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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

Category: Midweek Economic Briefing
November 18, 2009 at 9:40 AM

The entirely predictable ‘unexpected’ housing drop — and vote on the jobs mess

Top of the News: The only ones caught short by the “unexpected” nosedive in new house permits are people who haven’t been paying attention.

Sprawl housing construction became the major manufacturing sector in the 2000s as much of the rest of the productive economy was hollowed out. But it rested on consumers taking on unsustainable amounts of debt in tandem with the “creative” financial activities and swindles on Wall Street (and WaMu). That’s all gone now.

Americans still face record debt levels and mortgage requirements have been tightened. More subprime mortgages will reset in 2010, and banks continue to be saddled with huge real-estate toxic asserts. Big house-builders are still badly wounded and holding huge inventories of unsold properties, especially in the Sun Belt. Only the government’s first-time buyer credit created a mini-bubble thats now fading.

The recovery to “new normal” won’t come from another housing bubble.

Join me today at noon PST at for a Q&A on the state of the jobs market. You can post questions here.

The job market(poll)


Comments | More in Housing, Midweek Economic Briefing

November 11, 2009 at 10:15 AM

Why is this recession different, and other big reset questions

Top of the News: A reader asks, what’s this reset people keep talking about? Business cycles happen. So what’s different now compared with the aftermath of other recent recessions?

Obviously no one knows the full answer. During the worst of last year’s meltdown, many expected a consequence to be a large-scale reordering of business and even society toward a more sustainable, less bubble-dependent arrangement. That may happen, although at a slow pace thanks to the Fed pulling us back from Depression. A rescued Wall Street is back to its risky habits, so another crash is possible.

Several factors make this recession special and full of discontinuity. A big one is the speed and depth of job losses, surpassing all post-World War II recessions, and containing elements that point to a very long recovery. Another is a much weakened position of many American households and companies because of record debt that will take a long time to unwind. Americans are poorer as a result of the crash and wealth creation more difficult except for the rich. Income inequality is still high. Average wage-earners struggle.


Comments | More in Macro/Big picture, Midweek Economic Briefing, Outlook

November 4, 2009 at 10:00 AM

It’s not just the economy, stupid, it’s job creation

Top of the News: Any celebration over the ADP report showing the economy lost “only” 203,000 jobs last month is premature. Remember, we need to create around 125,000 net new jobs a month just to keep up with the natural growth of the workforce.

More importantly, the holiday layoff season — when companies clear their year-end books and start serious job cutting — is only beginning. Microsoft reportedly is making 800 job cuts worldwide today. Nokia Siemens said Tuesday it was eliminating 5,700 positions. And on it goes.

With unemployment nationally closing in on 10 percent, this chart shows how the pain has grown and spread since 2004. The hotspots: Michigan, California and the Southwest, Florida and much of the Southeast, as well as Oregon. If polling results in New Jersey and Virginia are to be believed, voters tilted to change — the GOP candidates — largely because of economic concerns.

Rutgers economists say it could be 2017 before we recover the lost jobs. Take the poll after the jump and give your opinion.


Comments | More in Jobs/Unemployment, Microsoft, Midweek Economic Briefing

October 28, 2009 at 9:55 AM

Echoes of another great crash — and the lessons we refuse to learn

Top of the News: This is the anniversary of Black Monday, the day in October 1929 when the stock market crashed. The Dow saw a record drop and things only got worse as the week progressed (there was a Black Tuesday, too).

It’s clear now that the crash of that day was not the beginning of the Great Depression but its loudest symptom. Other areas of the economy had been faltering for years and income inequality was near record highs, but this was cloaked by the mania on Wall Street, back in the day when banks could engage in highly speculative trading.

Of course, that toxic environment was rekindled in our time by the repeal of the Depression-era Glass-Steagall Act in 1999, and we got just what the reformers of the 1930s would have feared.

Milton Friedman made his mark as a great economist (as opposed to a great polemicist) by work with Anna Schwartz showing how the Federal Reserve botched its response to the crash, turning what might have been a short-term panic into a deep depression. This was a lesson current Fed Chairman Ben Bernanke was determined to implement — and indeed, Fed action pulled us back from the brink.


Comments | More in Bailout, Midweek Economic Briefing

October 21, 2009 at 10:00 AM

Boeing: Weak or strong? Investors are left to wonder

Top of the News: If Boeing didn’t have bad news, it wouldn’t have any at all. Today’s earnings announcement, showing a $1.56 billion loss, underscores that the defense business isn’t acting as a counterweight to commercial aircraft.

