Showing posts with label economic. Show all posts
Showing posts with label economic. Show all posts

2011/09/20

Housing starts drop underscores economic woes (Reuters)

WASHINGTON (Reuters) – New construction of homes fell more than expected in August, dragging on economic growth and keeping pressure on President Barack Obama to do more to help the sputtering economy.

Housing starts dropped 5 percent, the most since April, to a seasonally adjusted annual rate of 571,000 units, the Commerce Department said on Tuesday.

Economists polled by Reuters had forecast groundbreaking activity would fall to only a 590,000-unit rate in August. Housing starts are at less than a third of their peak during the housing boom.

"The housing market is not only bad, but still missing low expectations," said Sal Catrini, a managing director for equities at Cantor Fitzgerald & Co in New York.

An overhang of previously owned homes on the market has left builders with little appetite to break ground on new projects and is frustrating the economy's recovery from the 2007-09 recession.

The housing market "won't improve until the labor market improves substantially and that doesn't look like that would happen this year," said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

Housing has been a persistent headwind to the U.S. recovery, although now it only accounts for about 2.4 percent of gross domestic product, down from about 6.1 percent reached during the housing boom.

U.S. stock prices rose as investors shook off the data and turned their focus to a two-day meeting the Federal Reserve that kicked off on Tuesday. The Fed is expected to end its meeting with a decision to take further steps to aid the economy. U.S. Treasury debt prices were little changed.

The ongoing weakness in housing keeps pressure on the White House to provide more support.

Obama, who is struggling with a 9.1 percent unemployment rate that imperils his re-election bid next year, has proposed a $447 billion stimulus package combining tax cuts with infrastructure spending and extended jobless benefits.

The administration is also working with the Federal Housing Finance Agency, a regulator, to try to expand a program that helps distressed borrowers with government-backed loans.

Some other government props for the sector, however, are set to fall away. At the end of this month, the size of the loans federal housing agencies can purchase will fall, and next year government-controlled mortgage companies Fannie Mae and Freddie Mac will begin to raise fees on the loans they purchase.

RECESSION WATCH

The fall in new residential construction in August may have been fueled in part by tropical storms, including Hurricane Irene, which pummeled the East Coast at the end of the month. Starts in the Northeast fell 29.1 percent.

Most of the weakness in new construction nationwide was concentrated in the multi-family housing sector, where starts dropped 13.5 percent.

Single-family home construction -- which accounts for a larger share of the market -- slipped 1.4 percent.

With overall economic growth looking less steady, the International Monetary Fund warned on Tuesday the United States could slip back into recession.

However, the consensus view among economists is that the country will dodge that bullet.

Heavy manufacturer Caterpillar Inc on Tuesday reported a slight acceleration in machinery sales to North American dealers in the three months through August, a sign demand remains steady.

In another upbeat sign, General Motors reached a tentative deal to create more than 6,000 U.S. factory jobs, union officials said.

The housing sector also saw a glimmer of hope in Tuesday's data, with permits for future construction up 3.2 percent in August. A day earlier, home-builder Lennar Corp had forecast a strong fourth quarter.

Still, the sector does not look ready to provide much support to economic growth anytime soon.

"Housing isn't going anywhere fast," said Sean Incremona, an economist at 4Cast in New York. "The permits side is a little bit more positive looking, but it doesn't look like things are really finding their way off the ground."

(Additional reporting by Caroline Valetkevitch and Richard Leong in New York, Editing by Andrea Ricci and Neil Stempleman)


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2011/08/28

Analysis: Economic leaders fear policy paralysis (Reuters)

JACKSON HOLE, Wyoming (Reuters) – The heads of the U.S. Federal Reserve, IMF and OECD stepped up pressure on political leaders on both sides of the Atlantic to shake off their inertia and tackle urgent economic problems.

If politicians ignore their pleas -- including a blunt call from International Monetary Fund chief Christine Lagarde to "act now" -- the slowdown in world growth and debt turmoil in Europe could morph into a deeper crisis, top monetary officials and economists warned at an annual retreat here.

"I hope they listen," said Bank of Israel Governor Stanley Fischer.

Alarm over political deadlock was as obvious a backdrop to the annual meeting of policymakers in the wilds of Wyoming as the thunderstorms that rolled over the nearby Grand Teton peaks and dumped rain on the Jackson Lake Lodge.

"The governance right now is not going through a very brilliant moment, I have to say, neither in Europe nor in the United States," Angel Gurria, who heads the multi-nation Organization for Economic Co-operation and Development, told Reuters.

"The signals that are coming out of the short-term discussions is, 'We can't even agree on about the time of the day, even if there's a big clock telling us what the time of the day is.'"

In the United States, the political impasse has thwarted moves to tame massive budget deficits which brought the nation to the edge of a debt default and cost the United States its coveted AAA credit rating from Standard & Poor's.

In Europe, leaders are fighting over who should pay for the sovereign debt crisis in the euro zone, which has a unified regime for monetary policy but whose member nations run their own budget policies.

PHONE CALLS, SPEECHES

Lagarde, whose appearance on Saturday was a late addition and reflected her sense of urgency, delivered a hard-hitting pitch against braking spending too fast as nations struggle to rein in long-term budget deficits.

She was far from alone.

The Fed has slashed U.S. interest rates to near zero and bought $2.3 trillion in long-term securities in an effort to kick-start the recovery. With monetary policy stretched to its limits, fiscal policy is now key, Fed Chairman Ben Bernanke suggested.

"Although the issue of fiscal sustainability must urgently be addressed, fiscal policymakers should not as a consequence disregard the fragility of the current economic recovery," he said on Friday.

"Fortunately the two goals of achieving fiscal sustainability -- which is the result of responsible policies set in place for the longer term -- and avoiding the creation of fiscal headwinds for the current recovery are not incompatible."

Bernanke said battling long-term joblessness in the United States must be a top priority, and he called on the U.S. government to put a floor under the sagging housing market, remarks that Lagarde echoed forcefully on Saturday.

Bernanke's speech was "the shot across the bow of the government saying, 'don't keep layering expectations on the Federal Reserve, guys, you have a job to do,'" Columbia Business School Dean Glenn Hubbard said in an interview with Reuters Insider.

"The Fed is simply saying, 'We are monitoring the situation very carefully but would encourage the government, both parties, to get their act together and pass a long-term fiscal strengthening package and then perhaps short-term stimulus.

The calls from the world's economic policy elite may give some political cover to President Barack Obama, who faces a tough re-election fight next year with the U.S. unemployment rate stuck above 9 percent.

