While economists debate whether the current economic slowdown is a recession, Wisconsinites are increasingly grappling with the nasty effects.
A total of 80,000 workers lost jobs in March.
Among these, were 7,100 Wisconsin workers, the third highest total in the nation, who were laid off in mass layoffs. Wisconsin also had the third highest 12-month increase in average weekly initial claims for these job losses behind only Pennsylvania and Ohio.
The Milwaukee area has been hard hit, losing 1300 over the past year. More layoffs are anticipated.
Partly as a result, bankruptcy filings in the Wisconsin increased by 29.5% in the first quarter of 2008! This increase was slightly higher than the national increase of 27%.
For the year, bankruptcy filings rose 39% in Wisconsin and 38% nationally.
Major medical expenditures are the single most important reason people file for bankruptcy followed by job loss and divorce. But as the recession deepens, job loss is becoming an increasingly important factor.
Buyers also vanished from the housing market in March, as sales of new homes plummeted to the lowest level since the housing recession of the 1990s.
Sales fell in every region of the country, with the Northeast suffering the steepest drop, 19.4 percent. Sales in the Midwest and the West dropped about 13 percent and sales in the South fell about 5 percent.
Builders are now faced with the biggest backlog of unsold homes in more than a quarter century, a sign that home values may continue to drop and that worst days of the housing slump may lie ahead.
Normally a recession reduces pressure on prices. But because of soaring international demand, particularly in China and India, prices of crude oil, gasoline, and food, continue to soar.
The surging cost of necessities has also led to belt-tightening among consumers. Spending on food and gasoline is effectively crowding out other purchases, leaving people with less to spend on furniture, clothing and electronics. Consequently, chains specializing in those goods are proving vulnerable.
Sales plummeted 4.5 percent during the last three months, the largest decline since the 1990-91 recession.
Sales declined at department stores, clothing stores and furniture stores, as well as at auto dealers.
The consumer spending slump and tightening credit markets have unleashed a wave of bankruptcies in retailing, prompting thousands of store closings that are expected to remake suburban malls and downtown shopping districts across the country.
Since last fall, eight mostly midsize chains — as diverse as the furniture store Levitz and the electronics seller Sharper Image — have filed for bankruptcy protection as they staggered under mounting debt and declining sales.
But the troubles are quickly spreading to bigger national companies, like Linens ‘n Things, the bedding and furniture retailer with 500 stores in 47 states, which may be forced to file for bankruptcy.
Retailers that can avoid bankruptcy are shutting down stores to preserve cash. Over the next year, Foot Locker plans to close 140 stores, Ann Taylor 117, and the jeweler Zales will close 100.
The downturn has even spread to discretionary spending. The New York Times reports that laser vision correction surgeries are expected to fall by 17% in 2008. Even spas, the ultimate in discretionary purchases, are cutting prices in an effort to keep customers.
As the economy has slowed so have tax revenues. So Wisconsin is now facing a $650 million deficit.
President Bush has refused to support legislation that would protect homeowners who were duped into taking out loans they could not afford from foreclosure. He has even refused to support extending unemployment benefits and increasing food stamp payments which are recognized as effective counter cyclical policies.
When the initial stimulus package was passed gas cost $3 a gallon. By the time the rebate checks arrive it could be up to $4. At that price most of the $100 billion will go to fill people's gas tanks and do more for oil producing economies than for our own.
Wisconsin's Congressional delegation should demand immediate action that helps those who are losing jobs and income and that helps revitalize the economy. A basic stimulus package should include:
* an extension of unemployment benefits
* an expansion of the food stamp program
* legislation that allows bankrupt homeowners to have their mortgages modified under court protection and provides them with financial assistance
* aid to states' experiencing deficits
The recession is deepening. More and more people are hurting. If states are forced to reduce spending to balance their budgets, the downturn will become more severe.
It is time for Congress to act!