A restaurant in New Orleans suggests "Foreclose on the Banks." Image from Flickr.

The media and Uncle Sam want us to believe that times are getting better and that we are crawling out of the recession. In fact, there are some economic indicators that the economy is starting to come around.

The last few weeks have provided an increase in consumer spending, a slight decline in the unemployment rate, and the Dow Jones even broke 10,000. However, this may not be enough of a change to get excited yet. There are major economic indicators that are not providing such positive results.

The high rate of foreclosure

The 3rd quarter of 2009 has seen a record number of homes in some stage of foreclosure. The total number of foreclosures for this period was 938,000 compared to 890,000 for the previous three months. It is estimated by RealtyTrac Inc. that the total number of foreclosures for 2009 will exceed the 3.5 million mark. This is up from 2.3 million for 2008.

Gradual increase in total foreclosures

The pattern for all of 2009 has pointed toward an ever increasing number of foreclosures. Each quarter this year has provided even more staggering numbers than the quarter before it. The first quarter ended with 803,489 which was an increase of 9 percent over the last quarter of 2008. This was followed by an increase of 10.5 percent in the summer months and a 5 percent increase the past quarter.

Total foreclosure filings

The indicated foreclosure rates include default papers, auction sale notices and repossessions. These numbers are being partly blamed on the unemployment rate that is at a 26-year high.

Another major factor of this rate is that housing prices have plummeted, and some homeowners are severely under water – meaning they owe more than their homes are worth. These combined factors can remove the incentive for homeowners to keep up with mortgage payments.

The Government’s solution

The Obama administration has implemented steps to try to curtail home foreclosures from plummeting even further out of control. These steps have been aimed at encouraging financial institutions to offer mortgage modifications to those homeowners that are distressed. One of these programs is Hope Now, an organization set up to assist with mortgage modification negotiations.

Obama announced the beginning of October that 500,000 homeowners have been assisted by the government’s mortgage relief effort. While this is certainly a milestone that should be recognized, this help has been provided to 500,000 distressed homeowners out of the over 2.5 million homeowners that have faced foreclosure so far in 2009. The problem is that the rate of new foreclosures exceeds the rate of those that have been assisted. “The sheer scale of the problem is preventing the loan modification programs from having the kind of impact we’d all like” said Rick Sharga, RealtyTrac’s senior vice-president for marketing.

Some areas have seen improvement

While the National numbers are up the rate of foreclosures for some states are actually on a decline. New York has reported a drop in the amount of foreclosures for the third quarter of 2009. The overall numbers of foreclosures for the third quarter in New York were up 19 percent over the same period of the year before, but they are actually down 10 percent from the rate of the previous quarter.

Other states have seen signs of improvement as well. The first quarter of the year, California and Florida had the highest number of foreclosures. As of the third quarter they are ranked third and fourth with Nevada topping off the list.

September’s foreclosure rates are lower

RealtyTrac reported that the number of foreclosures nationwide for September were 344,000 down 4 percent from a month earlier. However, this number is still the third-highest month since the report started in early 2005. It was also the seventh straight month in which more than 300,000 properties filed foreclosure. These numbers may imply that the peak has been reached and the turn-around is slowly beginning. Only the rest of the year will indicate if this trend continues.

It appears the recession is not dissuading Boston Marathon runners from marking the occasion with souvenir merchandise. Sales at the three-day John Hancock Sports and Fitness Expo are right on track compared to previous years. In fact, the race’s official outfitter, Adidas, plans to double its sales over last year’s.

Gotta have it

Apparently, runners are willing to do whatever it takes, whether that means getting an online cash advance or using credit cards, to take home memorabilia that commemorates their participation in the Boston Marathon. From the Boston Globe:

“This is possibly a once-in-a-lifetime thing,” said Heather Billings of Boston, who checked out an $80 souvenir Adidas jacket at Marathon Sports on Boylston Street. “You always try to weigh the options. Do I really need this? Yes, I do because this is something I’m really proud of doing.”

More on the merchandise

Of course, Boston Marathon gear includes aisles of running gear. Also very popular are the commemorative plaques, lithographs and jewelry.

To put it in the words of the Boston Globe: “The 113th Boston Marathon appears largely recession-proof.

Sponsors still invested

The executive director of the Boston Marathon, Guy Morse, says that the slump in consumer spending has cause sponsors to re-evaluate how they spend their money.  However, he stays that sponsorship for the marathon has remained steady. He expects to add more sponsors next year. Adidas has already signed on to be the official outfitter again next year.

Larry Summers

President Obama’s top economic adviser, Larry Summers, said in a speech today that he believes the $787 billion economic stimulus plan is already working. He spoke at the Brookings Institution late this morning.