Obama is preparing for a speech after the September 5 Labor Day holiday in which he is expected to lay out proposals to boost hiring. He is reaching out to other world leaders too.

On Saturday, Obama spoke with German Chancellor Angela Merkel, and the White House said the two leaders vowed to act to shore up a global recovery that now looks at risk.

A day earlier Obama had called Lagarde to talk about fiscal policy. They agreed that the world economy needs further steps to boost growth.

Obama's potential presidential challengers, including leading Republican candidate Mitt Romney, have repeatedly blamed Obama's policies for impeding growth.

The U.S. economy grew less than 1 percent in the first half of the year and has yet to return to its pre-recession size.

EUROPE'S BANKS FACE SCRUTINY

In Europe, the biggest threat is a spreading sovereign debt crisis, and richer euro zone nations, chief among them Germany, have shown a hesitancy in picking up the tab for nations on the debt-strapped periphery.

Stress tests last month exposed the degree to which European banks are exposed to Greek and other shaky government debt, and lenders are balking at extending credit.

Lagarde and European Central Bank President Jean-Claude Trichet both said strengthening bank balance sheets is crucial.

"Although there is clarity on required policies, the uncertainty created by the political stances in both Europe and the United States poses some serious risks," Cornell University Professor Eswar Prasad said.

"Getting the policy balance right is tricky in itself; this adds a layer of uncertainty that will make it that much harder," Prasad said.

(Writing by Ann Saphir; Editing by Braden Reddall)


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2011/08/18

Wall Street drops as economic, European worries weigh (Reuters)

NEW YORK (Reuters) – Stocks sank on Thursday as data fueled worries the economy was weakening and bank shares tumbled on fears the European financial crisis could spread havoc to other parts of the world.

The losses extended a slide in stocks that began in late July, with the S&P 500 now off 15.7 percent from its April 29 highs, as economic worries both here and abroad have caused investors to exit risky assets.

Factory activity in the Mid-Atlantic region as surveyed by the Philadelphia Federal Reserve Bank plummeted in August, falling to the lowest level since March 2009. For details, see

Bank shares contributed to the market's slide. While a Federal Reserve official said the Fed scrutinizes U.S. banks and the American units of European banks equally, a Wall Street Journal report said regulators are questioning the U.S. units of Europe's lenders more closely.

In the broad selloff, sectors associated with growth were also hit hard. Top drags on the Dow included shares of IBM, down 4.8 percent at $163.25 and United Technologies, down 5.3 percent at $68.21. On the Nasdaq, shares of Oracle fell 7.8 percent to $25.34.

"Europe is dealing with an escalating fiscal crisis," said Robert Van Batenburg, head of equity research at Louis Capital in New York.

"In the United States the momentum is slip-sliding. You've got a lot of corporations that also came out with very worrisome comments that by the end of the quarter things really started to slow down."

The Dow Jones industrial average was down 398.55 points, or 3.49 percent, at 11,011.66. The Standard & Poor's 500 Index was down 48.11 points, or 4.03 percent, at 1,145.78. The Nasdaq Composite Index was down 110.18 points, or 4.39 percent, at 2,401.30.

As the Dow fell more than 520 points early in the session, U.S. Treasury debt prices soared and spot gold rallied to a record $1,825.29 an ounce, evidence investors were headed for safer assets.

Traders were on the defensive, paying more for protection as U.S. stocks tumbled on disappointing economic data and renewed bank worries. The CBOE Volatility Index, Wall Street's favorite pulse of investor sentiment, rose 29.4 percent to 40.87.

"This jump in the VIX has caught people off guard and they are now scrambling for protection," said optionMonster analyst Chris McKhann. Although risk perceptions rose Thursday, Wall Street's "fear gauge" is still below the 15-month high set at the close of trading on August 8.

Puts on the SPDR S&P Trust were active, with more than two trading for every call. The fund fell 3.8 percent to $115.01. In SPY options, the soon-to-expire August out-of-the money $110 puts were among the most popular as 77,566 contracts traded. The August $115 SPY strike was the busiest, with 178,500 contracts traded, Trade Alert data showed.

Among banks, Citigroup Inc was off 7.7 percent at $27.54 and Morgan Stanley was down 6.4 percent at $15.92.

Shares of luxury retailer Tiffany & Co dropped 7.4 percent to $59.52.

Economists at Morgan Stanley lowered the outlook for global growth and said the United States and euro zone are "dangerously close to recession."

(Reporting by Caroline Valetkevitch, additional reporting by Doris Frankel; Editing by Kenneth Barry)


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2011/08/16

Sarkozy and Merkel push tax, deeper economic coordination (Reuters)

PARIS (Reuters) – The leaders of France and Germany, under pressure to calm the euro zone debt crisis, will float proposals in September for a tax on financial transactions and push for stronger joint economic governance, French President Nicolas Sarkozy said on Tuesday.

After talks in Paris, Sarkozy said he and German Chancellor Angela Merkel were also proposing that all 17 euro zone countries commit to balanced finances and write that goal into their constitutional law by summer 2012.

Among other measures announced, he said they would strengthen the bloc's economic government via twice-yearly meetings of leaders and the creation of a presidency with a two-and-a-half-year term to steer this forum.

"We want to express our absolute will to defend the euro and assume Germany and France's particular responsibilities in Europe and to have on all of these subjects a complete unity of views," Sarkozy told a news conference at his Elysee Palace offices, where he was flanked by Merkel.

"Germany and France feel absolutely obliged to strengthen the euro as our common currency and further develop it. And it is entirely clear that for this to happen, we need a stronger interplay of financial and economic policy in the euro zone," Merkel said.

The two are under pressure to come up with plans to shore up the euro zone and restore financial market confidence after a year and a half of turmoil that has refused to die down despite bailouts of Greece, Ireland and Portugal and the creation of an anti-contagion fund.

On the financial transaction tax, Sarkozy said:

"The French and German finance ministers will table a joint proposal at the EU level next September for a tax on financial transactions. This is a priority for us."

Financial markets were closely watching the two leaders' second bilateral meeting in just over three weeks for any signal of bold steps to restore confidence, and above all any signal they might commit to issuing pan-European government bonds, a move that could make debt more affordable for troubled economies.

In the event that "last resort" of joint bond issuance, as Merkel called it, did not appear to be part of the Paris accord.

"What we are proposing here is the means with which we can solve the crisis right now and win back trust, step by step ... I do not think euro bonds will help us in this," Merkel said.

Sarkozy nevertheless sought to show the two leaders saw eye to eye on the matter.

"We have exactly the same position on euro bonds ... Euro bonds can be imagined one day, but at the end of the European integration process not at the beginning," he said.

