NEWS AND PHOTOS

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Monthly Economic Review - November 2009.
“A slowly rising tide does not lift all boats.”
By Joel L. Naroff, TD Bank Chief Economist

We have growth again. But a positive second quarter number doesn’t necessarily tell us all is once again right with the world. There remain many impediments to normal growth. If we do have an extended period of sluggish economic activity, which is indeed what I expect, then we need to be prepared for what that economic environment means: A potentially extended period of significant economic change.

The economy expanded during the summer for the first time since spring 2008. It also appears we will have decent growth in the fall. Warehouses were emptied and rebuilding inventories should keep manufacturers busy for a while. Though the end of the “Cash for Clunkers” program means consumer spending will be more modest this quarter, the expansion should be able to remain on track.

The real issue, though, is not what happens early in the recovery. What concerns me is the potential for growth over the next few years. Indeed, it is important not to be fooled by the “head fake” we are experiencing. Yes, we should have at least two and maybe even three quarters of solid growth. But then what?

It is hard to see how we could have a robust recovery when the banking system hasn’t joined the party. The financial sector is out of the ICU but it needs long-term care. A lot of damage was done and credit is still not readily available. And according to the latest Fed survey on credit conditions, banks are still tightening standards for both households and businesses

Can consumers ride to the rescue? Only if incomes grow solidly and that is not going to happen while the labor market remains a concern. While job losses are moderating, they are still way too high with another 190,000 positions cut in October. Worse, the unemployment rate jumped to 10.2%, the highest rate since April 1983. Having pared hours worked, businesses have room to expand without hiring many new employees. Unless another bubble similar to technology or housing develops to get us “shopping ‘till we drop” again, it could take four to five years for the unemployment rate to get back to full employment.

The sluggish improvement in the labor market means income growth and household spending could remain modest for quite some time. Without consumers leading the way, it is doubtful many businesses will commit to massive new capital spending. We may have to continue relying on the government for a while. There is still a lot of money from the stimulus bill left to keep things going. But there is little reason to expect that happy times are here again.

The outlook raises some major issues. While strong growth can hide many defects, modest growth exposes the weaknesses in business plans and management. Firms that cannot succeed without a rapidly rising tide will fall by the wayside. Bankruptcies could remain high and foster an extensive period of consolidations. A slowly rising tide introduces an extreme form of economic Darwinism into the economy. It will take strong, competent management to create the efficiencies needed to succeed. But those that survive should be able to compete against any and all competition, not just here but around the world.

Joel L. Naroff, Ph.D, is Chief Economist for TD Bank, America’s Most Convenient Bank®. Following TD Bank Financial Group’s acquisition of Commerce Bancorp Inc. on March 31, 2008, TD Banknorth and Commerce Bank merged on May 31, 2008, to become TD Bank, America’s Most Convenient Bank. Today, TD Banknorth and TD Bank form one of the 20 largest commercial banking organizations in the United States with more than $114 billion in assets, and provide customers with a full range of financial products and services at nearly 1,100 convenient locations from Maine to Florida. TD Bank is headquartered in Cherry Hill, NJ and Portland, ME. TD Banknorth and TD Bank are trade names of TD Bank, N.A. For more information visit www.TDBanknorth.com and www.TDBank.com.

TD Bank, America’s Most Convenient Bank, is a wholly-owned subsidiary of TD Bank Financial Group, one of the strongest banks in the world. Among the top 40 banks in the world, TD Bank Financial Group is one of only seven to be rated “Aaa” by Moody’s.

Monthly Economic Review - October 2009.
“The job market remains weak even as the recovery broadens.”
By Joel L. Naroff, TD Bank Chief Economist

The longest recession since the end of the Great Depression is just about over. Consumers are spending, housing is improving, manufacturing is rebounding and even the services sector is showing signs of life. So why isn’t everyone happy? Simple. A rising unemployment rate is not something that makes people want to smile. Unfortunately, that problem could linger into the first half of next year.