He says jobs have already been saved and consumer spending seems to be stabilizing.

Too soon?

Summers acknowledged in his speech that it was a bit early to be measuring the effects of the stimulus package. But, commented about consumer spending anyway.

“It is modestly encouraging that since it began to take shape, consumer spending in the U.S., which was collapsing during the holiday season, appears, according to a number of indicators, to have stabilized.”

Too soon, according to me

While it’s true that consumer spending isn’t plummeting the way it was during the last half, this “stable” period has only lasted for possibly eight weeks so far. Final reports aren’t in for February yet. Also, while consumer spending has stayed at about the same level, that level is very low.

If consumer spending does stabilize at this level, the economy will remain weak. We’re a long way from the days people used personal loans for unnecessary items. We need to find a balance between extreme frugality and irresponsible borrowing before the economy will truly be stable.

Jobs saved

Summers also pointed out that the economic stimulus package has already saved jobs, one of its main goals.

“Already, [the stimulus plan's] impact is being felt by cops and teachers who would have been laid off but whose jobs have been saved; it may retain14,000 teachers in New York alone.”

This is a much better indicator of concrete effects that the stimulus package has had.

Coming attractions

Summers also reminded the audience of the changes that will soon make their way into Americans’ pockets. Some could already be collecting extended unemployment benefits. Working Americans will see a little extra cash in their paychecks when withholding schedules are adjusted.

Manufacturing plant in Nevada

We all know that many sectors of the economy are continuing to get worse. However, there are a couple of key economic indicators that are ever-so-slightly getting better.

Manufacturing and consumer spending have both shown small increases this year.

Manufacturing taking a turn?

Despite many predictions to the contrary, manufacturing sector activity rose in February. It was the second straight month the sector’s index inched up after 11 months of decline.

The Institute for Supply Management reported a manufacturing index of 35.8 for February. It’s a tiny difference from the 35.6 reading in January, but it’s going in the right direction.

“Everyone is so pessimistic from first-quarter reports, so even when we see a modest gain, it’s a glimmer of hope,” said Sam Bullard, an economist at Wachovia.

Consumers spending slightly more

Another important economic indicator that saw a small gain was consumer spending. Analysts  had predicted a gain, but consensus said consumer spending went up 0.4 percent in January.

Saving is becoming a bit more trendy.

Now that final reports are in, it turns out personal spending went up 0.6 percent in January after falling for the six months previous.

While consumers are spending more, they are saving more, too. The savings rate hit 5 percent in January, up from 3.9 percent in December. People are also taking out fewer personal loans.

Income headed the right direction

Unfortunately, unemployment is still climbing.The Labor Department expects that unemployment hit 7.9 percent in February. Unemployment in January  was 7.6 percent.

I mustn’t end with bad news, so on a more positive front — another tiny, but important, change. Personal income rose just a tad in January, up 0.4 percent.

Every major pizza chain in the United States has reported a drop in sales at all stores that have been open at least a year.

Along with Domino’s and Pizza Hut, Papa John’s sales fell over the last year. However, Papa John’s was able to raise profits anyway.

Domino’s takes a hit

Domino’s profit fell 32 percent in the fourth quarter of 2008. Same-store sales fell 3 percent, and the company predicts that number will stay flat throughout 2009.

This year Domino’s introduced sandwiches to try to make up for the loss in pizza sales. It has brought in more customers into stores, but it didn’t offset the lower pizza sales.

Pizza Hut posts a challenge

Chief Executive David Novak said Pizza Hut sales have fallen because dinner has been the hardest-hit meal. It’s more expensive to eat out at dinner time, so more consumers are staying home to eat in the evenings. Because pizza is mainly a dinner food, sales have declined.

Pizza Hut has also expanded offerings to try to offset lower sales. New items on the menu include lasagna and pasta. It has also amped up promotion of its chicken wings.

Papa John’s posts a victory

Papa John’s pizza sales fell just like everyone else’s, but the company still managed to make a profit.

Papa John’s was the only major pizza chain that opened more stores than it closed in 2008. A market analyst attribute’s Papa John’s success to stealing other pizza place’s customers by emphasizing quality.

Could this little piggy bring the economy crashing down? I don't think so.

While it’s true that more people are relying on cash advances now, there are also a higher number of people stashing money in their savings accounts.

I will be the first to admit that when I read the headline “Why Saving is Killing the Economy,” I rolled my eyes.

Sensational saving skeptics

Call me cynical, but I just have a hard time believing that hard-working Americans stowing $20 out of their paychecks is “killing the economy.” For one thing, some would argue it was already dead.

