Archive for the ‘economy’ Tag

Faces of the recession in San Francisco

I thought it would be illuminating to get past the abstract brutality of the reported figures, to match some real faces with the numbers. A short visit today to the California Employment Development Department on Turk Street provided about 40 of them.

“Unemployed Men sitting on the sunny side of the San Francisco Public Library” by Dorothea Lange. Feb. 1937. Courtesy of the San Francisco History Center.

“Unemployed Men sitting on the sunny side of the San Francisco Public Library” by Dorothea Lange. Feb. 1937. Courtesy of the San Francisco History Center.

At a “job focus workshop” for people collecting unemployment insurance, the EDD instructor directed the conversation around two crowded conference room tables. People of all kinds listed their occupational fields and spoke briefly about how their job search was going. Not at all well. A few remained upbeat, but the discouragement and resignation among many was palpable. To some degree it was a matter of the diverse Bay Area economy, but the breadth of the carnage was still astonishing. No age or job sector was immune.

There were as many mid to senior-level professionals as working class folks, if not more of them. David, a lawyer for an energy company. Linda, a commercial real estate broker. Michael, a manager from a biotech firm. Also present: several people in marketing and sales, two people in the printing business, two bank tellers, an accountant, a travel agent, a telecom maintenance worker, a warehouse manager, an ice cream delivery truck driver, a construction worker, a creative director for an advertising agency, an environmental consultant, a mental health worker and a professional photographer.

The health care industry is said to be one of the few bright spots right now in terms of prospects. But here, too, was Olga, a soft-spoken middle-age woman, recently laid off from her job at a nursing home. Next she tried to pick up work as a home-care provider, but that didn’t last either. Apparently people losing their jobs are also giving up on health insurance for themselves and their families.

“This week I’ve been going door to door at offices downtown, asking to see if they need a receptionist,” Olga said. “Nothing yet.”

Someone across the room let out a small sigh.

Recently, a friend of mine who works downtown noted that the buses headed there during morning rush hour have been noticeably less full. Some popular lunch spots have started to look sparse. On a recent afternoon she was in a sandwich shop when a Latino man walked in, approached the counter and simply began pleading in a broken accent.

“I need a job,” he said, “I need a job.”

Putting lipstick on a bear

The Dow Jones average is swimming down around 6,800 today, hitting a new 12-year low. If in a basic sense the stock market represents a rough overall valuation of the U.S. economy, then the U.S. economy is now worth less than it was in April of 1997. Whether that’s realistic I have no idea, but either way it seems a rather stunning measure.

In recent days, by way of working on a forthcoming magazine article, I’ve been taking in a sizable dose of CNBC, the ubiquitous financial news network. The channel is watched obsessively by most on Wall Street (I saw this firsthand on a recent reporting trip to the New York Stock Exchange and surrounds), and its constant chatter can be found in airport lounges, urban corner stores and no doubt the many living rooms of America’s investor class. The personalities hosting CNBC’s various shows do produce substantive reporting on the financial world daily, but much of the air time is filled with infotainment, emphasis on tainment. In addition to the usual stream of industry banter and speculative investing ideas, these days there’s no shortage of finger-pointing commentary about the policy maneuvers of the Obama administration.

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Still, you can’t run a popular cable network on a steady drip of downer, so today the hosts of CNBC’s “Power Lunch” have been trying their darn best to dress up another ugly day on Wall Street. Courtesy of their “smart strategies special,” cue the segment: Three ways to make money in value stocks!

“Apparently there are more value stocks out there than ever,” announces Sue Herera, preparing to welcome two money managers who’ll offer favored picks.

“Value stocks are being created right now,” declares a smiling Bill Griffith, glancing sidelong at the sinking averages.

Good luck, folks. As James Grant noted in a sobering roundup of financial experts in yesterday’s Times, the truth about vicious bear markets is that they end when investors finally give up hope. “Hope sustains life,” Grant writes, “but misplaced hope prolongs recessions.”