(Reporting by Paris and Berlin reporters; Writing by Brian Love, editing by Mike Peacock and Ruth Pitchford)


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2011/08/11

Stocks rise on small but positive economic signs (AP)

NEW YORK – Wall Street's wildest week since 2008 continued with another 300-point move for the Dow on Thursday. This time, stocks shot up after investors saw small signs that the economy isn't headed into another recession.

Fewer Americans joined the unemployment line last week and a technology bellwether said revenue could grow faster this quarter than analysts expected. The news pushed gold prices down from record highs and sent prices on long-term Treasurys down.

The Dow Jones industrial average rose 283 points, or 2.6 percent, to 11,003 at 12:38 p.m. in New York. It had been up as many as 309 points a little before 11 a.m.

During a calm market, a 300 point move would rank as the Dow's biggest in months. This week, it's the smallest. The Dow has been volatile all week. On Monday, it plunged 634 points only to gain 429 points Tuesday and sink 519 points Wednesday. It's the first time that the Dow has moved by more than 400 points in three straight days since November 2008, when markets were tumbling during the financial crisis.

Carlton Neel, who manages about $2 billion as a senior portfolio manager at Virtus Investment Partners said investors are so scared of being the last one out of the market in a downturn or the last one in during a rally that they are stampeding in herds, creating more volatility.

"Fear tends to be a much more powerful emotion, and the sell-offs tend to be more violent than the rallies," he said. "But people are worried about missing the bottom, so you will have a few melt-ups along the way." That's because memories of the last meltdown in 2008 are still fresh in the mind of many investors.

Thursday's gain came after the government said the number of people filing for unemployment benefits for the first time fell to 395,000 last week, down 7,000 from a week earlier. It's the first time the number has dropped below 400,000 in four months.

Analysts said it may be a sign that the job market is slowly improving after its three-month slump. Job growth slowed to an average of 72,000 in May, June and July. In the previous three months, employers added 215,000 jobs per month, on average.

"It's the first scrap of economic data we've had recently that says the idea that we're going into another recession may be overdone," Neel said.

In the last few weeks, investors have grown more worried about the economy. The government said last month that it grew at its slowest pace in the first half of 2011 since the recession ended in 2009. Unemployment is still above 9 percent.

The S&P 500 index rose 33, or 3 percent, to 1,154. The Nasdaq composite index rose 74, or 3.1 percent, to 2,456.

Technology stocks helped lead stocks higher. Cisco Systems Inc. profit for the latest quarter topped analysts' expectations. Cisco is considered a bellwether for the tech industry because it is the world's largest maker of computer networking equipment. The company also said revenue may grow more quickly in the current quarter than analysts were anticipating. Cisco rose 16.5 percent. As a group, tech stocks in the S&P 500 rose 3.6 percent.

Financial stocks also rebounded from their steep drop Wednesday, up 4.1 percent after a 7.1 percent drop a day earlier.

The leaders of France and Germany, the region's biggest economies, said they will meet next week to talk about how to solve Europe's financial difficulties. Worries that Europe's debt problems could hurt the banks that own European government bonds have weighed heavily on financial stocks and the broader market. Pain for European banks could lead to more trouble for the U.S. banking industry and economy because the global financial industry is so closely linked. That has been one reason stocks have declined in the last several weeks.

Reports also circulated that European markets were considering a ban on selling stocks short, which is a way that traders bet a stock will fall.

Rumors have been a big force in driving the market in the last week. On Friday, speculation that Standard & Poor's may downgrade the U.S. from its top AAA credit rating helped knock down stocks. It turned out to be correct.

This week, speculation has centered on European banks, French ones in particular. The head of France's central bank said Thursday that the country's banks are solid and blamed "unfounded rumors" for big drops in their stocks.

In the U.S., media conglomerate News Corp., which owns Fox News and The Wall Street Journal, rose 19.1 percent. It reported earnings late Wednesday that were better than analysts expected.

Prices for longer-term Treasurys fell, as investors felt less need to put their money in investments considered safe. The yield on the 10-year Treasury note rose to 2.21 percent from 2.11 percent late Wednesday. A bond's yield rises when its price falls.

Investors had been pouring into Treasurys earlier in the week, and they briefly knocked the 10-year yield to a record low of 2.03 percent Tuesday afternoon. Treasurys have held onto their reputation as a safe place to put money even after S&P cut the U.S. credit rating to AA+.

Gold also benefited early this week from buyers looking for something safe. It rose above $1,801 per ounce for the first time on Wednesday as stock markets tumbled around the world. But it fell to $1,771.10 Thursday.

CME Group raised the amount of money that investors must put up to buy a gold contract on its COMEX exchange by 22 percent late Wednesday, driving prices off all-time highs above $1,800 per ounce as some investors were forced out.

The Dow's climb on Thursday pulls the average further away from bear market territory: The Dow ended Wednesday at 16.3 percent below its high for the year, set on April 29. A drop of 20 percent would mean the bull market that began in March 2009 has turned into a bear, a long period of stock declines.


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2011/08/09

Market rout deepens global economic crisis (Reuters)

BEIJING/SINGAPORE (Reuters) – The global economy stumbled deeper into crisis as stock markets slumped further on Tuesday, with investors losing confidence that the United States and Europe can rein in their debt burdens quickly and avert a double-dip recession.

Even as Asian equity markets pulled back from another day of staggering losses as they closed, European shares tumbled for an eighth session running, with news of an unexpected drop in British factory output in June highlighting the weakness of the economy.

The worsening market trauma has piled pressure on the U.S. Federal Reserve to announce fresh measures of support for the U.S. economy at a regular policy meeting on Tuesday, but analysts said its options are limited.

"You have got to a situation of capitulation and panic selling, and these things will keep running until we get some sort of policy response," said Peter Hickson, managing director of global commodity research at UBS.

"Even policy response these days seems to be impotent in terms of the market sentiment at the moment. The market is asking whether policymakers have many more bullets to fire."

Investors fear that, with confidence in the global economy's prospects evaporating, financial markets will remain in a slump, feeding a vicious circle of pessimism.

As of Monday, stock losses had wiped some $3.8 trillion from investor wealth globally in the recent rout as buyers rushing for perceived safety in the Japanese yen, the Swiss franc and gold, which hit another record high on Tuesday.

MSCI's all-country world index was down 1.2 percent, and has now shed about 20 percent since peaking in May. The market rule of thumb is that a fall of that magnitude constitutes a "bear market".

CHINA INFLATION DASHES STIMULUS HOPES

As the flight from risk continued in Asia and Europe on Tuesday, there was more bad news, this time from China, the stuttering global economy's main engine room.