There was some pretty good news this past month. The people at the forefront of business activity, the nation’s purchasing managers are becoming more upbeat. For the first time in a year, the Institute for Supply Management’s non-manufacturing index pointed to growth in the service sector. At the same time, manufacturing remained solid.

And then there is the new growth sector, housing. True, new home sales and housing starts moved upward in August while existing home sales posted a modest decline. Two out of three ain’t bad especially since housing prices seem to have found a bottom. The S&P/Case-Shiller housing price index was up solidly in July, the third consecutive rise in national home prices. Only three of the twenty major metropolitan areas surveyed still suffered from falling prices.

As for consumers, they too seem to be changing their tune. In August, spending grew at the fastest pace in eight years. Yes, “Cash for Clunkers” played a major role in generating the huge increase but that was not the only reason people parted with their hard-earned cash. They also spent a lot on soft goods services. In other words, we shopped ‘till we got tired.

Unfortunately, it may be tough to maintain the strong spending gains. Incomes are increasing minimally and people are not saving as much in order to pay for their purchases. But at least we are seeing a rise in wage and salary income. That rise should allow consumption to improve going forward though it will hardly be strong.

Despite all this positive data, surprisingly, consumer confidence didn’t rise very much. There had been many stories about the recession being over and even the Chairman of the Federal Reserve indicated that a turnaround was upon us. Normally, this spate of positive news would move the confidence needle.

However, people are still troubled by the job situation. Payroll losses are way too high as another 263,000 positions were cut in September. The unemployment rate rose to 9.8%, the highest level since June 1983. We know that employment is a lagging indicator, so this should not surprise anyone. At the early stage of a recovery, the growing firms are cautious about hiring while those still struggling continue to lay off workers. It will take time and a more broad based recovery before we see employment increase and the unemployment rate fall.

The recovery is just starting and that brings up an important point: Economic numbers rarely move in a consistent pattern. And at turning points in a business cycle, which is where we are now, the volatility is greater. Thus, don’t panic when we get a disappointing report. There are going to be more bumps in the road but we should remain on the path to recovery.

Monthly Economic Review - July 2009.
“It’s summer time and maybe the living will soon become easier.”
By Joel L. Naroff, TD Bank Chief Economist

The recession continues to lose steam. Confidence is rising, the stock markets are holding their own and some of us actually have started seeing a strange yellow disc appear in the sky more frequently. June was a pretty depressing month when it came to the weather but that finally has changed in many places. Now the true test for the economy will come. Will the return of the summer sun bring smiles to people’s faces and get them spending again or will this downturn linger on and on?

The government was expected to start the process of recovery even before the consumer started spending. By now, it was hoped that “shovel ready” construction projects would have kicked in. Eventually there will be lots of ribbon cuttings and I suspect that by August, we will be getting stuck in more and more traffic jams. That will signal our government is at work. Unfortunately, the stimulus is slow in getting going.

Because the economy is not yet getting a major push from federal efforts, it has fallen upon the consumer to pick up the slack. And they seem to be doing that, at least cautiously. Consumer confidence is rising steadily. When changes in attitudes are based on economic factors, household spending tends to follow. That seems to be the case right now. People are realizing the recession is going to end, they are adjusting to that reality and both confidence and retail spending are moving in the right direction.

Realistically, though, consumers are not going to open their wallets wide. They have been chastised and seemed to have learned a lesson. The savings rate hit a fifteen-year high in May, and people are not flooding back into the vehicle dealerships. There does seem to be some improvement in smaller-ticket sales and that is translating into a pick up in the services sector. The Institute for Supply Management’s June reading of the non-manufacturing portion of the economy showed that conditions have just about stabilized. In addition, their survey of manufacturers found that the decline is easing markedly. Okay, the upturn has not yet begun, but the skies are starting to clear.

Another place where the rain is letting up is in housing. Home sales are improving and construction looks to have finally hit a bottom. I know I have said that before, but this time I mean it. I think. But most importantly, housing prices are finally showing signs of turning. The drop over the year has moderated and a rising number of metropolitan areas posted monthly increases in prices. Once buyers understand that they are not purchasing a declining asset, they will be more willing to make offers. Sales are likely to continue to improve even though mortgage rates have edged up.

