Posts Tagged ‘Recession’
More Foreclosures and Suicides than During the Great Depression
Friday, 17 May 2013 10:31
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The San Francisco Chronicle notes that it is difficult to keep track of foreclosure rates now … let alone during the Great Depression:

Foreclosure rates of the late 2000s are often compared with those of the Great Depression, which took place through the first half of the 1930s. However, there were no public or private agencies keeping track of foreclosure rates at that time. Indeed, the government still does not keep an official statistic on the number of homes in foreclosure or repossessed by banks and lenders.

(Read more…)

But the Chronicle provides estimates of foreclosures during the 1930s:

A 2008 article by David C. Wheelock, an economist at the Federal Reserve Bank of St. Louis, cited annual reports issued by the Federal Home Loan Bank Board during the 1930s. These reports reveal that the foreclosure rate exceeded 1 percent from 1931 until 1935. At the worst point in the Depression-era economic crisis, in 1933, about 1,000 home loans were being placed in foreclosure by banks every day.

How does that compare to the last 5 years?

RealtyTrac notes (via North Carolina State University) that:

From January 2007 to December 2011 there were more than four million completed foreclosures and more than 8.2 million foreclosure starts ….

CoreLogic reported a year ago:

Approximately 1.4 million homes, or 3.4 percent of all homes with a mortgage, were in the national foreclosure inventory as of May 2012 compared to 1.5 million, or 3.5 percent, in May 2011 and 1.4 million, or 3.4 percent, in April 2012. The foreclosure inventory is the share of all mortgaged homes in some stage of the foreclosure process.

Given that there are currently around 316 million Americans – more than twice the number during the Great Depression – such high foreclosure rates mean that there may well be as many people suffering foreclosure than during the Great Depression … or more.

And NBC News reported this month:

Already some 5 million homes have been lost to foreclosure; estimates of future foreclosures range widely. [Moody's Analytics chief economist Mark Zandi], who has followed the mortgage mess since the housing market began to crack in 2006, figures foreclosures will strike another three million homes in the next three or four years.

For more comparisons of the Great Depression and today, see:

More Americans Committing Suicide than During the Great Depression

 

Suicide rates are tied to the economy.

The Boston Globe reported in 2011:

A new report issued today by the Centers for Disease Control and Prevention finds that the overall suicide rate rises and falls with the state of the economy — dating all the way back to the Great Depression.

 

The report, published in the American Journal of Public Health, found that suicide rates increased in times of economic crisis: the Great Depression (1929-1933), the end of the New Deal (1937-1938), the Oil Crisis (1973-1975), and the Double-Dip Recession (1980-1982). Those rates tended to fall during strong economic times — with fast growth and low unemployment — like right after World War II and during the 1990s.

During the depths of the Great Depression, suicide rates in America significantly increased. As the Globe notes:

The largest increase in the US suicide rate occurred during the Great Depression surging from 18 in 100,000 up to 22 in 100,000 …

We’ve previously pointed out that suicide rates have skyrocketed recently:

The number of deaths by suicide has also surpassed car crashes, and many connect the increase in suicides to the downturn in the economy. Around 35,000 Americans kill themselves each year (and more American soldiers die by suicide than combat; the number of veterans committing suicide is astronomical and under-reported). So you’re 2,059 times more likely to kill yourself than die at the hand of a terrorist.

NBC News reported in March:

Suicide rates are up alarmingly among middle-aged Americans, according to the latest federal government statistics.

They show a 28 percent rise in suicide rates for people aged 35 to 64 between 1999 and 2010.

RT reports:

In a letter to The Lancet medical journal, scientists from Britain, Hong Kong and United States said an analysis of data from Centers for Disease Control and Prevention indicated that while suicide rates increased slowly between 1999 and 2007, the rate of increase more than quadrupled from 2008 to 2010, Reuters reported.

Earlier this month, NY Daily News wrote:

The Great Recession may have been at the root of a great depression that caused suicides to soar among middle-aged Americans, a government report speculates.

 

The annual suicide rate for adults ages 35 to 64 spiked in the past decade, according to a study from the U.S. Centers for Disease

Control and Prevention.

 

And a shaky economy that nose-dived into the worst financial crisis since the Depression may be the biggest reason why.

