maybe 8 months. Until the months of supply decreases to the normal range, prices will continue to fall.

It's a terse, vague press release from FDIC that's got me scared today. (HT: Calculated Risk)

The release -- in high bureaucratize -- tells us that the nation's banking regulators are working with banks on "capital-restoration plans." Then comes the chilling part:

All institutions are reminded that investments in preferred stock and common stock with readily determinable fair value should be reported as available-for-sale equity security holdings, and that any net unrealized losses on these securities are deducted from regulatory capital.

Let me translate.

They are saying that a bunch of banks have so much Fannie and Freddie stock that they are now in serious trouble. They don't have the basic amount of money needed to run a bank, according to U.S. law and regulation.

The banking regulators want to work with the banks. But they're going to hold them to the rules.

This means, I am pretty sure, that we'll be seeing a bunch more banks fail in the coming weeks.

The press release does say most banks do not have risky levels of Fannie and Freddie debt.

When I hear about the mortgage mess, I sometimes find myself thinking that at least we're wiser for it, that this was just a kind of bad first date with the global economy, but we know better now.

That is not the view of Antonio Palocci. Palocci was the finance minister of Brazil, and he spoke up, after some prompting, at this conference I'm attending. (It's filled with former ministers -- the idea being that they can finally speak their minds since they've left their political jobs.)

"I had decided not to speak about this subject because I am a little too pessimistic.," Palocci said. "The question that I ask myself is 'Do we have the capability to avoid bubbles?' I think we cannot."

Bubbles are the result of "inevitable movements of the market," he said. He didn't go into detail, but I think he's talking about the growing quantities of money racing around the world, the tendency of investors to love one product to excess, the inevitable complexity of things. Other former ministers here were more optimistic and talked about how new regulations or institutions might stop bubbles, or at least keep them from growing so big. But Palocci worried instead that things might get worse as national economies merge into a single global one.

He spoke in Portuguese, so an interpreter had to put all that into English. When Palocci was done, John Snow, the former U.S. Treasury secretary, gave his own distillation. "I summarize him by saying, 'We have met the enemy and it is us.' "