Monday, November 26, 2007

CitiGroup May Layoff 45,000 Employees

MarketWatch reported that "Citigroup shares fell more than 5% Monday, falling under $30 for the first time in five years after CNBC reported the firm could lay off up to 45,000 staffers. "

"The expected layoffs are the result of several billion dollars of mortgage losses at Citigroup.
The bank said Monday that it's in a planning process to become more efficient and cost effective as the financial-services giant grapples with billions of dollars in losses from the subprime mortgage-fueled credit crisis. "

"CNBC described the layoffs as "massive" and said they would not be restricted to the fixed income and mortgage divisions."

"In April, Citi set layoffs of 17,000 people, or about 5% of its more than 300,000 employees. "

The layoffs are probably just getting started in the financial sector. The official unemployment rate remains low but is expected to increase as layoffs continue in the financial and real estate related sectors.

Don't Look Now, Here Comes the Recession

Fortune Magazine reports that "The cash registers were ringing on Black Friday, but make no mistake: American consumers are jittery, and seem all but certain to push the U.S. economy into recession. "

"After years of living happily beyond their means, Americans are finally facing financial reality. A persistent rise in energy prices will mean bigger heating bills this winter and heftier tabs at the gas pump. Job growth is slowing and wage gains have been anemic. House prices are sliding, diminishing the value of the asset that's the biggest factor in Americans' personal wealth. Even the stock market, which has been resilient for so long in the face of eroding consumer sentiment, has begun pulling back amid signs of deep distress in the financial sector. "

"With consumer spending accounting for about three-quarters of U.S. economic activity, some economists say it is inevitable that the economy will stop growing at some point in the coming year, for the first time since the mild recession of 2001. "Right now, the question is how bad it's going to get," said David Rosenberg, chief North American economist at Merrill Lynch. "The question is one of magnitude." "

Saturday, November 24, 2007

Strong Black Friday Sales, But a Shift Towards Cheaper Stores

From initial reports, the holiday season started off with strong sales, with a shift towards discount retailers.

The nation's retailers had a robust start to the holiday shopping season, according to results announced Saturday by a national research group that tracks sales at retail outlets across the country.

According to ShopperTrak RCT Corp., which tracks sales at more than 50,000 retail outlets, total sales rose 8.3 percent to about $10.3 billion on Friday, the day after Thanksgiving, compared with $9.5 billion on the same day a year ago. ShopperTrak had expected an increase of no more than 4 percent to 5 percent. (AP 11/24/07)

The intial reports showed shoppers appeared more interested in bargains then in upsacle shopping.

With an uncertain economy, a slowdown in the housing market and high gas prices hanging over their heads, consumers flocked to discount chains like Wal-Mart, Target and Best Buy, brandishing bargain-filled fliers.

In a reversal from years past, they largely bypassed more expensive retailers, including such powerhouses as Nordstrom, Coach and Abercrombie & Fitch, according to shoppers and merchants interviewed around the country (NYTimes 11/24/07).

Black Friday often sets the tone for the holiday shopping season. Perhaps, this holiday season's sales will be disappointing for retailers, as consumer cut back due to economic weaknesses.

Friday, November 23, 2007

Black Friday

Consumer spending makes up almost 70% of the US economy. A disproportionate amount of that spending occurs in the post Thanksgiving holiday season.

As US retailers prepare for Black Friday, the day after Thanksgiving that marks the start of the Christmas season, festive cheer seems limited.

With US economic growth hit by the downturn in the housing market, and the knock-on credit crisis, recent data has shown a sharp fall in retail spending.

And as US consumers seem less willing or able to spend, most retail analysts expect this downturn to continue.

"The holiday season will be terrible," said economist Ian Shepherdson. (BBC News 11/23/07)

What will happen to consumer spending this Black Friday compared to last year? How will the holiday season stack up against last year? Will consumers cut back, due to economic problems (high gas, housing bust, etc), or will they callously shrug off the economic problems and spend?

Thursday, November 22, 2007

Happy Thanksgiving

Happy Thanksgiving to everyone! Enjoy!

Wednesday, November 21, 2007

More Americans Expecting Recession in The Next Year

More Americans are expecting a recession in the next year. Consumers are waking up to the reality that the economy has a significant chance of recession next year.

The economic mood took a sharp turn for the worse over the past month, with 40 percent of Americans expecting a recession in the next year, according to a Reuters / Zogby poll released Wednesday.

That was a big rise from a month earlier, when 31 percent of the likely voters polled predicted a recession. The darker mood came as mounting concerns about housing and credit markets pounded Wall Street, and oil prices approached $100 per barrel.

That was a big rise from a month earlier, when 31 percent of the likely voters polled predicted a recession. The darker mood came as mounting concerns about housing and credit markets pounded Wall Street, and oil prices approached $100 per barrel. (CNBC 1/21/07)

Recession times are increasingly being expected. The coming holiday spending season will likely provide important clues to where consumer spending is headed. Consumer spending is about 70% of the US's GDP. Consumer spending is a key factor in a forecasting a recession.

Tuesday, November 20, 2007

Googling "recession" from United States has Tripled in the Past Year

Graph of the number of times the word "recession" was googled from United States over the last year. As one can tell it has triple in the past year.

Sunday, November 18, 2007

Nouriel Roubini: "clear by now that a severe U.S. recession is inevitable in next few months."

Nouriel Roubini, a leading economist at New York University, is now saying that a US Recession is almost here:
"It is increasingly clear by now that a severe U.S. recession is inevitable in next few months. Those of us who warned for the last 12 months about a combination of a worsening housing recession, a severe credit crunch and financial meltdown, high oil prices and a saving-less and debt-burdened consumers being on the ropes causing an economy-wide recession were repeatedly rebuffed the consensus view about a soft landing given the presumed resilience of the US consumer."

"But the evidence is now building that an ugly recession is inevitable."
Roubini is a smart economist who often goes against the consensus view.

Economist: America's Vulnerable Economy

Thursday, November 15, 2007

Tuesday, November 13, 2007

Risk Factors For A 2008 Recession

Here are the top risk factors for 2008 US Recession:

  • Continuing Housing Bust
  • High Oil Prices
  • Security Issues
  • Credit Crunch
  • High Consumer Debt
  • Large Trade Deficit
  • Consumer Spending is slowing (it makes up 70% of the US GDP)
  • Commercial Construction decline

Monday, November 12, 2007

Recession Fears Grow

Reuters reports that "Unsold goods are piling up in warehouses as the housing meltdown and soaring oil prices strain consumers, raising fears that already glum fourth-quarter growth prospects may tip toward recession."

"The sluggishness is apparent in the retail sector, where 70 percent of chain stores posted weaker-than-expected October sales results, according to research firm Retail Metrics.

"We expect the challenging retail environment to continue for the foreseeable future," Mike Ullman, chairman and chief executive officer of department store chain J.C. Penney (JCP.N: Quote, Profile, Research), said last week. He added that the company would keep inventory levels tight through 2008."

Respected economist Nouriel Roubini writes "Any recession call for the U.S. is clearly dependent on US consumption faltering. Since residential investment is only 5% of even a worsening housing recession cannot – by itself – trigger an economy-wide recession. Rather, since private consumption is over 70% of aggregate demand a sharp and persistent slowdown in consumption growth – below 1% or even negative - is necessary to trigger a full blown recession