I can’t help being pessimistic about the direction our economy is taking. I’ve watched in absolute amazement as the market has climbed over the last few months on better than expected earnings that in reality are just less than expected losses, or make believe “profits” from government bailouts.
I’m normally a glass is half full kind of guy, but I’m also not blind. Everyday I see more and more space available signs in office and commercial buildings. A week doesn’t pass that I don’t hear of a friend that has been out of work for more than six months. At one point, it was friends in homebuilding that were losing jobs, now it seems the job losses are happening in every sector.
The rate of bank failures hasn’t really slowed either. BNO News the Breaking News Wire’s late Friday afternoon tweets are now called BANK FAIL FRIDAY as it seems that every Friday sees another three bank collapses. We’re up to 77 so far this year. And, it’s not just the little guys anymore that are collapsing:
The Federal Deposit Insurance Corporation seized the struggling Alabama-based lender Friday and sold it to BB&T; Corp.
Late Friday, the FDIC announced four other banks had been closed: Community Bank of Nevada and its Arizona subsidiary, Community Bank of Arizona; Union Bank, Gilbert, Ariz; and Dwelling House Savings and Loan Association, Pittsburgh.
The Colonial BancGroup deal will knock roughly $2.8 billion off a pool of money, known as the Deposit Insurance Fund, which the FDIC maintains to guarantee bank customer deposits.
BB&T; /quotes/comstock/13*!bbt (BBT 27.02, -1.19, -4.22%) agreed to assume all of Colonial’s deposits, which totaled about $20 billion at the end of June, the FDIC said. Depositors of Colonial will automatically become depositors of BB&T; and customers can continue accessing their money by writing checks or using ATMs and debit cards, the regulator stressed.
Colonial had $25 billion in assets at the end of June. That makes it the largest bank failure this year, exceeding the collapse of Florida’s BankUnited Financial /quotes/comstock/11i!bkunq (BKUNQ 0.25, -0.05, -16.33%) , which had less than $13 billion in assets. See full story.
Consumer sentiment slipped in August, according to the University of Michigan as key positive drivers of confidence have yet to fall into place (see: Michigan Confidence Not Improving).
In line with weak consumer sentiment and weak spending, consumers’ financial situation remains weak, as indicated by soaring bankruptcy filings (see: Bankruptcy Filings Still Soaring). Dismal consumer fundamentals are also making consumers more hesitant to take on additional debt (see: Declines in Consumer Credit Accelerate).
A key driver behind the spending recovery will be the job market recovery but the outlook suggests that this process will be painfully slow (see: Unemployment Will Remain Elevated for Years to Come).
Whereas New Mexico has traditionally been insulated from these up and downs because of the reliance of federal spending in this state, this year that does not seem to be the case:
New Mexico’s revenues will fall more than $400 million short of what’s needed to cover spending in the current budget, lawmakers were told Friday as they received a bleak new financial report.
Revenues are down more than $700 million over two years, and the shortfall is large enough to wipe out the state’s cash reserves if the Legislature doesn’t cut spending and take other actions to balance the budget.
According to the latest financial forecast, revenues will drop to about $5 billion in the current budget year, which started in July. That’s $433 million less than what had been anticipated when lawmakers enacted the budget.
Revenues also came up short last year, about $309 million below what had been previously forecast. Final revenue figures for the just-ended 2009 budget year won’t be available for several months.
Most of the revenue decline over the two years is from weaker income and sales tax collections that economists blame on the national recession.
I’m still sticking with my prediction that the critical fall and holiday retail sales of 2009 will be one of the worst on record. We’ll have some more big name national retailers and thousands of Mom and Pop shops close their doors for good. Which means that sales tax and income collections will be even worse going into next year as more people lose their jobs and find their income and credit simultaneously slashed.