The storm clouds continue to grow
A number of disheartening stories for those paying attention to the economy. The first involves the continuing signs of the mortgage and credit crisis moving beyond the sub-prime lenders.
As home prices fall and banks tighten lending standards, people with good, or prime, credit histories are falling behind on their payments for home loans, auto loans and credit cards at a quickening pace, according to industry data and economists.
The rise in prime delinquencies, while less severe than the one in the subprime market, nonetheless poses a threat to the battered housing market and weakening economy, which some specialists say is in a recession or headed for one.
Until recently, people with good credit, who tend to pay their bills on time and manage their finances well, were viewed as a bulwark against the economic strains posed by rising defaults among borrowers with blemished, or subprime, credit.
“This collapse in housing value is sucking in all borrowers,” said Mark Zandi, chief economist at Moody’s Economy.com.
Moving beyond that is the announcement by GM that it is offering it's entire hourly workforce a buyout package in an attempt to get rid of the higher-wage workers, who also happen to be the most experienced, so they can replace them with lower-paid newbees, and not nearly as many of them. That's likely to put yet another crunch on the already weakening economy.
Then from Arizona, there are signs that the Latino immigrant community is leaving.
The signs of flight among Latino immigrants here are multiple: Families moving out of apartment complexes, schools reporting enrollment drops, business owners complaining about fewer clients.
. . .
On Monday, state lawmakers, concerned about shortages of workers and the failed revamping of immigration law in Congress, which was pushed by Senator John McCain of Arizona, pledged action.
Bills were announced that would create a state-run temporary worker program, though it would need Congressional authorization. And last week Gov. Janet Napolitano, a Democrat, offered to help the United States Labor Department rewrite regulations designed to streamline visas for agricultural workers, who growers say are increasingly hard to find.
While data for the last month or so are not available, there were already signs of migration out of Arizona at the end of last year. In the fourth quarter of 2007 the apartment-vacancy rate in metropolitan Phoenix rose to 11.2 percent from 9 percent in the same quarter of 2006, with much higher rates of 15 percent or more in heavily Latino neighborhoods.
“You have many people moving out, but they are not all illegal,” said Terry Feinberg, president of the Arizona Multihousing Alliance, a trade group for the apartment and rental housing industry. “A lot of people moving are citizens, or legal, but because someone in their family or social network is not, and they are having a hard time keeping or finding a job, they all move.”
A number of factors are at work here according to the article, with one being the tough new legislation targeting illegals, but the article does make a few other points worth considering, particularly those looking to do this sort of thing on a national scale. Getting rid of all of those illegals, and in some cases, their legal relatives, means further vacancies in a housing market already in deep trouble. Plus, as noted in the first paragraph, a lot fewer consumers for all types of business products and services.
The economic effect of tossing out millions of local customers would be a massive hit on the US economy, something most immigrant bashers tend to ignore.
The other major factor mentioned is in fact a slowing economy. Less chance for work means fewer people coming to look for it. Ties in nicely to the story about GM above. Well-paying jobs in the US are growing scarcer.
Ms. McLaren, the economist, said that in the end history showed it was difficult to stop illegal immigration so long as jobs paid better in the United States than at home. An economic rebound would probably draw people back here, no matter the laws.
Probably true. But the fact of the matter is, thanks to a number of factors, the jobs in the US may not pay more than elsewhere for a whole lot longer.
The ideology of unrestricted free trade (via globalization) assumes that the majority of the participants in the US economy are sufficiently differentiated from the billions in China, India and the rest of the world to command higher salaries. I suspect that isn't the truth and that the majority of Americans don't hold any substantive qualitative advantage over newly minted participants in the global economy.
Old advantages appear ephemeral -- seen in how quickly the US slipped to 38 in broadband. If we think in terms of how rewards/resources are allocated if the global economy operates as a single entity and not many loosely joined parts... then the vast majority of US workers will soon find their wages/salaries normalized to global standards (to those with similar skills etc.). The result will be that the US, as collection of citizens will get poorer (or at best tread water until everyone else keeps up).
It will, at least, solve the problem of illegal immigration, though I feel sorry for whatever group gets to take their place as scapegoats.