Official data showed China's industrial output grew at a slower pace and its annual inflation rate unexpectedly quickened to 6.5 percent in July.

The inflation pressure puts the country's central bank in a bind as it tries to keep prices in check without dragging down an economy that already faces increasing threats from abroad.

It may not be in a position to reprise its 2008 role of lifting the global economy. When the Lehman Brothers bankruptcy triggered a worldwide slump, China implemented a stimulus package that helped buffer its own economy and buoy the world.

However, some analysts called on Beijing to act.

"It's time for Beijing to announce to the whole world that it will try to stimulate domestic demand again," said Tang Yunfei, an analyst with Founder Securities in the Chinese capital.

Global leaders have failed to reverse sliding markets since a blow was dealt to investor confidence by Standard and Poor's downgrade of the U.S. sovereign credit rating last week.

The downgrade heightened concerns that the twin-pronged crisis of a worsening euro-zone debt problem and a faltering U.S. economy raised the risks of a double-dip recession.

The European Central Bank (ECB) swept into the bond market to buy Italian and Spanish debt and sling a safety net under the euro zone's third- and fourth-largest economies on Monday. But bickering has persisted in Europe over a longer-term rescue plan.

In the United States, President Barack Obama called on Monday for urgent action on the U.S. budget deficit, but his proposal on taxes was promptly rebuffed by Republicans.

A pledge by G7 finance ministers and central banks on Sunday to provide extra cash if markets seize up has also provided little solace as their credibility wore thin.

"CREDIBILITY DEFICIT"

"Four years into the financial crisis, it is becoming increasingly clear that the biggest deficit is not in credit, but credibility," Harvard University economist Kenneth Rogoff wrote in the Financial Times.

"Markets can adjust to a downgrade of global growth, but they cannot cope with a spiraling loss of confidence in leadership and a growing sense that policymakers are disconnected from reality."

Major indexes in Asia slumped in early trade following a drop of more than 6 percent on Wall Street on Monday, and although some staged a sharp rebound, Hong Kong shares recorded their biggest one-day decline since the 2008 crisis.

European bourses put in a short-lived attempted at gains at the open, but succumbed to the bearish mood. The FTSEurofirst 300 index of top European shares lost ground for the eighth session in a row, hitting a two-year low.

"The speed and degree of deterioration in the situation is akin to what we saw during the failure of Lehman Bros, through the dot.com burst ... and during the 1982 recession," said Warren Hogan, chief economist at ANZ Banking Corp in Australia.

"We are looking at markets pricing for some sort of financial crisis. I think we are at a critical period now."

Concerns mounted that Asia would inevitably feel the cold wind of the West's slowdown.

"This is the first time in several years that all three major economic regions are feeling economic distress at the same time," said Keith Ducker, chief investment officer of Tora, a dark pool operator.

FOCUS ON THE FED

With U.S. stock index futures pointing to further steep losses for Wall Street on Tuesday, attention focused on a meeting due later of the Federal Open Market Committee as a possible prop for the market, though the Fed is expected to keep interest rates unchanged.

"Speculation is growing that Chairman Ben Bernanke may do more to help restore confidence with possibly another round of asset purchases," said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets, in Brussels.

On the political front, Obama said on Monday he hoped the loss of the prized AAA credit rating would add urgency to U.S. budget cutting plans.

He called for both tax hikes and cuts to welfare programs as part of the $1.5 trillion in deficit reduction that a special committee would deliver in late November, but Republican House Speaker John Boehner once again rejected the call, saying tax hikes were "simply the wrong approach."

Obama also spoke with the leaders of Italy and Spain, welcoming measures by their governments to address the economic turmoil in Europe.

Traders said the ECB was again seen buying Italian and Spanish debt on Tuesday after it agreed on Sunday to broaden its bond-buying program for the first time to halt an attack on the Mediterranean countries. Italian and Spanish yields declined sharply.

The ECB move was seen as only a temporary solution, however, due to the sheer size of Italy's bond market -- $1.6 trillion -- and there are doubts in the market it can be sustained.

(Editing by Lincoln Feast)


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2011/08/03

Analysis: World poorly placed to meet new economic crisis (Reuters)

LONDON/FRANKFURT (Reuters) – With financial markets in turmoil and economic growth slowing, policymakers around the world may once again be forced to cooperate to try to head off a crisis, as they did successfully in 2008-2009. But this time, they have fewer good options.

Central banks have less room to ease monetary policy than they did three years ago; cash-strapped governments cannot afford to boost spending as much; and political disarray in some countries may make concerted global policymaking harder.

"What can you do? On monetary policy, clearly no one agrees with anyone. On fiscal policy, everyone is blocked," said Deutsche Bank economist Gilles Moec.

By some measures, the global situation is not nearly as bad as it was in 2008. Banks have strengthened themselves since the collapse of Lehman Brothers and the world is still far from a recession; JPMorgan may have cut its forecast for 2012 U.S. growth this week but it still expects an expansion of 1 percent.

Global stocks have dropped nearly 10 percent in the last month but MSCI's world equity index is still 90 percent above its 2009 low.

"I know people are saying that this feels very much like 2008 but I don't think we are there. In 2008, you could point at the problem in the banking sector and there were failed banks," said Nomura economist Jens Sondergaard.

Still, the trends have clearly turned negative. National purchasing managers indexes around the world have dropped near or below the "boom or bust" threshold separating economic growth from contraction. This week's slide of British government bond yields to record lows underlines both investor nervousness and a grim growth outlook.

In some ways, the situation is more worrying than it was in 2008: There is widespread concern about the risk of a downgrade of the U.S. sovereign credit rating, and a bond market attack on Italy, the euro zone's third-biggest economy, has called into question the long-term viability of the zone. Valuations of U.S. and European bank shares are back around levels hit at the time of Lehman's collapse.

"The difference (between 2008 and now) is that this is not only a currency and banking crisis, you have now a currency, banking and sovereign crisis," said Sylvain Broyer, analyst at European financial firm Natixis.

The Swiss central bank's shock decision to cut interest rates on Wednesday to fight the rapid appreciation of the Swiss franc was seen by some analysts as a possible precursor to concerted efforts by central banks in the Group of 20 nations to stabilize markets.

Steen Jakobsen, chief economist at European investment bank Saxo Bank, said the G20 nations were likely for now to leave it up to their central banks, which can act relatively flexibly and quickly, to handle market turmoil.

But if the economic climate keeps worsening, perhaps with another 10 percent fall by global stocks, G20 governments may be pushed into making a concerted pledge of action to protect markets and growth, as they did at a London summit in April 2009, he said.