A reality check for the recovery plan haters

It doesn’t seem particularly out of the ordinary when Rush Limbaugh looks at Obama’s economic recovery plan and reiterates his desire to see the president fail. Or when Gov. Bobby Jindal, purportedly the rising star of the Republican Party, argues that federal spending is a bad way to pull the nation back from the brink. But these are no ordinary times — faced with the greatest domestic crisis in modern memory, at what point does hard-line politics make for sheer lunacy?

While reporting for a forthcoming magazine piece, I spoke recently with economist Dean Baker about some of the political right’s machinations regarding the economic meltdown.

“One thing that was amazing to me was people blaming the housing crisis on the Community Reinvestment Act. It makes no sense whatsoever,” said Baker, who is co-director of the Center for Economic and Policy Research in Washington. “The idea was widely circulated, so there are a lot of people out there who believe that what lies at the center of the crisis is that the government forced banks to make loans to poor people and minorities. That’s absurd, and the media should’ve been doing more to point that out.”

A few did, at least: Businessweek’s Aaron Pressman explained last fall why the 1977 federal law, requiring banks to lend in low-income neighborhoods where they take deposits, had little to do with the insidious subprime mortgages that inflated the housing bubble. (Pressman further pointed out that the Bush government in fact weakened the CRA, while enabling Wall Street to gorge on dubious derivatives and absurd leverage.) But the blame game holds powerful emotional appeal in dark days, and the warriors of the right soldier on in earnest. hannityfox Fox News’ Sean Hannity keeps repeating a debunked GOP talking point that the freshly signed $787 billion recovery package contains a $30 million provision to save a salt marsh mouse in San Francisco. Simply erroneous, as Congressman Joe Sestak pointed out this week on Hannity’s own show. (Here’s the video.)

Baker worries that partisan warfare will squelch political appetite for additional stimulus — which he believes will be necessary going forward. Obama had to fight hard just to get the first big spending plan through Congress. “Nobody wants to waste money,” Baker said, pointing out that job creation and a particular project’s usefulness are different issues. “But if the alternative is that people think we’re somehow going to benefit by not spending money, then they’re just on another planet.” Without more government spending to come, he said, “we could see this downward spiral continue for some time.”

California notebook: New highs, new lows

dojeradicationSan Francisco’s Tom Ammiano, a former city supervisor turned state assemblyman, wants to go green to help bail out the state from fiscal crisis. His plan would boost weed farms not wind farms. He introduced a bill Monday to legalize recreational marijuana and regulate it in a manner similar to alcohol, with a potential tax windfall of more than $1 billion. (The fragrant green stuff is thought to be a $14 billion cash crop in the state. Then there’s the potential savings in law enforcement costs in the hundreds of millions.) Not likely to fly, despite California’s reputation for cutting-edge policy and a devastating $42 billion deficit. But credit the San Francisco maverick for thinking creatively in a time of crisis. And credit the political opposition with the Most Mangled Cliché Award — said Calvina Fay, executive director of Save Our Society From Drugs, in the LA Times: “This would open another door in Pandora’s box.” (What’s she been smokin’?)

It’s been raining in the Bay Area for almost a week straight, happy news after a bone-dry January. But 2009 is on track for a third straight year of drought in California, with reservoirs still sitting at alarmingly low levels. It’s not just the prospect of shorter showers and less lush front lawns. As Jesse McKinley reported on the front page of Sunday’s New York Times, the twin calamity of recession and drought is hitting the Central Valley, the nation’s biggest agricultural engine, hard. Even as your income may be headed south, you’ll soon be paying more if you want almonds and avocados.

