With economic growth here down in the December quarter and looking like it’s still falling, there’s been an upsurge of “times are tough” and “people are hurting” stories in Australia.
And it’s true, people here are feeling the pinch. However, compared with the experience of tens of millions of Americans, Australia is still a bountiful economic oasis of plenty with low unemployment, solid incomes and money to spend. It’s really only our confidence that is down.
In fact we should spare a thought for ordinary Americans and hope that our Government doesn’t lose the plot like the Bush Administration and so many people in Congress, the media and business did (indeed, they still don’t understand the enormity of the crisis slowly grinding Americans lower).
Americans are really doing it tough, so tough that only their grandparents or great grand parents who lived through the Great Depression would understand.
Take these scattered facts and figures from this week:
A record 31.8 million Americans were receiving food stamps at the latest count, an increase of 700,000 people in a month and equal to around 10% of the entire US population.
Food stamps, which help poor people buy groceries, are the major US anti-hunger program, forecast to cost at least $US51 billion in the American financial year ending September 30. That will be five times the 2008 cost of $US10 billion, according to figures out overnight.
The average food stamp benefit is $US115 a month for individuals and $US255 a month per household. The previous record for food stamp enrolment was 31.6 million last September, which included “disaster” stamps for states hit by hurricanes and floods.
The US Labor Department said the number of people on the government’s jobless benefits roll after drawing the first week’s benefit was 5.11 million in the week ended February 21. Tonight’s employment and jobless figures are expected to show over 600,000 people lost their jobs last month in the US and the unemployment rate is rising to around 8% or higher from January’s 7.6%. The underemployment figure is much larger; it could be around 14 million in tonight’s figures.
With jobless numbers rising, and more people needing food stamps to survive, it’s not surprising that the primary cause of the misery remains the black hole known also as the US housing sector. It started in the subprime sector; now it’s across all housing and figures out overnight showed that around 20% of people with mortgages owe more than their home is worth, up from 18% in the September quarter.
More than 8.3 million US mortgages were “underwater” in December. In December, home prices were declining in 75% of all US metro markets, up from a third of those markets last March. US home values are said to have falled $US2.4 trillion in 2008 all up.
And, when you are broke, or near the breadline, you trade down: from Pizza Hut to McDonald’s and lower. From canned soup to dried soups, as Campbell’s Soups is reporting, and down to pre-made pizzas from supermarkets. If you have a bit of cash or a job, you stop shopping at Target, or the Gap, Safeway and head for just one place, Wal-Mart. You can go to the giant discount clubs like Costco (and Sam’s Clubs at Wal-Mart). But Costco this week reported lower sales and earnings for the latest quarter as it was forced to cut its already very low prices prices to attract customers to come and spend on food and other products.
Wal-Mart has been intensifying its discounting for over a year now (and by the way, paid its US staff 4.5% more in the December quarter). Yesterday same store sales figures for the month of February for America’s major chains were released and illustrated the complete dominance that Wal-Mart has. Overall same store sales for these chains rose 0.3%, but without the 5.1% surge in Wal-Mart’s sales, same store sales would have fallen 4.7% in the month.
Those figures are a bit better than forecast, but underline the new quip in US retailing: American retailing is Wal-Mart and the zombies.
One of the supposed ‘defensive’ areas for investors in a crunch is gambling (just ask James Packer). Overnight we had more evidence that gambling is losing its allure, not only in Las Vegas where the subprime/foreclosure slum is hurting, but in racehorses.
Magna International, the Canadian company that controls seven US racecourses, including the well known Pimlico in the east of the country and Santa Anita Park in California, has gone bust and is in bankruptcy with debts of almost a billion dollars.
The company blamed increased competition from casinos, rising debt and the economic recession, plus the impact of higher petrol prices last year which cut attendances.
According to Bloomberg, betting on US horse races fell 11.6% last month, quoting a company called Equibase which provides racing statistics and information to North American tracks. Betting on US races totaled $US999.8 million last month, down from $US1.131 billion in February of last year.