The Dreamliner and 747-8 delays are at the heart of the earnings trouble, and Morgan Stanley analyst Heidi Wood still isn’t convinced we’ve seen the end of Dreamliner delays. That carries weight with investors. So does Boeing’s scaling back of guidance for earnings-per-share this year.

CEO Jim McNerney added to the uncertainty by saying the company’s core businesses remain strong, but commercial airplanes and defense face challenges. Well, which is it? The more sobering thought is that much of Boeing’s troubles so far have been self-inflicted. What happens when the consequences of the world recession really hit home? The result: Continued uncertainty in the Puget Sound region.


Comments | More in Aerospace/Boeing, Midweek Economic Briefing

October 7, 2009 at 10:20 AM

Want to create real jobs? Get busy building high-speed rail in U.S.

Top of the News: Many smart people talked about “a lack of imagination” among American leaders in not foreseeing the 9/11 attacks. The same language was used to describe the sleepwalk into the financial crash. It could be applied now to efforts to restart job creation.

The other Washington is apparently mulling a tax credit for employers who will hire. This seems like a bad idea for at least two reasons. First, the jobs would not be related to real demand and would likely not have a future unless the economy rebounded strongly, an unlikely scenario. Second, every tax credit already increases the deficit.

American policymakers seem mired in the past. A federal effort to actually build high-speed train networks would create real jobs, many of them permanent for workers to operate and maintain the system. It would relieve congestion and enhance productivity, as well as better positioning the nation for a high-cost energy future (and helping with carbon emissions).

While America is only studying high-speed rail (and Amtrak still lacks predictable, adequate funding for regular trains), the world is racing ahead of us. Britain, continental Europe, China, India and Saudi Arabia are building and expanding their systems.

Here, another failure of imagination, with more costly consequences.


Comments | More in Jobs/Unemployment, Midweek Economic Briefing, Sustainability, Transportation, Urban issues

September 30, 2009 at 10:20 AM

Unemployment crept up in Seattle — but August was far worse in many metros

Top of the News: Unemployment in the Seattle-Tacoma-Bellevue metro area rose to 8.8 percent in August from 4.7 percent in the same month last year. It also increased 1 percentage point from July, according to today’s federal report. It’s a reminder of just how fast the Great Recession slammed into us.

Across the region, Longview turned in Washington’s worst performance, with 13.4 percent unemployment, while Kennewick-Pasco-Richland was best at 6.5 percent. In Oregon, metro Portland vaulted to 11.8 percent from August 2008’s 6.1 percent.

Nationally, unemployment rates were higher in all metros, with 16 posting rates of 15 percent or higher. Highest in the country: Detroit, at 17 percent. (The jobless rate nationally in August was 9.6 percent).

UPDATE: On a conference call this morning, Rutgers University professors James Hughes and Joseph Seneca discussed a gloomy, but unsurprising, new report that says the economy won’t recover all the jobs lost in the recession until 2017. You can download the report on “the new normal” here.


Comments | More in Jobs/Unemployment, Midweek Economic Briefing

September 23, 2009 at 9:50 AM

Washington scores well on national wealth and opportunity scorecard

Top of the News: Washington state gets an A in the new Assets and Opportunity Scorecard by CFed, the economic development think tank. It’s one of only a handful of states to score high on these 92 yardsticks of wealth, poverty and family financial security.

Still, there’s work to be done. The organization recommends policies that boost investment in small businesses, enhance housing affordability and enact stronger protections for the customers of payday loan outfits.

Oregon and Idaho received Cs. The feared South Carolina got an F.


Comments | More in Midweek Economic Briefing

September 17, 2009 at 10:00 AM

Behind the housing numbers, signs of continued pain

Top of the News: Our skepticism alert should always go on high when housing stories come out. So it is with today’s report that housing construction rose 1.5 percent in August.

Single-family housing construction actually fell, and the overall rate disappointed the forecast. This with a new tax-credit that is probably distorting sales upward and is likely not sustainable. Construction is a staggering 70 percent below its peak in 2006. And that’s where we begin to understand the deep wounds facing this sector — which had become more and more central to an American economy that was producing less of almost everything else (other than housing swindles) in the 2000s.

Even when housing “recovers,” it will feel sick. And the problem goes beyond the huge inventory of unsold houses.


Comments | More in Housing, Midweek Economic Briefing

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