As I write this post, the temperature outside is barely tipping double digits; many of my colleagues are scratching their heads over the very inaccurate weather forecast that was supposed to blast us with six to 12 inches of snow; the rest are trying to figure out why their children’s school districts closed today.
Those dire winter forecasts do more than dampen our spirits; they hurt the economy. Yesterday, for example, a lot of people decided to heed the meteorologists warnings. They tucked in and avoided going outside altogether. This has been the trend for the past three months -- one ugly mess of nasty, cold weather after another. And whether or not the storms materialize, people still hole up inside rather than go out and spend money to keep our economy going.
And we have evidence that the economy is slowing. One indicator is that the U.S. added fewer than 200,000 jobs in December and January. Far below expectations. The Labor Department reported that payrolls rose less than projected in January. And housing starts fell in January to their lowest point since 2011, according to the Commerce Department. Last week a Reuters reportsummed it up this way:
“Economists estimate that freezing temperatures and the ice and snow storms that have blanketed much of the nation will shave as much as half a percentage point from gross domestic product in the first quarter.”
The indicators for February aren't out yet, but everyone – including Federal Reserve Chair Janet Yellen – is laying the year’s mushy numbers so far on slushy streets and freezing temperatures.
So, to a certain degree we can blame the weather for the bad economy. But what if it's not winter's fault? New York Sen. Charles Schumer posted that question to Janet Yellen at a Senate Banking Committee last week.
Yellen’s response, according to CNNMoney:
"Asset purchases are not on a preset course," she said. "So if there's a significant change in the outlook, certainly we would be open to reconsidering, but I wouldn't want to jump to conclusions here."
Translation: If the weather isn’t entirely to blamed for the slowing economy, then the Fed will consider changing its current policy of slowing its bond-buying program. For the past four years, the Federal Reserve has been buying scads of Treasury and mortgage-backed securities as part of its effort to stimulate economic growth after the Great Recession.
At the end of December, former Fed Chair Ben Bernanke announced that the Fed will taper off its bond buying activities, saying, essentially, “Hey, things are going better. The economy needs to walk on its own again, so we’re going to slowly remove the crutches we had been using to prop things up.”
That was before “Snowmaggedon” and “Snowpocolipse” and “Snowtastrophe” and “Polar Vortex” were a part of our daily lives and people decided they’d rather hibernate than go out and hire new employees or make major buying decisions. (OK, I made up “snowtastrophe,” but feel free to use it for the next big storm.)
So, if we emerge from this long winter and discover that the economy got soft not only because of the bad weather but also because we weren’t on as clear a course of recovery, then the Federal Reserve may have to pull out some fancy backward footwork and keep its bond-buying program in place.
About that "Great Recession"
Let's not forget why the Fed began to take aggressive measures to bolster the economy ... why we experienced a Great Recession in the first place: sub-prime mortgage lenders.
OK, that is a simplistic explanation for what happened in 2008, but it was a part of the problem. The New York Times had a fascinating story about a guy who wants to bring back the sub-prime mortgage. The man in question, Bruce Marks, makes some very logical-sounding arguments for getting loans to sub-prime borrowers.
- Low interest rates and lower housing prices have created an opportunity for low-income families to take on home loans under terms that they can afford.
- The government has grown over cautious in its lending policies, which is reviving a time when home ownership was out of the reach of many families, especially minorities.
Marks has created a nonprofit organization that will provide loans for some of those families. The nonprofit, the Neighborhood Assistance Corporation of America has $10 billion in funding from Bank of America.
The method for making sure that those who take the loans don't default? It includes charging interest rates on par with regular mortgage loans.
"He planned to rely on careful screening of applicants and on building a sense of community among the borrowers, in part by requiring them to join the nonprofit for a $20 annual fee and to participate in its advocacy. These are time-tested strategies for reducing defaults."
For Mary Delach Leonard’s coverage of the NACA foreclosure efforts in St. Louis, read
Controversial traveling foreclosure event returns to small crowd in St. Louis (St. Louis Beacon, Aug. 19, 2012
Homeowners are warned about NACA foreclosure event here (St. Louis Beacon, July 13, 2012)
Local housing counselors say they are helping homeowners left in wake of NACA's Save the Dream tour (St. Louis Beacon, July 28, 2010)
40,000 sought help at St. Louis foreclosure event, but how many homes were saved? (St. Louis Beacon, July 26, 2010)
Well worth the read.
A while ago, St. Louis Public Radio’s Maria Altman interviewed Betsy Cohen about her role as director of The St. Louis Mosaic Project, an effort to boost the number of immigrants in St. Louis and increase their economic contribution to the region.
While Mosaic is looking at a broad spectrum of nationalities, St. Louis is thought to have the largest population of Bosnians in the U.S. Most of them were fleeing the war in Yugoslavia in the 1990s and St. Louis opened its doors to this community.
Now, two decades later, the children of these immigrants and refugees are grown up and mixing into St. Louis’ tapestry in a variety of ways. Al Jazeera.com produced an amazing profile of several of these young people, looking at how they relate to their countries of origin, their religion and their current home, St. Louis.
The article is compelling for several reasons: First, it’s a reminder of the atrocities of the Yugoslavian war. But it also captures the complexities of the immigrant experience, and how these new Americans influence the city around them as much as they are influenced by it.