Although the recovery is looking like it should be here soon, the labor market remains a major concern. Job losses are still way too high and the unemployment rate continues to rise. The unemployment data are lagging indicators and they are likely to rise well after the economy turns back up. Nevertheless, as long as people are concerned about their jobs they will spend carefully.

The damage done to the economy has been great, and the upturn will likely be slow in coming and not very robust. But it is on the way.

Builders League of South Jersey Response to NJ Supreme Court decision in recreation fee ordinance case (June 25, 2009).

CHERRY HILL, N.J., June 25, 2009 – The New Jersey Supreme Court handed down its decision in the consolidated appeals of the Builders League of South Jersey vs. Egg Harbor Township and New Jersey Shore Builders Association vs. Jackson Township, which raisedthe issue of a municipality’s authority to adopt ordinances that require developers to provide open space or recreation set asides within a community, or payment in lieu of, as a condition of development approval. In one-page decision the Supreme Court today upheld a lower court ruling that municipalities do not have the authority under the state’s Municipal Land Use Law to exact increasing amounts of contributions to both on-site and off-site improvements from developers.

“This is a tremendous victory for residents of New Jersey – particularly for those who are about to or those who may be considering buying a new home - in that it rejected the ability of municipalities to impose recreation and open space requirements on traditional subdivisions and site plans. Before today these costs were shared by our buyers in the way of higher home prices,” said Michael Paparone, President of the Builders league of South Jersey.

“This case was not about a municipality’s authority to take land for open space and recreation, but rather a municipality’s belief that it can enact land use ordinances to take that land for free. We asked the New Jersey Supreme Court to reject them.”

When the appeal was heard before the Supreme Court on March 9 at the Rutgers Law School in Camden, the Builders League of South Jersey argued that the Supreme Court needs to read the MLUL as it is written.

“This decision is important, because it serves to halt a growing trend in local land use ordinances to exact increasing amounts of contributions from developers, which affected both on-site and off-site improvements,” Paparone said. “The homebuyers of today should not bear the costs of providing open space and recreation for the entire community. Every ordinance that raises the cost of building a new home negatively impacts the housing affordability. On average the ticket price for obtaining approvals and permits to construct a new home in New Jersey is quickly approaching $100,000.”

For specific developers who made those payments in lieu of under the invalidated ordinances under protest, the decision could serve as a foundation for demanding reimbursement of those payments.

Additionally, the Court’s Decision followed the lead of another Supreme Court decision handed down last year in Toll Bros., Inc vs. Board of Chosen Freeholders of Burlington County, 194 N.J. 223 (2008) that concluded New Jersey developers cannot be held responsible for general community impacts beyond the narrow categories of improvements set forth in Section 42 of the MLUL.

Home Buyer Tax Credit May Now Be Used at Closing
By Michael Paparone, Builders League of South Jersey President 2009

In an effort to help accelerate the recovery of the housing market, Department of Housing and Urban Development (HUD) Secretary Shaun Donovan announced new rules that would allow the $8,000 first-time home buyer tax credit to be used to help with certain downpayment and closing costs.

Initially, home buyers could only file for and receive the $8,000 tax credit after they closed on the home and moved into it as their primary residence.

In January 2009, the Missouri Housing Development Commission was the first state housing finance agency (HFA) to develop a program that provided a short-term loan to qualified home buyers, which allowed them to use the tax credit to help with the upfront costs at closing.

Nine other states soon followed Missouri's lead, including Colorado, Delaware, Idaho, Kentucky, New Jersey, New Mexico, Ohio, Pennsylvania, and Tennessee.

The New Jersey Department of Consumer Affairs launched a new Housing and Mortgage Finance Agency (HMFA) Program in May designed to allow first-time homebuyers in New Jersey to take immediate advantage of a federal tax credit for people buying their first home. Eligible households can get a loan of up to $5,000 in anticipation of receiving a federal tax credit after filing their tax returns. New Jersey was the third state in the nation to offer such a program. For further information on the Prefund Program, please call 609-278-7400, or log on to http://www.nj.gov/dca/hmfa/.