G20

By displaying solidarity among world leaders and promising $1.1 trillion for global lending institutions and trade financing, the London summit succeeded in reassuring investors enough to support a recovery in markets and economic growth.

Now, however, it may be harder for governments to show such solidarity. President Barack Obama has been weakened politically, and his economic policy options narrowed, by his battle to push up the U.S. debt ceiling.

Some big countries are further along in their election cycles, complicating decisions. Important elections are due in the United States, Germany and France over the next couple of years, as well as a leadership change in China.

"The maneuverability of governments is much less than it was in the last crisis. A lot of people want to be seen not to be caving in to pressure," Jakobsen said.

During the 2008-2009 crisis, the International Monetary Fund played a major role in coordinating the global response, but there are now signs of internal division, with powerful emerging economies criticizing the policies of Western governments.

Last month, Brazilian and Indian directors of the IMF warned the Fund's management against pouring more large sums of aid into the euro zone debt crisis, while official Chinese media have denounced U.S. politicians as globally irresponsible over the debt ceiling dispute.

These tensions may complicate G20 agreements on action in several areas:

- Joint currency intervention. This is the most likely initial form of G20 cooperation because well-tried mechanisms for it already exist; central banks could send a message that they want stability in markets by intervening massively to stop appreciation of the Swiss franc or Japanese yen.

But China and the rest of the world are still far from agreeing on a more fundamental problem in the global currency system -- the value of the Chinese yuan.

- Coordinated interest rate cuts. In October 2008, six Western central banks cut interest rates in a coordinated move, while China also eased policy.

Global central bankers may signal an easier policy bias when they meet in Jackson Hole in the United States on August 25-27. But coordinated rate cuts look unlikely in the foreseeable future because some central banks such as the U.S. Federal Reserve have very little room left to cut, and central banks are also at different stages in their monetary cycles. The European Central Bank began tightening this year, criticizing Fed policy as too loose; China may still be in tightening mode.

A weakening economy might eventually push the Fed and the Bank of England into printing more money through "quantitative easing." But this would almost certainly not be part of any coordinated G20 move; China and other emerging economies sharply criticized U.S. quantitative easing last year as destabilizing for markets.

- Expansionary fiscal policy. During the 2008-2009 crisis, the G20 did not resolve differences over fiscal policy; Germany resisted U.S. pressure to boost government spending more. But the London summit in 2009 still produced a pledge of "an unprecedented and concerted fiscal expansion" by G20 states, which cheered markets.

Such a pledge is extremely unlikely now, with the euro zone and the United States desperate to reassure investors that they can bring sovereign debt down to manageable levels.

Markets are hoping fiscally strong G20 members may spend more to help weak ones. Germany could change tack and support a major expansion of the euro zone's 440 billion euro bailout fund in order to provide a precautionary credit line to Italy. [ID:nLDE77017G] China might invest more of its $3.2 trillion foreign exchange reserves in euro zone sovereign debt.

Both these measures might be discussed by the G20 and could have a quick, dramatic effect on markets. But they would face some political opposition within the contributing governments, and would not necessarily change the long-term outlook for economies.

(Writing by Andrew Torchia)


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2011/07/28

Jobless claims, housing data offer economic hope (Reuters)

WASHINGTON (Reuters) – The number of Americans claiming new jobless benefits hit a three-month low last week and contracts to buy existing homes rose in June, hopeful signs for an economy that has struggled to regain momentum.

Initial claims for state unemployment benefits dropped 24,000 to 398,000, the Labor Department said on Thursday, below economists' expectations for a fall to 415,000.

A separate report from the National Association of Realtors showed pending home sales rose 2.4 percent in June, the second straight monthly increase. Contracts usually lead sales by a month or two.

The reports offered some relief after a recent string of weak data, which had shown the economy closing out the first half of the year on a soft note. A deadlock in Washington over raising the nation's debt limit has hurt sentiment.

"Claims provide some hints that the economy is going to do better in the third quarter," said Michael Strauss, chief economist at Commonfund in Wilton, Connecticut.

"Assuming we don't get massive government furloughs because we don't get the debt limit raised in the next couple of days or couple of weeks, we would probably see GDP growth in the 3 percent range in the second half of year as opposed to sub 2 percent in the first half."

U.S. stocks rose on the data, a day after posting their biggest fall in eight weeks. Prices for Treasuries also increased despite fears of the government defaulting on its debt, while the dollar fell against a basket of currencies.

WEAK HOUSING, JOBS FRUSTRATING RECOVERY

The government is expected to report on Friday the economy grew at an anemic 1.8 percent annual rate in the second quarter, according to a Reuters survey, a touch slower from the already weak 1.9 percent first-quarter pace.

The weak economy hurt domestic sales of consumer companies such as Colgate-Palmolive Co and Avon Products Inc in the second quarter.

However, Colgate Chief Executive Ian Cook said on Thursday that business in the United States got off to a healthy start in July.

While the rise in pending home sales was encouraging, there has been an increase in contract cancellations because of problems with property valuations and tight lending standards, and high cancellations had pushed down home resales in June.

"The pickup in pending home sales might not necessarily end up in a measurable pick up in mortgage closings and translate into a healthy increase in existing home sales," cautioned Yelena Shulyatyeva, an economist at BNP Paribas in New York.

The weak housing and labor markets are high on the list of factors frustrating the economy's recovery from the 2007-09 recession.

The labor market took a beating in May and June, with nonfarm payrolls increasing only 43,000 over the two months. But the dip in claims below the 400,000 mark offered reason for cautious optimism.

"The recent softness in the labor market may be beginning to subside," said Troy Davig, a senior economist at Barclays Capital in New York.

"The full unwinding of the high gasoline prices and supply chain disruptions stemming from the Japanese earthquake, which led to much of the softness in the second quarter, will take time, but appears to be proceeding."

A four-week moving average of claims, considered a better measure of labor market trends, fell 8,500 to 413,750, while the number of people still receiving benefits under regular programs after an initial week of aid declined 17,000 to 3.70 million in the week ended July 16.

Data for the so-called continuing claims covered the survey week for the household survey from which the unemployment rate is derived. The jobless rate rose to 9.2 percent in June from 9.1 percent in May.

(Editing by Andrea Ricci and Neil Stempleman)


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2011/07/20

EU warns of economic damage if Greece summit fails (Reuters)

BRUSSELS/FRANKFURT (Reuters) – EU leaders must find a convincing solution to Greece's debt crisis at a summit on Thursday or the global economy will pay the price, the head of the European Commission said in an unusually somber warning.