The once venerable San Francisco Chronicle may be the next casualty of the besieged newpaper industry. The paper lost more than $50 million in 2008 and is on pace to fare worse this year. Its owner, the Hearst Corporation, is demanding deeper cuts among an already downsized staff. If that doesn’t stem the tide of red ink, Hearst execs say, “we will have no choice but to quickly seek a buyer for The Chronicle, and, should a buyer not be found, to shut down the newspaper.” As with many others the publication’s reporting capacity has been shriveling as it struggles to survive the industry’s upheaval. But San Francisco without its oldest and largest newspaper? At the very least, another clarion call for digital journalism 3.0 to really get cranking.

Update: David Cay Johnston explains how the Chronicle, tellingly, failed to report adequately on its own serious situation.

Nothing to fear but everything itself?

With the stock market sitting at half the level it did a decade ago, and with new surveys showing carnage in consumer confidence and housing, I’m struck by the saturated language of the national nightmare. (It’s not just the apocalyptic headlines driving us to despair.) This story from the Associated Press today gathers the poetry of the pain — after its lead sentence announcing that American confidence went into “free fall” in February, the relatively short dispatch uses each of the following terms at least twice:

fear (2)homer_thescream
decline (2)
plummet (2)
plunge (2)
collapse (2)
severe (2)
slash (2)
shrinking (2)
battered (2)
suffer (3)
drop (4)
sink/sank (4)
worried (4)
low (6)

Superlative phrases in the story include “massive job cuts,” “driven to their lowest level ever” (consumer expectations) and “the largest drop in its 21-year history” (a national home price index).

Recently a friend sent me an email wondering why President Obama hasn’t done more to talk up confidence as he’s traveled around promoting his economic recovery plan. The answer probably lies most in the calculus of Capitol Hill, and the political pressure apparently needed to pass his legislative agenda. There’s also Obama’s admirable position that he won’t sugarcoat the truth about our troubles the way the administration before him did to such disastrous effect.

But it’s a daunting balancing act with perception at this point. You don’t have to be an economist to sense how the downward spiral of fear could itself become deeply damaging. (If it hasn’t already — as Robert Shiller warned in a recent column, a Great Depression narrative “could easily end up as a self-fulfilling prophecy.”) And Obama’s political opponents increasingly are able to agitate using raw emotional appeal: Last night CNN’s in-house ideologue Lou Dobbs hammered at Obama’s “fear mongering” and accused him of repeatedly talking down the markets and economy. In the New York Times today David Brooks feigns sympathy for the president while suggesting that Team Obama is in way over its head. (“I hope the president succeeds even though he probably won’t!” is the message.)

Many will be watching intently tonight when Obama addresses a joint session of Congress for the first time. The only positive polling in sight shows that he’s still got the thumbs-up on job approval from a decisive majority of the public. It’s a remarkable measure of confidence floating on a tide of ugly numbers — Americans believe Obama will sail us in the right direction, even with no horizon in view.

Apocalypse Dow

Just about every day the headlines across the national media range from grim to utterly frightening. Today being no exception.

Swift, Steep Downturn Crosses Globe and Automakers Seek $14 Billion More in Aid and Florida Court Blasts Through Foreclosure Cases and No One Can Escape the Crisis.
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As someone who has written many a front-page headline, I know not to underestimate the power publications have in setting a tone. At what point does the steady drip — or the full fire-hosing, as the case may be — become torture? And more importantly, does the flood of doom-laden headlines itself deepen the economic crisis? Obviously the role of reporters and editors is to cover what’s going on in the world to the best of their knowledge and belief. No doubt the current economic reality is ugly. But the public mood matters, not least because so much of U.S. economic activity is based on consumer spending.

I’m working on a related magazine article right now and have been looking into how the media’s influence on the economy can be measured. According to a study published in 2004 from the Federal Reserve Bank of San Francisco, media coverage does have an impact — and sometimes can even serve to unhinge sentiment from reality:

In addition to moving in line with [data on] economic fundamentals, consumer sentiment also swings in response to the tone and volume of economic reporting by the media. Over the past 25 years, there have been several periods when the tone and volume of economic reporting pushed consumer sentiment significantly away from what economic fundamentals would suggest.