HUD Secretary Donovan's announcement in late May provided the guidelines approved by the Federal Housing Agency (FHA) that other state housing finance agencies, as well as certain newly-included non-profits, can use to monetize the tax credit.

In order to help us to better understand the complexities of the program, here are some answers to commonly asked questions:

What does “monetizing” the tax credit mean?
In the context of the home buyer tax credit, monetization means to treat the payment of the credit as if it was cash and allow its use as a payment for certain closing and downpayment expenses.

I don't see my state listed above, how do I find out if my state housing finance agency is working on providing this service soon?
The National Council of State Housing Agencies (NCSHA) maintains a directory of state HFAs on their Web site at www.ncsha.org. Most state HFA Web sites include phone numbers and e-mail addresses by which they can be contacted.

I see that certain lenders can provide this service as well. How do I find them?
In addition to state agencies, FHA-approved lenders may be offering to purchase a first time home buyer's tax credit in conjunction with an FHA-insured mortgage loan. Check with area lenders, home builders, or real estate agents for the names of participating lenders. You can also find FHA-approved lenders at www.fhaoutreach.gov/FHALookup.

What types of loans qualify?
At this time only the FHA has issued guidance regarding the monetization of the first-time home buyer tax credit in conjunction with FHA-insured mortgage loans.

Is this an interest-free loan or are there fees associated with this type of short-term loan?
If a governmental agency, such as a state housing finance agency, or an FHA-approved lender purchases a first-time home buyer tax credit, they are allowed to charge no more than 2.5 percent of amount of the credit.

Since the program is still relatively new, some lenders and housing finance agency staff are still working on programs to provide this service. To find out if a program to monetize the tax credit is available to you, contact your lender or state housing finance agency today.

For more resources to help you understand the process of financing and buying a home, visit www.nahb.org/forconsumers. You can also find more information about the first-time home buyer tax credit at www.federalhousingtaxcredit.com and new homes in Southern New Jersey at www.buynewitstime.com.

Michael Paparone, a second-generation homebuilder from Mount Laurel, is president of the Builders League of South Jersey.

Monthly Economic Review – June 2009
“The recovery is coming, but let's not get ahead of ourselves.”
By Joel L. Naroff, TD Bank Chief Economist

The economy is still in recession, but there has been a moderation in the downturn and growth should return soon. But let's be realistic. This is the second longest recession in one hundred years and much damage has been done to the economy. A full recovery is still some distance away.

Recessions come and recessions go – and this one is no different. At the end of a recession the economic data are all over the place. Some of the numbers are suddenly better while others deteriorate further. This is what we currently are seeing in the reports.

One key indicator of economic health, the labor market, was an economist's dream. On the one hand the unemployment rate soared to 9.4%, the highest level in 16 years. While unemployment claims are starting to ease, they are so high that we should easily hit double-digits. It may even exceed the peak hit in the steep recession in the early 1980s.

But there was good news in the jobs data as employment cuts slowed sharply. Of course, anyone who thinks a decline of 345,000 positions is good has probably lost touch with reality, but slower is much better than faster. This was the fourth consecutive drop in payroll losses and the May level was about half of what it had been averaging earlier this year. Progress is being made.

Indeed, most of the economic data this month could be characterized as “good, bad numbers”. Homes sales, although pathetically weak, edged upward in April. With pending home sales strengthening, it looks like the worst is behind us in the housing market. This is critical because the collapse of the housing bubble started us on this long recession path.

There was also good news on the financial sector front. When housing prices collapsed, a number of major banks faltered and the credit crunch followed. Now, instead of the government having to prop up the banks, some of those who received government bailout funds are paying it back. Ten of the biggest banks have been approved to return the funds and that indicates that the worst of the financial crisis also is behind us.

Although the recession should be over sometime during the second half of the year, new hurdles are cropping up. Energy expenses have skyrocketed – gasoline prices are up about 50%. The increase in gasoline costs is negating much of the tax cuts that came as part of the stimulus bill.

