Sunday, September 23, 2007


Note: Now that classes have resumed for the new term, I've decided to go to FEATURED QUESTION instead of QUESTION OF THE WEEK. Featured Questions will appear at intervals of my own choosing, no more than once a week and probably more infrequently.

(Each "Featured Question," an idea which I gleaned from A Republic If You Can Keep It, will remain toward the top of the blog until the next question appears. The previous Questions are HERE and HERE. Please scroll down for recent postings)

Due to a variety of causes, the United States economy appears to be on a downturn, perhaps a serious one. Please read this excerpt from a September 16, 2007 front-page article in the Washington Post:
Sunbelt City in Grasp of Housing Undertow
Ripple Effect Could Be National Omen

FORT MYERS, Fla.-- To understand how the housing bust may ripple through the broader American economy, look beyond the countless for-sale signs that dot this middle-class city. Instead, stop by Boater's Landing, where salespeople sit idle, hoping someone will once again want to buy a boat.

Or visit the women answering phones at the local United Way, which is dealing with a flood of aid requests from the unemployed, whose numbers have nearly doubled in a year. Or talk to the Shevlins, a real-estate agent and a carpenter, whose combined incomes dropped from $350,000 to less than $60,000 in two years.

Across this city, even businesses that have little to do with real estate are reeling. Unemployment is up, sales are down and redevelopment ambitions have been scaled back.

The Sun Belt city of Fort Myers saw real estate and construction grow to dominate its economy, accounting in recent years for nearly one out of every four jobs. That meant the housing downturn hit swiftly here, making it a kind of early and extreme indicator of what might happen to the U.S. economy as a whole.

The effect could be less dramatic in places like Washington, where government contracting and other industries may provide a cushion. What the Federal Reserve is trying to determine, as it decides Tuesday how much to cut a key interest rate, is to what degree the rest of the U.S. economy will behave like that of Fort Myers.

Economists increasingly believe the housing downturn and related problems in mortgage lending will slow the U.S. economy. Barely a month ago, most economists viewed a recession as a distant possibility. Now they think there is more than a 1-in-3 chance that one is on the way -- or even has already begun in cities like this.

"We are in a real estate recession," said Laurance Baer, manager of the Fort Myers-based Baer's Furniture chain, where sales are plummeting. "And we have an economy that's much more tied to real estate than anyone realized." ...


The major question is whether areas like Fort Myers have gone through the worst or if they are still heading downward. There are signs of both. It could take two years to sell all the houses currently on the market, and a Manpower Inc. survey of businesses found that a third planned to reduce their employee count in the fourth quarter.

Still, some real estate agents say a few buyers are returning, attracted by cheap prices, a potentially optimistic sign.

"The sooner the excessive prices correct, the sooner these markets can get back to growing again," said Mark Vitner, a senior economist at Wachovia. "It's just painful while it's happening."

QUESTION OF THE MONTH (in two parts): (1) Do you see signs of the housing-market downturn and other signs of economic downturn in your area? (2) What is your economic forecast for the United States, including outlook and possible remedies?

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posted by Always On Watch @ 9/23/2007 04:00:00 AM