 

***

 

The CDC’s Morbidity and Mortality Weekly Report said the annual suicide rate jumped 28.4% from 1999-2010.

 

It was the biggest increase of any age group, said the CDC, citing “the recent economic downturn” as one of the “possible contributing factors” for the increase.

 

“Historically, suicide rates tend to correlate with business cycles, with higher rates observed during times of economic hardship,” the report said.

David Stuckler (a senior research leader in sociology at Oxford), and Sanjay Basu (an assistant professor of medicine and an epidemiologist in the Prevention Research Center at Stanford), write in the New York Times:

The correlation between unemployment and suicide has been observed since the 19th century.

(And see these articles by the Wall Street Journal and the Los Angeles Times.   This is obviously true world-wide.  For example, last year the New York Times reported:

The economic downturn that has shaken Europe for the last three years has also swept away the foundations of once-sturdy lives, leading to an alarming spike in suicide rates. Especially in the most fragile nations like Greece, Ireland and Italy, small-business owners and entrepreneurs are increasingly taking their own lives in a phenomenon some European newspapers have started calling “suicide by economic crisis.”

 

***

 

In Greece, the suicide rate among men increased more than 24 percent from 2007 to 2009, government statistics show. In Ireland during the same period, suicides among men rose more than 16 percent. In Italy, suicides motivated by economic difficulties have increased 52 percent, to 187 in 2010 — the most recent year for which statistics were available — from 123 in 2005.)

Indeed, more Americans are killing themselves today than during the Great Depression. Specifically, there were were 123 million Americans in 1930.  The maximum suicide rate during the depths of the Great Depression was 22 out of 100,000  Americans.  That means that up to  27,060 Americans killed themselves each year.

In contrast, the U.S. Centers for Disease Control reports that 38,364 Americans committed suicide in 2010. In other words, 2010 suicides were approximately 142% of suicides during the depths of the Great Depression. (The suicide rate is lower today than during the Great Depression, but – given that there are more Americans – there are more suicides each year.)

The head of my local county’s mental health services confirmed to me today that there are now more suicides now than during the Great Depression.

The Root Causes: Unemployment and Foreclosure

Why do more people kill themselves during severe downturns?  It’s not just a downturn in the business cycle in some general sense.  It’s more specific than that.

Unemployment and foreclosure are the largest triggers in increased suicide risk.

David Stuckler and Sanjay Basu write:

People looking for work are about twice as likely to end their lives as those who have jobs.

 

***

 

Unemployment is a leading cause of depression, anxiety, alcoholism and suicidal thinking.

ABC News points out:

“Joblessness is a risk factor for suicide,” said Nadine Kaslow, professor of psychology in the Department of Psychiatry and Behavioral Sciences at Emory University in Atlanta. “The stress is just overwhelming. … People are freaked out.”

Bloomberg reports:

“The suicide rate started accelerating in 2008, 2009 and 2010 — someone might still be working, but their house is underwater, or they’re working but they’re working part-time,” Eric Caine, the director of the CDC’s Injury Control Research Center for Suicide Prevention, said by telephone. “These things ripple into families. There’s an economic stress.”

NY Daily News writes:

“Most people who commit suicide tend to suffer from major depression, and this vulnerability tends to be brought forth by very stressful situations like losing one’s home or job,” [Dr. Dan Iosifescu, director of mood and anxiety disorders program at Mount Sinai Hospita] said.

NBC News reports:

The American Association for Suicidology says economic recessions don’t normally affect suicide rates.

 

“Although US suicide rates did increase slightly during the years of the Great Depression, reaching a peak rate of 17.4/100,000 in 1933, subsequent US recessions have not been found to lead to increased national rates of suicide in the period of or immediately following each recession,” the group says.

 

The latest numbers suggest suicide rates for middle-aged Americans now surpass the peak during the Depression. And there’s another possible explanation.

 

“There is a clear and direct relationship between rates of unemployment and suicide,” the suicidology group says in its statement.

 

“The peak rate of suicide in 1933 occurred one year after the total US unemployment rate reached 25 percent of the labor force. Similar findings have been documented internationally. At the individual level, unemployed individuals have between two and four times the suicide rate of those employed.”