And then there is the vehicle sector. GM joined Chrysler in bankruptcy and the economic impacts of those two major corporations failing will be felt as we go through the summer. Production cuts and dealership closings will be additional restraints on the recovery.

Finally, inflation fears are cropping up. Long-term rates have jumped and are likely to increase quite a bit more over the next year. Ultimately, the Federal Reserve will have to tighten to calm concerns. That will not happen until the members are convinced the recovery can be sustained.

We are starting the recovery process, but it is likely to be fitful. Don't expect the economic numbers to look consistently good for a while. So go with the flow and don't get too down when a number is weak or too up when we get a good report.

Michael Paparone Takes Your Questions
Second generation home builder from Mount Laurel leads the Builders League of South Jersey.

Q: The nation's economic crisis has cast a pall over the housing market. How has that impacted South Jersey residents?

Throughout the last year we have seen many folks go into a state of irrational disillusion, particularly since the unfolding of the credit markets last fall. They're afraid to go out and spend any money on any thing, even if their jobs are secure. They are simply worried about their future and are being extremely careful. It's understandable. That lack of confidence, however, is having a negative ripple effect on the overall economy of New Jersey. If every one cut their lifestyle to the extreme bare minimum, then no one should be shocked when the economy in our area takes a nosedive.

Q: How are the housing market conditions in this area?

People who are looking for their next home – especially if it is their first home – will find that there are no better conditions to buy a home then today. The prices of existing homes have already adjusted and in some areas, like Cape May County, we have begun to see prices inching up over the last two quarters. Homes sales rose 5 percent nationwide in February. That's good news. Sales traffic has been up for the last eight weeks. People are beginning to trickle out and take a look. Mortgage rates are still at an all-time low and the financing programs available today are making its sweeter for qualified buyers to purchase a home.

Q: Aren't home prices expected to drop for another year?

Some economists still predict that home prices will fall another 10 percent in New Jersey this year. The retrenching of the state's housing market began in 2005 when prices outstripped the number of households that could afford them. For 11 years existing home prices rose by a cumulative total of more than 250%: Now they've declined for two consecutive years. There is still some adjustment needed in some segments of the market. As well, home sellers need to be realistic with their asking prices and the condition of their homes must be ready for the market. No one is going to buy a handyman special at top-of-the-market prices.

Q: Home prices for new construction haven't fallen as much as those for existing homes. Why is that?

There is less flexibility in new home construction dollar changes than in the costs associated with an exciting home. Existing homes have a pre-existing baseline where it has already appreciated. New homes are establishing that baseline. In New Jersey a new home typically costs 15 percent more than existing homes. Home builders are still faced with the approval and development costs associated with putting a roof over someone's head. Those costs for approvals, permits, materials and labor haven't rolled back during this economic downturn. Builders want to see families have a life at home. They want to see all the joys associated with that life happen in a new home. As such, they're doing one of two things in this market: maybe both. They are either adjusting their homes prices by renegotiating contacts with all their vendors or they are changing what they offer in terms of standard features and special packages in a home. For the buyer, that means they may be able to get a new home with a host of upgraded features and benefits that they may not have been able to purchase just a few years ago.

Q: In the American Recovery and Reinvestment Act of 2009, the federal government gave first time homebuyers an $8,000 tax credit if they purchase their first primary residence between January 1 and December 1. How will that benefit residents in our area?

Many of our residents were priced out of the housing market during the boom years. There was a point where a household earning the median annual income couldn't afford the average priced home. Coupled with the market correction, more variety in the inventory and some of the lowest mortgage rates in history, the federal tax credit (www.federalhousingtaxcredit.com) gives thousands of first time homebuyers the opportunity to finally purchase a home of their own. Every homebuyer that closes on their first property in New Jersey sets off another five real estate transactions. Each one will invest in those properties by buying paint and furnishings, shopping in local stores, eating in local restaurants and contributing to their community.