Jose Manuel Barroso delivered the message as officials of the 17-nation currency area and bankers struggled to pin down a package of measures to persuade markets Greece can be saved from default and the rest of the euro zone from contagion.

"Nobody should be under any illusion: the situation is very serious. It requires a response, otherwise the negative consequences will be felt in all corners of Europe and beyond," Barroso told a news conference.

He said the elements of a solution must include: measures to ensure the sustainability of Greek public finances, private sector involvement in funding for Athens, more flexible use of the euro zone's EFSF bailout fund, repair of the region's banking system and liquidity to keep the economy going.

In what sounded like veiled criticism of German Chancellor Angela Merkel, Europe's reluctant paymaster, Barroso said it was time for leaders to say "what they can do and what they want to do. Not what they can't do and won't do."

Merkel lowered expectations on Tuesday, saying the summit would not bring a spectacular one-shot solution to the Greek crisis but only the latest in a series of incremental steps to tackle the roots of Athens' debt and competitiveness problems.

Christine Lagarde will attend the summit on behalf of the International Monetary Fund, which has told euro zone leaders that they should put more money into the EFSF bailout fund and allow it to buy government bonds on the secondary market.

The euro and peripheral euro zone bonds rose on hopes that policymakers would heed the IMF's advice on bond purchases and provide precautionary credit lines to countries in difficulty.

BANKS' PROPOSAL

However, Germany has so far blocked either course, and while a source close to the talks told Reuters earlier this week that both ideas were back on the table, there is no sign yet that Berlin has changed its mind.

Both would require changes in the EFSF's rules that would have to be ratified by national parliaments, and could fall foul of skeptics in Germany, the Netherlands and Finland.

They would also run counter to a treaty signed just three weeks ago creating a permanent crisis-resolution mechanism from 2013, the ESM, which would not have such powers.

Major European banks and insurers were to send euro zone governments a complex proposal later on Wednesday for helping in a planned 115 billion euro second Greek bailout, industry sources said.

One banking source said the banks were offering a mixture of debt rollovers, maturity extensions and other measures worth roughly 40 billion euros over three years, but details have yet to be finalized.

Another source said negotiations were still fluid but key elements would be a large rollover of expiring bonds for up to 30 years on credit-enhanced terms, and probably a much smaller buyback by the Greek government of its own bonds on the secondary market with money lent by the EFSF.

Those options would almost certainly prompt credit ratings agencies to declare a selective default, putting the European Central Bank in an acute dilemma as to whether to carry out a threat to reject Greek bonds as collateral -- a move that would starve Greek banks of vital liquidity.

The banks are determined to fight a proposal for a tax on the financial sector to help pay for a second Greek rescue, which a euro zone working paper obtained by Reuters on Tuesday showed was seen as the least risky private sector contribution.

A senior EU source said governments seemed to be converging around the tax proposal despite its drawbacks.

"We're heading for another sticking plaster deal," he said. "We're in a crisis and there's panic. Sometimes panic can lead to action, but it can also lead to paralysis, and in this case it's more about paralysis."

Banking sources said a tax would unfairly penalize banks with no exposure to Greek debt and would inevitably give rise to legal challenges.

"GERMAN RETICENCE"

Merkel and French President Nicolas Sarkozy, who conferred by telephone on Tuesday, met in Berlin on Wednesday evening for what could be the decisive preparatory session before euro zone officials start thrashing out details on Thursday morning, just hours before the summit, which could run late into the night.

There were no plans for Merkel and Sarkozy to talk to reporters, officials said.

"We are very confident that there will be a good and sensible solution," Merkel's spokesman said, stressing private sector participation remained a key German priority.

French Foreign Minister Alain Juppe also said he was "sure we will find an accord," adding that contrary to media reports, "there is a very broad convergence of views" among euro zone capitals.

However, Paris signaled apparent frustration at Berlin's continued opposition to common euro zone bonds, a step which European Socialist leaders and many economists argue would provide a long-term solution to the debt crisis.

French government spokeswoman Valerie Pecresse said after a cabinet meeting that "German reticence" was the main obstacle to the idea of issuing joint euro bonds.

Despite Wednesday's cautious market optimism, many analysts fear the fifth European summit this year will produce half-measures that, at most, will buy a couple of months before pressure for a Greek debt restructuring becomes acute again.

"(The) summit could provide the last chance for euro-zone policymakers to get a grip on the region's debt crisis," Capital Economics said in its daily market note.

"Anything other than a very decisive response could see the situation become irretrievable."

The ECB kept up a drumbeat of pressure on euro zone leaders to avoid any step that could cause a selective Greek default.

ECB chief economist Juergen Stark said in a newspaper he hoped the leaders would stick to a previous commitment to avoid a selective default, because anything else would confuse markets.

(Additional reporting by Alex Chambers, Jessica Mortimer and Kirsten Donovan in London, Andreas Rinke and Stephen Brown in Berlin, Nick Vinocur in Paris; writing by Paul Taylor; editing by Janet McBride)


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2011/07/13

Pessimism deepens as economic concerns rise: Reuters/Ipsos poll (Reuters)

WASHINGTON (Reuters) – Americans are deeply pessimistic about the future as economic concerns rise and White House talks on raising the U.S. debt limit sputter, according to a Reuters/Ipsos poll released on Wednesday.

The number of Americans who believe the country is on the wrong track rose to 63 percent this month, up from 60 percent in June, with stubbornly high unemployment and prolonged gridlock in Washington dashing hopes of a swift economic recovery.

But voters do not appear to be holding President Barack Obama responsible for the problems so far. Obama's approval rating held relatively steady at 49 percent, down 1 percentage point from June. His approval rating among independents -- a group Obama needs to win re-election -- fell to 39 percent from 44 percent.

Obama's standing could deteriorate quickly if the economy does not begin to generate jobs and if Washington cannot show it is capable of solving problems, Ipsos pollster Julie Clark said.

"If those things don't happen, Obama will be in for a real challenge in getting re-elected next year," Clark said.

Obama and Republicans have hit an impasse in negotiations to raise America's borrowing limit before the government runs out of money to pay all of its bills on August 2. That could force the government to try to prioritize its payments.

Asked what bills the government should stop paying if the debt limit is not raised, 36 percent listed international creditors like banks and 12 percent listed government departments like agriculture and education.

The sputtering economy and high unemployment are certain to dominate the race for the White House in 2012, and the Republican candidates for the nomination to challenge Obama repeatedly have criticized his economic leadership.