 

The group also raises concern about the home foreclosure rate.

Indeed, it is likely that more people have lost their jobs during this “Great Recession” than during the Great Depression … especially when you look at the masses of people who have given up altogether and dropped out of the work force.

And it is possible that more people have lost their homes through foreclosure than during the Great Depression as well.

No wonder there are so many suicides …

Postscript:  If you suffer from depression, this may help.

    



 
Which EU Economies Are Growing?
Friday, 17 May 2013 10:30
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As Europe ends another week comfortably in the green (near all-time highs) – the short answer – not many…as the region’s longest recession in history rolls on…

Chart: Goldman Sachs, revised to reflect France re-entering “red” status. (Read more…)

    



 
Goldman Issues Q&A On Tapering: Says “Not Yet”
Friday, 17 May 2013 09:32
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On one hand we have bad Hilsenrath sending mixed messages saying the Fed may taper sooner (with good Hilsenrath chiming in days later, adding it may be later after all), depending on whether HY bonds hit 4% YTM by EOD or mid next week at the latest. On the other, even resolute Fed doves are whispering that a tapering may occur as soon the summer, so in a few months, and halt QE by year end. Bottom line – confusion. So who better to arbitrate than the firm that runs it all, Goldman Sachs, and its chief economist Jan Hatzius, who issues the following Q&A on “tapering.” His view: “not yet. (Read more…)” Then again, Goldman is the consummate (ab)user of dodecatuple reverse psychology, so if Goldman says “all clear” the natural response should be just as clear.

From Goldman Sachs’ Jan Hatzius:

Q&A on Fed Tapering: Not Yet

Q: What are your forecasts for the future of the Fed’s QE program?

A: We expect continued purchases at a $85bn/month pace through 2013, followed by a gradual tapering process toward zero that starts in 2014Q1—presumably announced at the December 2013 FOMC meeting—and ends in 2014Q3. This is based on our forecast that real GDP will grow 2% in Q2/Q3 and 2.5% in Q4, the unemployment rate will fall to 7.3% by the end of 2013, and core PCE inflation will edge up a bit to 1.3% year-on-year by Q4.

Q: How do you see the risks around this central forecast?

A: Roughly evenly balanced between an earlier and a later move. It is likely that the FOMC will want to announce the first reduction in the pace of QE at a meeting followed by a press conference, so that the Chairman can explain the context of the decision. The next four press conferences are scheduled for June 19, September 18, December 18, and March 19. In our view, a tapering announcement is highly unlikely for June 19, possible for September 18, most likely for December 18, and also possible for March 19 (or potentially even later). All of this will, of course, depend first and foremost on the output, employment, and inflation data.

Q: Have you increased your probability of an early tapering step—say, before the September meeting—over the past few months?

A: No. Such a step would imply a hawkish shift at a time when the incoming information has, if anything, pushed in the other direction. As of the March 19-20 meeting, it seems that the median committee member believes that “…if the outlook for labor market conditions improved as anticipated, it would probably be appropriate to slow purchases later in the year and to stop them by year-end.” We believe that “later in the year” means no earlier than the July or—more likely if a press conference is required—September FOMC meeting.

Since the March meeting, economic activity has, on balance, disappointed expectations. Although the weakness in the employment and retail sales reports for March was reversed in the reports for April, the US manufacturing sector continues to slow, with declines in industrial production in April and the NY Empire State and Philly Fed reports in May. Moreover, the latest spike in initial jobless claims raises at least some questions about whether the downward trend in claims that was previously evident is still in place.

Perhaps more importantly, inflation has continued to fall in recent months. Following the lower-than-expected April CPI report, we estimate that the core PCE index slowed to 1.0% year-on-year in April. Although other indicators of the underlying inflation trend have been consistent with slightly higher inflation, our core inflation “tracker” now stands at an estimated 1.3% for April, clearly below the 2% target.

Q: So you don’t read much into the recent increase in press and market chatter about tapering?

A: Not really. A significant part of this chatter seems to be based on an article by Jon Hilsenrath in the Wall Street Journal on Friday evening. But although the headline “Fed Maps Exit from Stimulus” sounded dramatic, the article itself contained little new information on the key question, namely the timing of any tapering moves. It merely stated that ”some” Fed officials “can envision” taking the first step toward tapering soon. This has been clear for many months; in fact, “some” Fed officials have been uncomfortable with the program from the get-go and would of course like to end it as soon as possible.