I completely understand that consumer spending is key to supporting a thriving economy. But given the fact that more and more people need cash advances, I’d say we need not look at low- and middle-income Americans as the culprits in this “saving crisis.”

Show me the money

All that’s happening is people aren’t spending money on things they don’t need. Yes, that does mean businesses that deal in frivolity run the risk of going under. Or maybe they just need to market their frivolousness to a different market.

Will Smith is "Hollywood's Most Valuable Actor." I say: Smith, get to shopping!

What about all of the actors, athletes and big business owners who have millions, if not billions, stowed away? I think if Paris Hilton went on a major shopping spree it’d make a much bigger difference than me emptying my $100 savings account.

Keep your money

If you’ve got a few dollars tucked away as a cushion, it’s not going to save someone’s job if you spend it. Buy what you need. That’s enough. The economy did very well in the ’50s when the savings rate was between 8 and 10 percent. Right now it’s at 3.6 percent.

Economists are saying that if everyone suddenly begins saving 10 percent of their income we’ll have a real problem. Call me crazy, but going from “People are saving 3 percent of their income,” to “Prepare for the worst! Everyone is about to start saving 10 percent!” is a bit extreme.

Wrapping up

To summarize my point, I understand that consumer spending will help the economy. But it frustrates me when I read headlines that say “saving is killing the economy.” It’s just so sensationalistic — kind of like when cash advances and payday loans are referred to as “predatory lending.”

A different outlook

In “The Big Bing Blog” on Fortune Magazine’s Web site, author Stanley Bing writes about the SkyMall catalog in relation to the recession. He is of the opinion that people buying things from said catalog is a sign that the economy will stabilize.

“I still believe that in the end we’re all going to be all right. If people are buying meerkat gang sculpture for their yards and living rooms, can recovery be far behind?”

You can order your very own Harry Potter wand from the SkyMall catalog. (Warning: Wand does not actually contain magic.)

But are people doing that? Bing argues that the SkyMall catalog, and the marketing business in general, makes us think that we actually need things like cigar humidors and slippers with built-in night lights.  I admire Bing’s optimist, and I understand that his blog is meant to be humorous. Still, I can’t help but wonder if Americans are still making frivolous purchases like these.

Cold, hard facts

Statistics indicate that they are not. The Commerce Department has released its official report on just how dismal holiday sales were this season. Wall Street had predicted that the decline was about 1.2 percent, but final  figures show that sales fell 2.7 percent.

Before you go thinking that maybe Americans did their holiday shopping early this year: It was the sixth straight month of decline. I’m no financial guru, but it seems to me that if people were going to be making frivolous purchases, they would have done it for the holidays, even if they had to take out payday loans to do it.

Aftershocks

In the wake of these reports, some major retailers are announcing big changes. California department store chain Gottschalks is up for sale, and it has filed for Chapter 11 bankruptcy.

Famous luxury retailer Neiman Marcus Group Inc. says it is going to cut 375 jobs. Macy’s department store is closing 11 stores, which will affect 960 employees. So between those two companies, I can safely assume that at least 1,335 people out there will be even less likely to be making discretionary purchases.

Job loss leads to job loss

So, because consumers aren’t spending enough on retail, employees from retail store are out of a job. If (when) those employees go on unemployment, their incomes will be slashed by more than 30 percent, leading to even less spending and more … well, you get the picture.

Thus, it comes as no surprise to me that Federal Reserve says this low-spending trend is continuing and worsening this month. An AP reporter says “job cuts, sinking home values and cracked nest eggs have made American consumers wary of spending.”

Ahem. I think that by “wary of spending” she means “unable to spend.”

A slow fix

The only way I can see to change this trend is for employers to start hiring instead of firing. American consumers aren’t going to suddenly start spending money they don’t have, especially considering the credit crunch going on.

So Obama has the right idea by including programs that create jobs in his American Recovery and Reinvestment Plan. You see, the government will spend money it doesn’t have to hire people to work on roads and bridges and alternative energy sources. Then perhaps those Americans will start ordering antique-style gumball machines from the SkyMall catalog and all will be well again. Perhaps.

The future of the American way

Are we changed forever? Americans, especially those who have lost their homes, have learned some hard lessons in the past year. When this is all straightened out, will Americans really go back to maxing out their credit cards at luxury department stores?

No one can tell the future, but it’s always fun to make predictions. So, what do you think? Will Americans start using payday loans because they absolutely must have that UV-ray-blocking beach canopy right now?

