Economic News Offers Little Hope

Two news items today indicate the economy is in real trouble–and may be approaching an even tougher time in the near future.

  • The Fed’s Beige Book indicates the economy is getting worse. The Fed said that "economic conditions have weakened since the last report." Nine districts
    reported a lesser economic pace; the other three said activity was
    "mixed or steady."

The culprit? Housing: According to Bloomberg, because of the "worst housing contraction in a quarter
century," growth declined to a 0.6 annual pace from October to
December–a reduction from a 4.9 percent pace during the three
prior months.

  • Merrill Lynch lost $1.96 billion in the first quarter. Cringe-worthy news from Merrill–one of the firms that has been hardest hit by housing issues–included it posting $1.5 billion in collateralized debt obligation-linked
    writedowns and $3.1
    billion in Alt-A residential mortgage-related writedowns.

That brings Merrill’s writedown total to $27.4 billion for three quarters in a row.

And it’s causing Merrill to cut about 10 percent of its workforce–which fits right in with the Labor Department’s announcement today that it appears unemployment is rising. In the week ended April 12, unemployment benefit claims rose by 17,000.

In all: Not a great snapshot of a healthy economy, is it?

Speculation still exists about whether or not the country is headed toward a recession–some say we’re already in one–and things are not looking good.

If firms like Merrill Lynch aren’t through with seeing mortgage-related writedowns, unemployment is rising and the overall economy is slowing in more areas than it isn’t, can we still pull out of the tailspin to avoid a recession?

Those economic stimulus checks should be on their way soon … will that provide enough of a burst to consumer spending to save the day?

Or are we doomed to stand by and watch while our economy contracts further–and further–until it is officially declared as being in a recession?

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