Recession Spreading Through The Economy
The hardest hit sectors during the economic downturn have been housing and financial services but now we are seeing waves of job cuts spreading through the rest of the economy. Most estimates have the economy losing an additional 500,000 jobs this month as the recession in this country intensifies.
We are also see earnings forecasts being cut across the board as many corporations see the recession lasting well into 2009 if not longer. Companies are tightening their belts and are cutting costs and job losses are expected to climb in the months ahead.
As the economy continues to pull back, consumer confidence is expected to fall even further and rising unemployment figures could send consumer spending spiraling downwards. The question is how quickly can the new administration put into effect it’s proposed $850 billion stimulus package.
There does appear to be some light at the end of the tunnel however, it was reported today that sales of existing homes rose 6.5% last month. If the Fed can expand it’s liquidity operations and can return lending activity to some kind of normalcy, there is demand out there for housing but whether there is enough credit to finance that demand is the big question.
Even then, demand for distressed homes doesn’t equate to rising home prices and like many others, I feel that there can’t be any meaningful rebound until the housing market can recover.