Today marks the 75th day that gas prices have fallen and another day that consumers are saving money at the pump. This is good news for Americans approaching the Christmas holiday, when a lot of people get payday loans for those holiday gift expenses.

Payday Is Coming More Often. Now At The Pump!

With the troubled economy, saving money has been difficult. Higher gas prices only compound the country’s economic strain and tend to discourage tourism and people’s willingness to travel, spend, and consume.

40% of American households live paycheck to paycheck so when the price of gas doubled, hitting a national high of $4.114 a gallon, it put a lot of American consumers in trouble; alternative measures had to be taken just to make ends meet. Utilizing local city transit systems, cutting back on consumer spending and taking advantage of payday loans services were just a few of the actions taken by many in order to meet and pay their monthly expenses.

National retailers largely depend on revenue made by consumer spending during the holidays.

Tis The Season To Be Spending

With the the third quarter of the year responsible for the largest percentage of the nation’s consumer spending, it is important for many retailers, and therefore the economy, that consumer spending habits be left unbridled for what is left of the Christmas shopping season. This year has raised a lot of questions in regards to how much would be spent by consumers under the economic pressures such as rising gasoline.

Thankfully however, gas has dropped over 55% to a national average of $1.83 per gallon. This has made some big differences in the balances of consumers’ checkbooks.

“It’s like an extra payday every time I go to the pump”, said one consumer. “What was costing me over fifty dollars is now costing me under twenty-five. I have to fuel up at least three times each month so it’s nice to see the extra seventy-five dollars in my pocket come the month’s end”

This is an encouraging change of events as the money consumers save in gas, they are likely to spend on gifts for both themselves and others, which will help to stimulate and rejuvenate the state of our current economy.

Saving Money Through Conservation

Practicing fuel economy can save you big in the long haul.

Saving money is a hot topic today and gasoline seems to be where the money is being made, that is if you have learned to be conservative with it. Here are a few money saving tips that will help you to do just that and save yourself even more money this month.

Don’t Drive Aggressively

Aggressively speeding up and slowing down as well as constant breaking can cost you up to 33% of your gas mileage on the freeway and 5% of your gas mileage in town. Try to avoid the constant stop and go of your daily commutes. This aggressive behavior is usually associated with being in a rush on the road, and will also send you out for payday loans to pay off traffic tickets. Practice leaving five minutes earlier for work and you can save on both gas and money.

Keeping it under 60mph

Honestly, how often do you keep your speed under sixty miles an hour on the freeway?

Most speed limits are around 65mph and everyone is always trying to press the “Ticket Limit” which is usually five to seven miles per hour above that.

The thing to remember here is that wind resistance increases exponentially with the rise in speed and although vehicles tend to reach their optimum fuel efficiency at different speeds, the general rule of thumb is that it will cost you an additional $0.24 per gallon for each 5mph above 60mph.

Depending on the length of your daily commute and the speed at which you drive, you can decrease your fuel consumption dramatically and again, save money.

Lose The Extra Weight

Still have those fifty pound sandbags in your truck from last winter? If so, the last nine months may have cost you a small bundle. For every hundred pounds extra, you may reduce your fuel consumptions by up to 2%.

Cruise When You Can

The steadier the speed you maintain, the better the fuel consumption you will achieve. Whenever you are on the highway or freeway take advantage of automatic cruise control if you have it and remember to keep it at 60mph or under.

Every little bit helps, especially today. Practice implementing the tips above and you will give yourself a good start on saving the additional funds for the holiday’s and beyond.

With Thanksgiving now behind us and the biggest day of year just ahead of us, we all begin to get a little anxious about getting our gift shopping done. Between family and friends, it can be difficult financially to get everyone something you know they will appreciate. Consumers often get carried away in the spirit of spending, charging exuberant amounts on their credit cards or by pulling payday loans, cash advances and installment loans that they might not be able to afford.

Although you may enjoy shopping for others and getting that “Special Item” for all your loved ones, the nostalgia wears off quickly once the new year rolls around along with those unwelcome credit card statements.

Careful Considerations For Saving Money This Season

Filling your basket may be emptying your pocketbook

Here are some dietary consumer tips to consider, that will keep you from having to spend time on the debt treadmill for gluttonous over-spending this holiday season – you shouldn’t have to get installment loans to make people feel appreciated.

Make A List, Check It Twice

1. The first thing to do is sit down and decide what you can afford to spend this year. Write down all the individuals for which you plan on buying gifts for this year as well as the gifts you had in mind. This will help you get a general idea of what you may end up spending on gifts.

You will also want to considered things like gift boxes, gift wrapping, and gift cards. These things are not very costly items individually but they can sure add up. Also if you plan on buying anything online you will need to consider shipping and handling charges as well.

