Philly Fed Head Sees Recovery This YearCharles Plosser, President of the Federal Reserve Bank of Philadelphia, says he expects the recovery to start slowly in the second half of 2009, but the unemployment rate will continue to rise.
Plosser's remarks at the University of Delaware on Wednesday had some other positives, including his prediction that even though unemployment will continue, it won't rise to the double-digit figures seen in the recession of the early '80s. He cited that unemployment is a lagging indicator, and won't come down until the economy is on track to recovery.
Plosser says the housing market will bottom out this year and Wall Street will slowly regain balance, although he warns the current recession could be one of the longest since WWII.
The influx of lending to banks and the creation of a huge liquidity pool needs to be monitored closely, Plosser notes, to be able to stop the flow quickly, else risk fueling future inflation. The involvement of the central bank also deters private-sector involvement. His solution is to increase the cost of borrowing funds from the government.
Fed Report Shows More Economic Slowdown
The Federal Reserve says the U.S. economy has slid further down, with a slowdown across a wide range of industries. The overall economic activity continued to weaken across all Federal Districts, says the Federal Reserve's Beige Book report.
This report will be used by the Federal Open Market Committee at its next policy meeting in late January to make decisions on addressing the recession that began in late 2007. The report shows reduced or low activity across most industries, although a few districts reported some exception in certain sectors.
The decline hit auto sales, the majority of manufacturing and most tourism. Credit is still hard to obtain. In the housing market, conditions continue to worsen in most districts. A drop in construction activity, as well as lower home prices, is reported.
The last Beige Book was issued in early December before the Federal Reserve lowered its interest rate from 1.0 to zero - 0.25, an historic low. The report says the Fed will hold this exceptionally low rate for some time. This unprecedented move was only one action the Federal Reserve took in the last months to turnaround the nation's economic crisis.
Home Foreclosures Skyrocket 81 Percent
Home foreclosures skyrocketed by more than 81 percent in 2008, according to a report. The 2008 number of foreclosures was up 225 percent when compared to 2006 foreclosures, says RealtyTrac, a real estate research firm.
In its year-end report the firm says 861,664 homes were foreclosed in 2008. More than 3.1 million foreclosure filings were issued in 2008, meaning that one out of every 54 homeowners got a foreclosure notice. The report says despite government and banking industry efforts to stem the flood of foreclosures, defaults continued to soar by the end of the year. December foreclosure filings were up 17 percent from November, and compared to December 2007 were up 41 percent. The December increase came even as Freddie Mac and Fannie Mae had put a moratorium on home foreclosures from November 26 to January 31, and major lenders enacted programs to delay foreclosures against troubled mortgage holders.
The three states hit hardest by foreclosure in 2008 were Nevada, Florida and Arizona. California had the highest total number of filings for any state, 523,624, double that of 2007 levels. Stockton, CA recorded the highest rate of foreclosure at 9.5 percent of any city. Las Vegas came in second at 8.9 percent and the Riverside/San Bernadino, CA area came in third with an 8 percent foreclosure rate.