WA State now in a double dip recession!
Governor Christine “Quagmire” stunned the media yesterday when she announced that tax revenues were so bad, major cuts in the budget would have to be made! Her notification that we are back in recession was on the front page of the Seattle Times!
You have a statewide double dip recession when state domestic product (GDP) growth slides back to negative after a quarter or two of positive growth. A double-dip recession refers to a recession followed by a short-lived recovery, followed by another recession. It is hard to determine state GDP, but frankly I and many others believe that unemployment, real estate combined with retail sales have a major impact on the determination.
First let’s take a look at national facts and figures that have primary impact on Washington State’s economy. Real estate is the major mover in the US economy and it is in the tank. Increasing number of Strategic defaults where folks, with great credit ratings find themselves in a situation where they paid twice as much or sometimes more, than the property is currently worth, are taking action. They go out and buy a second home and then go back to the mortgage holder on their current first home and simply turn over the keys, deed and default. That has led to a situation where out of all the foreclosures nationwide, 12% are in this category of a strategic foreclosure. Bloomberg Business News is reporting that 18.9 million houses and condos are currently vacant nationwide!
On the other side of the coin we now have a situation where 530,000 folks who got into the Obama loan modification program nationally dropped from this failed program and again defaulted. This has led to a huge number of foreclosures about to be executed. In other words the estimate is that we have 50% more default/foreclosures than are currently being reported! This is referred to as “shadow home inventory” because the properties have yet to be foreclosed on.
How is Washington State fairing in the real estate sector? The Seattle Times is reporting that WA State is having the largest number of mortgage defaults and foreclosures in history! And that same newspaper is also reporting that home and real estate sales are in the TANK! On the retail side of the economy, Washington State retails sales have dropped off dramatically from the fourth quarter of last year.
ON the national unemployment side of the economy, we now have the highest number of youth unemployment in history! The latest weekly unemployment numbers from the US Department of Labor show a major increase in first time unemployment benefit filers. They increased by 18,862!
Also nationally the first quarter GDP of 3.7% dropped to 1% in the 2nd quarter and word has it that the first month report on the 3rd quarter GDP indicate a sharp downward trend.
As for consumer sentiment, the stock market took a hit this last week when a small business survey showed that 75% of small business owners think we are already in a national double dip recession! Remember that 75% of all employment in the United States happens to be small business jobs! If you look at the county by county U3 numbers for the state (meaning the number of folks collecting unemployment benefits) in June; I doubt that the July numbers that will be coming out on the 17th of this month will show any significant improvement