In an article published in Political Research Quarterly, economists concluded: “Consistent with previous research, we find that, overall, the media tend to follow negative economic conditions more closely than positive economic conditions.” And those findings were published back in 1995, when media ubiquity and consumption was a sliver of what it is today.

To its credit, National Public Radio’s “Morning Edition” tried in earnest on Tuesday to buck the trend, tracking down a relatively upbeat economic story in Youngstown, Ohio. (A thriving bit of technology entrepreneurship in the Rust Belt, of all places!)

Until it soon returned to the horror show: Zombie Banks Feed Off Bailout Money.

Toxic banks one-up bin Laden

I’ve been thinking about the economic crisis as a rising national security danger since sometime back in December, and I’m sure I haven’t been alone, even though scant attention has been paid in the mainstream media — until now. It’s only an odd coincidence that the same day earlier this week that I was suggesting we’d soon be hearing more from President Obama’s intelligence chief on the matter, Dennis C. Blair was in fact on Capitol Hill sounding the alarm. The global economic crisis now represents the top security threat to the United States, he told the Senate Intelligence Committee on Thursday.

“Roughly a quarter of the countries in the world have already experienced low-level instability such as government changes because of the current slowdown,” Blair said. (That would be nearly 50 countries. Including Iceland, whose government collapsed three weeks ago.) Blair further warned of the kind of “high levels of violent extremism” seen in the 1920s and 1930s if the economic crisis persists beyond 2009.

The fears have now reached the front page of Sunday’s New York Times: “Unemployment Surges Around the World, Threatening Stability.” The trio of images above the fold are a quick world tour of worker displacement and unrest, from Bejing to Reykjavik to Santiago, where street graffiti declares “unemployment is humiliation.”

<em>Ivan Alvarado/Reuters</em>

Ivan Alvarado/Reuters

Just one glaring manifestation of a troubling global trend.

From decadent to ominous in Dubai

Laid-off foreigners are fleeing Dubai as the emirate’s economy collapses, according to Thursday’s New York Times. Thousands of their abandoned cars reportedly now sit at the Dubai airport, while dark rumors spread about luxury developments sinking (literally) and lavish hotels turning decrepit.

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Long ago I was astonished by the development-cum-decadence of Dubai — the excess seemed nuts even in unprecedented oil-boom times. (The desert as home to the world’s largest indoor snow park? A 154-story skyscraper sired by a “cybersheik”? A giant artificial island whose palm-tree-shaped land cost north of $12 billion in reclamation alone?) It couldn’t end well.

Now it may well be ending. What’s most haunting about the Times report isn’t the opening tale of a young French expat who leveraged herself with a $300,000 apartment and may have to flee the country or face debtors’ prison. It’s the circumstances of Hamza Thiab, a 27-year-old Iraqi who relocated from Baghdad to Dubai in 2005, and who lost his job with an engineering firm six weeks ago:

Mr. Thiab was sitting in a Costa Coffee Shop in the Ibn Battuta mall, where most of the customers seemed to be single men sitting alone, dolefully drinking coffee at midday. If he fails to find a job, he will have to go to Jordan, where he has family members — Iraq is still too dangerous, he says — though the situation is no better there.

What happens with all of those frustrated young men when the shaky economies of the Middle East really implode? (It seems unlikely the price of oil will scale Burj Dubai-esque heights again any time soon.) In the early days of the Obama presidency we’ve been terribly preoccupied with our own reeling economy, and understandably so. But the peril clearly is global (never mind that silly theory of “decoupling” in vogue not long ago) and certain areas of the world are looking increasingly explosive just beneath the surface. It’s all stimulus bills and Obama’s economic team in the headlines of late, while only a few voices have drawn an explicit connection between economic and national security. But soon enough we may be hearing a whole lot more from Obama’s Director of National Intelligence and Joint Chiefs of Staff.