Owners who want to move up to their next home and may be selling their existing home to a first time buyer would be wise to work with a financial institution to develop mortgage financing options that also promotes the tax credit. People need to see the numbers to really believe this is a great time to buy.

Q: What are homebuilders doing today to entice people to buy their next home?

The Builders League of South Jersey has an initiative called Buy New It's Time to address some of the misconceptions of the marketplace. There was too much news from other areas of the country impacting the confidence of people here. We're not Phoenix, Las Vegas or California. We don't have a glut of new homes on the market. This is because of the way most local builders finance their business and because New Jersey's land use decisions have made it impossible to overbuild. The conditions that we talked about in the Buy New It's Time campaign a year ago are even sweeter today.

Builders have been developing special programs to help buyers for awhile. Most are working with lenders to develop special financing options. Others have begun to provide staging and consulting help to buyers who have an existing home to sell. As well, special incentive packages and deals on spec homes are running the gamut. There's also a big emphasis on the greening of New Jersey. Homes built today are more energy efficient than ever. Many homebuilders are responding to this growing market demand by offering new options and services. It's just a matter of whether buyers will buy into that long-term investment.

Q: Why should any one buy a home today?

No one other time in recent history have the conditions been so perfect to purchase a home. We have an increased inventory in homes, mortgage rates that are as low as 4% for qualified borrowers, an expanding market of energy efficiency options, an $8,000 first-time homebuyer tax credit, and South Jersey is a great place to live.

Q: You're a second generation homebuilder. Your company has weathered a down turn before. What changes are you making within your own company?

We're going back to basics by simplifying all our processes, limiting any excessive overhead, and modifying the product we offer to meet the needs of our more frugal and environmentally-sensitive buyers. We are constantly improving the flow and function in our designs. It's important in this process to maintain a close active relationship with our subcontractors, suppliers, and local and state homebuilders associations. Most of all, we communicate and interact frequently with our legislators and financial lenders to be able to react quickly to any adverse or detrimental changes to our industry. That is how we remain strong in this market.

Michael Paparone, a second-generation homebuilder from Mount Laurel, is president of the Builders League of South Jersey.

Monthly Economic Review – April 2009
“Is that a flicker of light I see?”
By Joel L. Naroff, TD Bank Chief Economist

The recession grinds on, but there are strange doings in the darkest corners of the economy. Some consumers have actually started revisiting the malls and vehicle dealerships. Businesses have seen a glimmer of hope on the orders front. Realtors are starting to see not only interest in homes, but a few hardy souls have actually made offers that were accepted. Even investors seemed to get into the swing of things. Yes, the challenges are many and there will be surprises ahead, but it is possible that conditions are starting to change.

As usual, the news about the economy was dominated by the monthly jobs numbers. And once again, we discovered that firms are better described as un-employers rather than employers. Another 663,000 positions were lost – bringing the total this year alone to more than two million. The 8.5% unemployment rate is the highest since November 1983, and a 10% rate is possible. Clearly, this is the worst economic climate we have experienced since the wrenching back-to-back recessions in the early 1980s.

I have argued that even if the unemployment rate hits double-digits, the consumer can still lead us out of this mess. Currently, not only are the unemployed cutting back on spending, but those who have jobs have decided to follow suit. They are consuming as if they too have lost or will soon lose their positions.

Ultimately, my “Dr.Strangelove Syndrome” theory should start kicking in. Indeed, people already appear to be learning to live with the recession. They are starting to buy the little things again. Retail sales have been okay for the past two months. In February, demand rose for the second consecutive month if you exclude motor vehicles. And it looks as if people have started kicking the tires again as vehicle sales were up solidly in March. Consumer spending could add to growth during the first quarter for the first time since spring 2008.

The housing market also is showing signs that a bottom might be at hand. Purchases of both new and existing homes rose in February and builders put a few more shovels in the ground as well. Clearly, given the extraordinarily low level of demand, it is not hard to get an increase. But up is an awful lot better than down. Although housing will likely reduce first quarter growth sharply, it may not do so going forward. And because this sector had taken about one full percentage point out of GDP for the past two years, even stability would be good news.