ROMNEY EASILY LEADS BACHMANN

In a head-to-head matchup of the two top declared Republican challengers, Mitt Romney easily leads Michele Bachmann, 40 percent to 23 percent, the poll found.

Romney, a former governor of Massachusetts, leads most national polls of the Republican race but Bachmann, a U.S. representative from Minnesota, has made inroads with an appeal to Tea Party activists and social conservatives. Among independent voters only, Romney's lead is just 10 percent.

The poll found more than half of Americans believe the economy is the country's most pressing problem, the first time a public majority has put it at the top of the list since shortly after Obama took office in February 2009.

The survey was taken after a weak jobs report last week showed the U.S. economy is recovering slower than expected. Unemployment rose slightly to 9.2 percent.

"People aren't seeing the jobs that they want to see," Clark said. "One in five people say unemployment is the biggest problem, and there has been no improvement in that."

Talks between Obama and congressional leaders on raising the $14.3 trillion U.S. debt ceiling before an August 2 deadline also have made little progress. Officials have warned failure to raise the limit could derail the economic recovery and endanger the global financial system.

"People are watching these talks and getting a real sense of gridlock and a sense of pessimism about anything getting accomplished in Washington," Clark said.

The number of people listing government spending and the deficit as the most important problem rose to 14 percent in July from 8 percent in October of last year. Republicans have insisted on spending cuts as part of any deal on raising the debt limit. Democrats want tax increases as part of the deal.

The poll of 1,173 adults, including 989 registered voters, was taken on Friday through Monday and had a margin of error of 3 percentage points. Interviews were conducted on both land lines and cell phones, in either English or Spanish.

(Editing by Sandra Maler)


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2011/07/09

Black economic gains reversed in Great Recession (AP)

BALTIMORE – Growing up black in the segregated 1960s, Deborah Goldring slept two to a bed, got evicted from apartment after apartment, and watched her stepfather climb utility poles to turn their disconnected lights back on. Yet Goldring pulled herself out of poverty and earned a middle-class life — until the Great Recession.

First, Goldring's husband fell ill, and they drained savings to pay for nursing homes before he died. Then Goldring lost her executive assistant job in the Baltimore hospital where she had worked for 17 years. The cruelest blow was a letter from the bank, intending to foreclose on her home of almost three decades.

Millions of Americans endured similar financial calamities in the recession. But for Goldring and many others in the black community, where unemployment is still rising, job loss has knocked them out of the middle class and back into poverty. Some even see a historic reversal of hard-won economic gains that took black people decades to achieve.

Goldring remembers her mother taping the blinds to the wall so no one could see them stealing electricity. She remembers each time she sat on the curb with her three brothers, surrounded by her family's belongings, waiting for a new place to live. Sitting on those curbs, she promised to always pay her bills on time.

Now, after finding herself poor again, "the only word I can say is devastated," says Goldring, 58.

"For me to live that life we were so comfortable in, we never had to worry about finances, we always had money where I can help my kids and my grandchildren — to go to calling my daughter to borrow $100 because I can't pay a bill ..." Goldring's voice trails off as she struggles to hold back tears.

Economists say the Great Recession lasted from 2007 to 2009. In 2004, the median net worth of white households was $134,280, compared with $13,450 for black households, according to an analysis of Federal Reserve data by the Economic Policy Institute. By 2009, the median net worth for white households had fallen 24 percent to $97,860; the median black net worth had fallen 83 percent to $2,170, according to the EPI.

Algernon Austin, director of the EPI's Program on Race, Ethnicity and the Economy, described the current wealth gap this way: "In 2009, for every dollar of wealth the average white household had, black households only had two cents."

Since the end of the recession, the overall unemployment rate has fallen from 9.4 to 9.1 percent, while the black unemployment rate has risen from 14.7 to 16.2 percent, according to the Department of Labor.

"I would say the recession is not over for black folks," Austin says. He believes more black people than ever before could fall out of the middle class, because the unemployment rate for college-educated blacks recently peaked and blacks are overrepresented in state and local government jobs that are being eliminated due to massive budget shortfalls.

Maya Wiley, director of the Center for Social Inclusion, says the anti-discrimination laws passed in the 1960s took decades to translate into an increase in black economic security — and that was before the recession.

"History is going to say that the black middle class was decimated" over the past few years, Wiley says. "But we're not done writing history."

___

Goldring was born and raised in Baltimore, and her mother was single for much of Goldring's childhood. At 16, she dropped out of school and went to work cleaning hotel rooms.

"That's when I first met white people. Some of them would stay a month at the hotel. They would have all their children with them," she remembers. "I thought, one day I'd like to hang out at a hotel."

She didn't know any middle-class people in her all-black neighborhood. "Where we lived, everyone struggled. We just struggled a little harder," she says. "If the lights stayed on for a whole year, if we didn't get put out, I thought we were doing really, really well."

At 21, pregnant with her second child, Goldring decided to get her GED. Then she went to community college, got a degree in secretarial work, and began a career.

She met her husband in 1983. He had a steady job as a heating and air-conditioning installer, and owned a brick two-bedroom home in Morgan Park, a leafy, integrated neighborhood.

With two incomes, money was not a problem. He liked to travel. She had never been out of Maryland.

"I thought, `Is this how rich people live?'" Goldring remembers. "From where I was to where I ended up, it was way different."

Her husband had been married before. As a condition of the divorce, his daughter's name was added to the deed of the house. After Goldring's husband died in 2007, Goldring took out a 30-year fixed-rate mortgage, with a 6.5 percent interest rate, to purchase the house outright.

Everything was fine until her hospital "restructured" in 2009. Her boss, a senior vice president, was transferred to the corporate office. Executives were now sharing secretaries. A few months later, they let Goldring go.

No more family vacations. No more trips to the mall. No more filling the grocery cart.

But what Goldring misses the most is her checkbook. Her unemployment payments arrive on a debit card.

"Just being able to pull out my checkbook and pay a bill, even though there might not be much left in there," she says. "I really miss that checkbook with my name on it."

___

Last April, black male unemployment hit the highest rate since the government began keeping track in 1972. Only 56.9 percent of black men over age 20 were working, compared with 68.1 percent of white men.

Chris Wilder, a Philadelphia journalist, lost his job in 2008 as the media industry suffered huge losses. Unemployment benefits amounted to about one-third of his salary. Ever since they ran out, his income has been near zero, other than sporadic freelance work.

If not for a policy in his apartment co-op to assist people who lose their jobs, "I might be living with my mother," he says.

He has felt depression and anxiety. He's gone from a six-figure salary to having to check his balance before using his bank card. "I miss being able to go into a store and go off budget," he says. "Now, when I go to shop for something, I have to stick to exactly what I came to get. I never have money to buy anything else."