Q: But didn’t the Hilsenrath article provide quite a lot of information about the shape of the exit process, i.e. the likelihood that the sequencing of the QE tapering will be very sensitive to economic conditions?

A: Again, not really. The FOMC has been trying for a while—going back at least as far as the March press conference and continuing through the May 1 statement—to convince market participants that the tapering process will be less “deterministic” than many have been thinking. The purpose is probably to reduce the extent to which market participants would extrapolate forward a small reduction in the QE pace at one meeting into additional reductions at subsequent meetings.

But even this point needs to be qualified. In our view, Fed officials have an incentive to portray the tapering process as less deterministic than it is likely to be in reality. Uncertainty about whether an initial tapering step foreshadows additional steps at subsequent meetings would probably keep the initial tightening in financial conditions more limited. This would be desirable from the Fed’s perspective. For this reason, we would take the FOMC’s signals on this issue with a grain of salt.

Q: Where does the recent Fedspeak fit in?

A: We have not received a lot of new information since the May 1 statement, which was quite similar to the prior March 18 statement. Perhaps the most interesting update came from a speech on May 16 by San Francisco Fed President Williams. He remains less enthusiastic about continuing the QE program than we would have expected a few months ago: “[A]ssuming my economic forecast holds true and various labor market indicators continue to register appreciable improvement in coming months, we could reduce somewhat the pace of our securities purchases, perhaps as early as this summer. Then, if all goes as hoped, we could end the purchase program sometime late this year.” This was only slightly softer than his remarks on April 3: “[A]ssuming my economic forecast holds true, I expect we will meet the test for substantial improvement in the outlook for the labor market by this summer. If that happens, we could start tapering our purchases then. If all goes as hoped, we could end the purchase program sometime late this year.”

Ultimately, however, it is the leadership whose signals will carry the most weight. We are therefore particularly focused on the upcoming testimony by Chairman Bernanke to the Joint Economic Committee of Congress on May 22. We expect a somewhat softer message than that from President Williams.

Q: Some commentators argue that the rapid decline in the federal budget deficit may prompt the Fed to taper earlier than they otherwise would have done. Do you agree with this?

A: No. This argument seems to be based on the implicit assumption that the purpose of the QE program is, at least partly, to finance the federal deficit. Fed officials would take strong exception to this notion. In fact, if we accept the notion that QE affects financial conditions and economic activity mainly via the stock of securities held, rather than the flow of issuance absorbed, there is no obvious link between the size of the deficit and the pace of asset purchases. A smaller deficit could call for a smaller QE program if it was mainly due to a stronger economy; but it could likewise call for a larger QE program if it was mainly due to greater fiscal drag. In practice, it is probably due to a combination of both factors, and we do not believe that it has substantial implications for Fed policy.

Q: So what could get Fed officials to increase the size of the QE program, either through a later beginning to the tapering process (say, March 2014) or a higher run rate of purchases?

A: Such a decision would probably be due to a combination of weaker job market data and lower inflation. We think that the hurdle for increasing the size of the purchase program is significantly higher. It would probably require either a clear downturn in the economy with a renewed risk of recession or a substantial decline in core PCE and CPI inflation as well as inflation expectations. But the hurdle for pushing out the date of the initial tapering may not be that high. If the labor market and economic recovery remained a little more sluggish than our forecast and underlying inflation trends moved any lower than the current 1¼% rate, we believe that the start date would move into 2014, with an announcement at the March meeting or later.

Q: Will they taper Treasury or mortgage QE first?

A: We think they will disproportionately taper the Treasury purchases, as there is a widespread belief that the stimulative per-dollar effect of MBS purchases is larger. According to the March FOMC minutes, “[a] few participants felt that MBS purchases provided more support to the economy than purchases of longer-term Treasury securities because they stimulated the housing sector directly.” Although the minutes also note that “a few preferred to focus any purchases in the Treasury market to avoid allocating credit to a specific sector of the economy,” the former group is likely to be closer to the views of the FOMC leadership.