Finally, there is the stock market, which actually seemed to defy gravity by rising. Whether it was only a hot air balloon that will run out of gas, or it is the start of a longer-term rally, is hardly clear yet. But the gain could turn the recent stabilization in consumer confidence into an upward trend. Both the Conference Board's and University of Michigan's surveys noted increases in confidence in March.

The economy is hardly out of danger and the risks are great. Problems in both the financial and vehicle sectors persist. But the negative responses to bad news are having smaller impacts and that tells me we are adjusting. That is the start of changing the course of the economy.

Monthly Economic Review – March 2009
“You have to stop falling before you start rising, and that hasn't happened yet”
By Joel L. Naroff, TD Bank Chief Economist

The string of bad economic data was unbroken as just about every number that came out this past month added to the concern that the economy is spiraling downward. Even the “Oracle of Omaha” – Warren Buffett – described the economy as being in a shambles. But interestingly, most observers of the economic scene – be they economists, stock market gurus, Washington politicians or the person on the street – noted that confidence is the worst problem of all. And in that there is hope.

First the usual bad news. It turns out that the economy was a lot weaker at the end of last year than originally thought. That is not to say anyone really thought the economy was anything but bad. However, it turns out that instead declining by 3.8%, growth was actually down 6.2%. You have to go back twenty-seven years to see a drop that sharp.

And then there is the labor market. Businesses no longer should be called employers: A better term is unemployers. Firms cut another 650,000 workers in February. Over the past four months alone, more than 2.5 million positions have disappeared. With that kind of carnage, it was not surprising that the U.S. unemployment rate broke the 8% level for the first time in twenty-five years.

Am I done? Hardly. The stock market seemingly went straight down. Housing starts, sales and prices continued to fall, factories cut back production and the malls weren’t even being used by people for an afternoon stroll. With some of the largest banks looking like “dead banks walking”, the news was indeed bleak.

Is there any reason to have hope? Yes. Confidence, as noted before, is ultimately the key. The problem is not that the unemployment rate is 8.1%, it is the 92% of the people who are employed but spending as if they are about to be out of work. If everyone, even those with jobs and money don’t spend, we should not be shocked that economic activity has hit a major air pocket.

The way out of this, at least in part, is to turn around confidence. Part of the job of the stimulus bill was – and still is – to improve confidence. Although the political discourse clearly hurt, once the ribbon cuttings start, perceptions will change. Indeed, the sweetest sound could be the loud complaints about all the traffic we are stuck in once the highway projects get going.

We also need the banks to start acting like lenders not hoarders. Actions by the Fed to help create markets for consumer loan products and mortgages should help. We shouldn’t expect in the middle of a steep recession that financial institutions will change lending standards greatly. But a move back toward more normal standards, which is likely to come as a consequence of government actions, will help.

This recession is not going away soon. Even when growth turns positive, the level of economic activity is likely to be weak for quite some time. But the doom and gloomers are forgetting one thing: It’s hard to stay totally depressed for an extended period of time. When consumers get tired of hiding, growth will turn. So cheer up and start helping the economy.

Monthly Economic Review – February 2009
“The government to the rescue?”
By Joel L. Naroff, TD Bank Chief Economist

The beat goes on, the beat goes on. Unfortunately, the drumbeat pounding the rhythm to the brain is not soothing. As the data continue to pour in, the picture of an economy in crisis becomes clearer. Jobs are being lost at an extraordinary pace, the unemployment rate is rising sharply and confidence remains at lows not seen before. Into the mess rode President Obama and Congress. Proposals for change were thrown around, but it isn’t clear that we are getting what we need. What we didn’t need was the continued nasty noises that only Washington politics could create.

That the economy continues to deteriorate further was driven home by the loss of nearly 600,000 jobs in January. Just about every sector of the economy posted declines in payrolls, with gains once again seen only in education and health care. The unemployment rate surged to 7.6%, the highest rate since the deep recession in 1982. In just three months, firms have let go nearly 1.8 million workers.

