Archive for April, 2008|Monthly archive page

Statistics and Stories Behind the Financial Crisis

The statistics are staggering, but they reflect only a part of the unemployment picture. Self employed consultants, lawyers and other professionals dependent on one or two important clients do not qualify for unemployment benefits when they lose those clients, thus do not factor into most unemployment statistics.

Counted or not, they are no less unemployed. And for the very marginally employed, especially if you are single, there are few bright spots. Assistance is not available where you have even a tiny source of income. They don’t call it the poverty level for nothing.

The cost of looking for work, especially professional or managerial type positions, is substantial. Networking costs money. Trying to look good costs money. When you are living on a shoestring the cost of a haircut, a cup of coffee or parking at downtown networking event is often out of reach. When you factor in the cost of keeping a roof over your head, the utilities on, food for your family and gasoline for your car – staying afloat is a daunting task.

Each day of unemployment generates more debt. Late fees on car payments, phone bills and the like are astronomical; each month a bill is not paid adds to debt. This is why Bill Callahan’s post on the flaw in the foreclosure compromise bill is so important. If you are lucky enough to get a job after a prolonged period of unemployment the amount of debt can overwhelm what is most likely a lower salary. Bankruptcy offers the possibility for a fresh start. The importance of keeping your home in rebuilding a life cannot be overstated. But the Bankruptcy Court cannot offer you restructuring or deferment on your home mortgage. If you have a second home or a boat you could get that – but not for the home you need to live.

This is insanity. McCain made a statement intimating that the need for foreclosure assistance is the result of borrowers acting irresponsibly. When you have a job and buy a house you can pay your mortgage. When you lose your job and have to choose between food and the mortgage, you most likely will choose food and not pay the mortgage. This isn’t irresponsible – this is having no choice.

Bankruptcy and credit reporting reform is essential to solving the foreclosure crisis. Unless you have lived through long term unemployment you have no idea of the hardship encountered when you try to get back on your feet. Credit dictates everything – banking, insurance and sometimes even your search for a job. Almost to a person those in government, democratic or republican, have never experienced what many Americans are living through in this economic downturn. If they were challenged to live on the income available to the average unemployed American for a month of two, maybe they would begin to understand. It worked to bring awareness to hunger.

For middle class professionals the stigma of job loss and poverty is profoundly isolating. Drive through any suburb. What you see may look affluent and stable, but I guarantee you, behind those doors are families in crisis. Families struggling to pay their bills, put food on their table and gasoline in their cars. They don’t go to sleep fearing a 3 AM call to the White House about terrorism; they worry about the grinding noise in the driveway (is their car being repossessed) or the power surge that makes them think the electricity is being turned off.

People need to look at what is happening in their neighborhoods – I live in an upper middle class suburb. Many of my neighbors are hanging on by a shoestring. There are five houses empty on my block – their owners moved suddenly. What do you think happened? I think job loss and foreclosure.

People need to tell their stories, without shame.

The Statistics

CNN Money.com

The Labor Department now estimates that the economy has shed 232,000 jobs in the first three months of this year.

The revisions are the real surprise in the report,” said John Silvia, chief economist for Wachovia. “If we had known it was anything like that, there would not have been any debate going on about whether we were in a recession. It’s pretty stark.”

The job losses were widespread, with the battered construction sector losing 51,000 jobs and manufacturing employment falling by 48,000. But there were also losses in key service sector industries. Retail employment dropped by 12,000 jobs, and business and professional service employers cut staff by 35,000. …

The unemployment rate jumped to 5.1% from 4.8% in February. The new reading is the highest level since September 2005 in the wake of Hurricane Katrina. Economists had forecast that unemployment would rise to 5%.The unemployment rate is based on a separate survey of households, rather than the employer survey that produces the closely watched payroll number.

The household survey gave an even grimmer view of job losses. It found that the number of Americans saying they were unemployed soared by 434,000, the biggest jump in that reading since October 2001, right after the Sept. 11 attacks.

Bloomberg.com reports

— The number of Americans filing first-time claims for unemployment benefits unexpectedly increased last week to the highest level since just after Hurricane Katrina in September 2005. Initial jobless claims climbed by 38,000 in the week that ended March 29 to 407,000, the Labor Department said today in Washington.

The four-week moving average, a less volatile measure, rose to 374,500 last week from 358,750, Labor said.The biggest housing recession in a generation, coupled with mounting losses in financial markets, is prompting companies to sack workers and consumers to slow their spending.

The Stories Behind the Statistics

America’s Money: In Their Own Words

For Laura Martin-Wilson it is summed up in 3 words – “No Jobs Anywhere.”

I sold my house in Atlanta (at a small loss) in 2006 to move to Sarasota for a new position. In the process, I met and married my husband. He works in Tampa, and since my job was in Sarasota, we bought a brand new house halfway in between.

While the cost of living in Florida is much higher than in Atlanta, we were making a comfortable living and were able to pay the bills with no problem. Until January — when I lost my job.

As this is being written, I am awaiting the payout on my 401(k) – what remains after taking the 10% down payment for our house. After night after night of tossing and turning, it seems to be the only solution to paying the bills, and hopefully not having to foreclose on our home.

I am sending resumes daily, and am even looking in other states for a job. In our part of Florida, the job market is practically non-existent. I am 39 years old and have managed to maintain great credit. I feel like I may be going into a downward spiral, beginning with the distribution of my 401(k).

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