Wilder, 43, grew up solidly middle class, the son of a newspaper editor and a college administrator. Now the single parent of a 15-year-old, he has managed to keep his son in cleats and baseball camps, but thoughts of dying poor have crept into his mind. All of his savings are gone.

"It's definitely harder for black people to get jobs," Wilder says. "With the economy as bad as it is, people are hiring nephews and family friends and friends of friends. It's hard for black people to break that cycle. We don't own or even run the big companies."

"It's hard to keep jobs as well, because they're gonna `last hired/first fired' you," he adds.

Wilder isn't giving up on finding a job in his field, "but I should."

"I call everyone. I send resumes. It is extremely rare that I get a call back," he says. "When I was growing up, I never imagined there would be a time when I was out of work for three years."

College-educated blacks fared worse than their white counterparts in the recession. In 2007, unemployment for college-educated whites was 1.8 percent; for college-educated blacks it was 2.7 percent. Now, the college-educated unemployment rate is 3.9 percent for whites and 7 percent for blacks.

"I've definitely played by the rules," Wilder says.

He's not desperate enough to break the law, but "I see why people become drug dealers."

___

Horace Davis did become a drug dealer. He illustrates another dimension of the recession's impact on blacks: While law-abiding folks are falling out of the middle class, those who got in trouble with the law are further than ever from a second chance.

After serving four years for drug trafficking, Davis walked out of prison into the middle of the recession in 2008. "I thought to myself, I'm older, I need to get a job, move on. The dope game was dead to me," Davis says, sitting on a concrete porch in an Asheville, N.C., housing project.

In the past few decades of the "War on Drugs," harsh drug sentencing laws have sent a disproportionate number of black people to prison, even though blacks are not more likely than whites to sell or use drugs, according to a 2008 report by the Sentencing Project. Today, about 280,000 African-Americans exit prison each year. They are often the last of the last to be hired.

After Davis got out, he spent months applying for dozens of jobs mopping floors or flipping burgers. He carried a letter from the state offering a $2,500 tax credit for hiring ex-offenders. He got one call back, from a chicken restaurant. "We'll be in touch," Davis remembers them saying. They weren't.

"Nobody wants black felons in their businesses," says Davis, 26.

A 2003 University of Chicago study by Devah Pager sent young white and black "testers" to apply for real low-wage jobs. Some of the testers were randomly assigned felony convictions. The study found that whites with felonies were slightly more likely to get callbacks than black applicants without criminal records.

"The penalty of a criminal record is more disabling for black job seekers than whites," Pager and other researchers wrote in a follow-up study in 2009.

Davis says he learned skills in prison: "How to cook, clean, horticulture, janitorial. I can do it. I've been trained. Tile, carpentry, mortar, edging and trimming, all that. I can operate a backhoe, a roller. Any opportunity to do something that would show my talents, I'd do it. It would be my ticket out the streets.

"I just need someone to give me that chance. A nice construction job, anything. I would hold onto that until I die."

Some economists say the real black unemployment rate is as high as 25 or 30 percent, because government figures don't count "discouraged" workers who have stopped looking for jobs and dropped out of the labor force.

Davis now falls into that category — partly due to societal forces and partly, he knows, because of his own bad decisions.

Recently, police said they caught Davis with a half-ounce of marijuana. His trial date is approaching. As a habitual felon, he could get a 10-year sentence.

___

Some see a bitter irony in soaring black unemployment and the decline of the black middle class on the watch of the first black president.

"I thought Barack Obama could have provided some way out. But he lacks backbone," Princeton professor Cornel West told truthdig.com recently.

He said Obama had sold out the poor and become "a black mascot of Wall Street oligarchs and a black puppet of corporate plutocrats ... I don't think in good conscience I could tell anybody to vote for Obama."

Yet many jobless blacks do not blame their plight on the president.

"I have no problem with Obama when I look at what the alternatives are," Wilder says.

Goldring doesn't think Obama is doing a bad job either. "The unemployment situation is not the best, but I don't think it has a lot to do with him," she says. "Fixing this economy, it's going to take time.

Wiley, the Center for Social Inclusion director, says Obama should be applauded for several initiatives that have helped the black middle class, such as programs to modify certain mortgages and forestall foreclosure due to job loss.

She would have liked Obama to aggressively counter the suggestion that first black president would be showing favoritism if he specifically helped black people.

"It's the right thing to do for the nation," she says. "Black people are a huge segment of the population, they're especially hard-hit, and the country cannot recover if the black community — as well as the white community and others — does not recover."

___

Black homeownership hit an all-time high in 2004, with 50 percent of African-Americans owning their homes, according to census data.

Today, the black homeownership rate is 45 percent, compared with 74 percent for whites. Nearly 8 percent of African-Americans who bought homes from 2005-2008 have lost them to foreclosure, compared with 4.5 percent of whites, according to an estimate by the Center for Responsible Lending.

Goldring remembers that when she got a foreclosure notice from the bank, "I bawled."

Her son, Chris Fredericks, says she was "vulnerable, more than I have ever seen her, but she still kept moving."

He was incredulous that his mother was in such a position. "At any point, you can slip back. It's just the way the economy is going," he says. "Once you get into a spiral, there's no telling how far down you could go."

One day, at a counseling session on how to prevent foreclosure, Goldring learned about a new Maryland program that offered help to people who were behind on their mortgages due to layoffs or medical bills.

She thought it was too good to be true. It wasn't.

The Emergency Mortgage Assistance program, financed by federal money, offered a zero-interest loan of up to $50,000. The money would pay off up to a year of back mortgage payments, plus up to two years of regular payments. All Goldring had to do was pay 31 percent of her current gross income, or the full mortgage payment if she got a new job close to her original salary.

And so on a sweltering June day, Goldring stood before a podium in her freshly mulched back yard, flanked by a congressman, the mayor, the lieutenant governor, and other officials. The sound of chirping birds filled the air. Cameras rolled as the dignitaries told Goldring's story, using her as an example to spread word of the Emergency Mortgage Program to other struggling homeowners.

"I want to thank you for your courage," said the lieutenant governor, Anthony Brown.

"I know you did everything right," Brown said. "You worked hard, you saved diligently, but challenges never overtaking our will sometimes overtake our wallets."

Goldring stood in front of the microphone and exhaled.

"After this," she said, "the only good thing would be to be employed, once again."

___

Jesse Washington covers race and ethnicity for The Associated Press. He is reachable at www.twitter.com/jessewashington or jwashington(at)ap.org.


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