Once you have done the above, recheck your list once more to avoid any unforeseen surprises later. By now you will have set yourself a realistic budget that will help you realistically determine what you can afford to spread across your gift list.

Search The Sales and Save Yourself Money

2. Remember this is the shopping season. Everyone is competing for your business and small pieces of each of your paychecks.

You can use this to your advantage. Pay close attention to close-out sales, marked down prices, promotions and other specials to save money on the items you buy. This will help you get everyone that special something without having to compromise as well as help keep you on budget and maybe even under!

You Can Wait! It Will Be Worth It!

3. Avoid shopping for yourself! I know that this can be difficult but impulse buying is what gets most consumers into financial trouble. This can prove to be difficult, but if you can manage yourself until after the holidays, retailers usually slash prices to get rid of excess inventory. You will typically save money by doing so, and you may not end up having to get installment loans to pay off the credit cards.

Look for products offering mail-in rebates to save money!

Learn to Appreciate The Rebate Process

4. Take advantage of rebate offers. Rebates are a great way to save money and many retailers bank on the fact that the consumer who purchases their rebated products will fail to send in their rebate. If you can hold yourself accountable to the rebate process, you can take advantage of saving money on a large array of consumer products. These rebates are usually most prevalent among consumer home electronics.

Good luck this year.

China is in need of a credit repair

Some Good News for China

China’s government has revealed that it is going to deliver a credit repair, instant payday loans economic stimulus package that is larger than any such program in the country’s history.

According to a report in The Economist, the plan aims at the following areas:

The two-year spending initiative will inject funds into 10 sectors, including health care, education, low-income housing, environmental protection, schemes to promote technological innovation, and transport and other infrastructure projects.

For those of you scoring at home, it’s $586 billion U.S.

For the United States, the Chinese stimulus package means that the value of the dollar falls in relation to the euro worldwide. Traders were more willing to invest in Chinese stocks in light the stimulus package news. However, there is concern that it may not be enough for China.

You see, China isn’t eager to spill too much info

The true size of the stimulus package may be significantly smaller than reports, or it may have been partially distributed already, depending upon the source you believe. But as China the superpower goes, so goes the world. According to Samarjit Shankar, Director for Global Strategy at The Bank of New York Mellon in Boston:

There has been some renewed hope that since China is a key driver of global growth, that might lead to some recovery in market sentiment

China’s government is very interested in encouraging its consumers to spend and obtain forms of instant payday loans, because it is in the best interests of the nation’s bad credit. Apparently this has been difficult over the years. But it’s key to economic growth. As superpowers go, so goes the world.

Referring again to The Consumerist’s November 10 article “China seeks stimulation,” I found one reader’s comment to be insightful:

You wouldn’t need payday loans if you had a personal bailout, now would you? And, a 700 billion dollar bailout! Clearly a figure that is difficult to comprehend.

If you watched 60 minutes last week, you now have a clear picture of just how this bailout came to surface. The very ones getting bailed out are those who have steadily contributed to the crisis – seems unfair to give them government payday loans.

Where is the accountability? Where is the justice?

Should we, the American people, have to pay for the greedy misconduct of these banking institutions? The tax payer is going to have to pay for this 700 billion dollar bailout and what do we get in return? A worsening economy.

The banks are now tighter, which means businesses have a harder time with obtaining their loans, resulting in layoffs and or wage reductions. This, of course, results in less consumer purchases which hurts business and well, the merry-go-round goes round and round.

Just imagine

Now imagine if they would have split that 700 billion dollar bailout among the American taxpayers. I believe the figure came out to be something like 200k per household which would have changed the course of the economy significantly and reduced the need for payday loans. What would you have done with an extra 200k in the bank? Most of us would have payed off debts.

An iPhone, laptop, 53 inch HD plasma

I personally would have paid off my mortgage loans and my credit card debt and had 40k left over to invest as well as pick up a few things that i have been wanting for a long time, like an iPhone, laptop, and a 53 inch HD plasma, Oh YAA!

Yes, increased spending!

Assuming that most consumers would attempt to do the same, this would have lowered consumer debt, increased consumer spending, bailed out the banks, created new employment opportunities and so forth. Our economy could not have gotten a better kick in the pants, but instead the engineers of this bailout have done the contrary, leaving you and I with the bill.

My momma taught me . . .

My mother always taught me that there was no such thing as a free lunch and that is not what I am asking for. I always pay my bills and payday loans on time. However, it seems only fair to me that if the government expects me to pay for the mistakes of others, maybe they ought to think a little more about who they are bailing out.