This article first appeared in the St. Louis Beacon, Jan. 21, 2009 - On the day after President Barack Obama somberly told the nation that "we must pick ourselves up, dust ourselves off, and begin again the work of remaking America,'' the question is:
How much dust are we talking about?
A report on national and regional economic conditions released by the Federal Reserve last week offers fresh insight into the depth of the nation's economic hole -- and how far we're going to have to climb to get out of it. Dubbed the "Beige Book" for the color of its cover, the report paints a financial picture in varying shades of red.
"Overall economic activity continued to weaken across almost all of the Federal Reserve Districts since the previous reporting period,'' according to the report, which documents across-the-board declines in such key areas as retail and automotive sales, manufacturing, real estate, construction, credit and lending.
Particularly troubling: Despite the billions of dollars of federal bailout funds pumped into the nation's financial institutions since October, the Fed reports "tight or tightening lending conditions" in most of its districts.
In the 8th District, which includes St. Louis, a sample of small and mid-sized banks reported that total loans decreased 1.4 percent from mid-September to mid-December. Real estate lending, which accounted for 73 percent of total loans, decreased 2 percent. Total deposits at the banks decreased 3 percent.
"Beige Books," which are released eight times a year, are described as short-term snapshots of how the economy is doing, based on confidential information compiled from business and community leaders. The Fed uses the reports to help determine the direction of monetary policy. The January report included the holiday sales season, which was described as "generally weak" with deep discounting.
And so it goes, 14 months into a recession that economists acknowledge started in December 2007 and is still playing out.
How much longer will this go on?
"My suspicion is that things are going to get a little worse at least for our next report -- certainly not better. This bad news is expected to continue at least through the first half of the year,'' said Howard Wall, an economist with the St. Louis Federal Reserve.
Wall said the only surprising aspect of the district report was in the area of existing commercial real estate, which seems to have stabilized. But, he acknowledged, that could be due to a time lag between declining retail sales and the closing of stores.
Wall believes the housing market may also be stabilizing, with prices showing signs of flattening.
"But there's not very much volume going on; it's hard to sell your house if you need to,'' he said. "We are seeing a lot of refinancing.''
Wall said that while the region's bankers say they have funds available for "good projects," the definition of good projects has changed dramatically, reflecting tightened loan standards and a reluctance to lend because banks want to keep a surplus of money for their own protection.
Here are some sobering numbers to ponder.
The "shock" market
- On Tuesday, even as Obama was encouraging the nation with his call to action "bold and swift," Wall Street succumbed to worries about more multibillion dollar losses in the banking industry. Shares of Citigroup fell 20 percent, Bank of America lost 29 percent and State Street Corp. plunged 59 percent, as the Dow Jones Industrial Average dropped 332 points. (And Wall Street's worries weren't confined to U.S. banks. Shares in Royal Bank of Scotland fell 69 percent, driven by its forecast of a $41.3 billion loss for 2008.)
- Tuesday's 4 percent loss was the biggest Inauguration Day decline since the Dow was launched in 1896, according to data compiled by Bloomberg and the Stock Trader's Almanac.
- The Dow Jones industrial average fell by 33.8 percent in 2008, the worst decline since the 53 percent loss of 1931 (during the Great Depression).
- In 2008, stocks lost about $7 trillion in value.
Unemployment: Going up
- The U.S. lost 2.6 million jobs in 2008 -- the most since 1945 when 2.8 million jobs were lost, according to the U.S. Labor Department's Bureau of Labor Statistics.
- The nation's unemployment rate rose to 7.2 percent after 524,000 jobs were cut in December.
- The unemployment rate in the St. Louis area was 7.3 percent in November 2008. (December's numbers have not yet been released.)
- The St. Louis area will lose more than 30,000 jobs between the fourth quarter of 2008 and the fourth quarter of 2009, according to a report released last week by the U.S. Conference of Mayors. The forecast by IHS Global Insight projected that that the area's unemployment rate will rise to 9.5 percent and ranked St. Louis 17th among U.S. metropolitan areas for estimated job loss in 2009.
Real estate: Going down
- Year-to-date home sales in St. Louis were down 15 percent for November 2008, when compared with the same period in 2007, according to the Fed's January "Beige Book." Building permits for single-family homes declined 42 percent.
- The median sale price of homes in St. Louis County decreased from $156,000 in November 2007 to $126,250 in November 2008, according to the St. Louis Association of Realtors.
- Nationally, sales of existing homes in November fell 8.6 percent, with new home sales falling 2.9 percent, according to the National Association of Realtors.
- The national median existing home price fell by 13.2 percent in November, probably the largest decline since the Great Depression, according to the National Association of Realtors.
Foreclosures: The flood continues
- Nationally, foreclosure filings were reported on 303,410 U.S. properties in December, up 17 percent from November and nearly 41 percent from December 2007.
- St. Louis County had 734 new foreclosures in December; St. Louis city had 730.
- Foreclosure activity in the United States increased by 81 percent in 2008, according to RealtyTrac.com.
- One of every 10 U.S. homeowners is delinquent on mortgage payments or in arrears.