The shocking cut in workers makes it clear that firms have adopted a bunker mentality. Survival has become the order of the day and cutting costs is the primary strategy. Executives are not waiting and they are not approaching the problem slowly and cautiously. Instead, they are reducing their labor expenses now so they can ride out the storm. About the only glimmer of hope in the data was the possibility that with so many companies laying off workers, the adjustment process will be shortened and the job losses will slow sooner than might be expected. That remains only a possibility, though.

Mr. Obama and his economic advisors moved quickly to try to pass a fiscal stimulus bill. Unfortunately, Washington politics took hold and the rancor that we all hoped would be limited flared up once again. Politics and political philosophy replaced economic reality and lines were drawn and the pitchforks were sharpened.

Ultimately the stimulus bill will pass and it will be a compromise plan. In this case, the need for immediate stimulus that would jump start the economy will be supplemented with tax cuts and spending programs that likely will not affect the economy before the end of this year at the earliest and, in many cases, not until next year. Although many of those ideas are nice, the problem is now. Still, there should be enough near-term stimulus to start moving the economy forward.

What is disconcerting about the debate is not that politicians have different views of what is good economic policy – that is normal. It is the tone that could create a problem. The government cannot solve the economic problems by itself. But it can start the process of revival. Ultimately, it is up to the private sector – businesses and households – to take over to create a lasting recovery. The fiscal stimulus bill was supposed to not only create new spending and demand, but it also was expected to bolster confidence that we could get out of this mess. Let’s hope the Washington negativity doesn’t overcome the great potential to get things going that is in the fiscal stimulus bill.

BUILDERS TRADE ASSOCIATION SAYS 2 OUT OF 3 AMERICANS SUPPORT $15,000 HOME BUYER TAX CREDIT, NEW POLL FINDS

CHERRY HILL, N.J., Feb. 9, 2009 – The Builders League of South Jersey is sharing results of a national survey that shows two-thirds of Americans support a $15,000 home buyer tax credit now being considered by Congress as part of its economic stimulus package and believe it will be effective in stimulating home sales.

That sentiment is being expressed locally as well. “Our local economy is suffering, and a $15,000 tax credit would create a positive ‘ripple effect’ as home buyers would spend money on products and services for their new home and help restore the health of our local economy,” said Michael J. Paparone, President of the Builders League of South Jersey, a housing industry trade association based in Cherry Hill that represents homebuilders, contractors, suppliers and all consulting professionals devoted to residential real estate.

“This survey reinforces our view that the $15,000 home buyer tax credit in the Senate stimulus package will successfully tackle the housing and economic crisis head-on,” said David Crowe, chief economist of the National Association of Home Builders (NAHB).

The national telephone survey was conducted by Voter Roll Call of Verona, N.J., on Feb. 8.

The survey of more than 1,200 registered voters found that one-third of all respondents and 61 percent of renters would be more likely to buy a home if the $15,000 home buyer tax credit were to be enacted into law.

“This is extremely significant because normally in any one year only about 5 to 7 percent of households purchase a home,” said Crowe. “This is more evidence that this temporary, timely and targeted tax credit would trigger home sales, end the free-fall in the housing market, generate new jobs and help lead the economy back to higher ground.”

In addition, 64 percent of survey respondents said it was important that the $15,000 home buyer tax credit be included in the final package that is signed into law.

The $15,000 home buyer tax credit will push folks off the fence the day the bill is enacted, helping to stop house price declines and bring confidence back to the housing market, added Crowe. “Congress must make sure that the full $15,000 tax credit remains in the final stimulus package.”

FIVE Appliances THAT can HELP YOU save money

Washington, DC (February 3, 2009)—Many Americans are finding themselves looking for ways to save money. The Association of Home Appliance Manufacturers (AHAM) has come up with a list of five appliances that may already be in your home, which can help you save money.

Coffeemakers—Save on pricy coffeehouse blends by brewing your morning cup at home. Resisting a three dollar cup of coffee will save you nearly $1,000 per year!
Freezers—Stock up on frozen foods when they are on sale. In 2008, shipments of home freezers were up five percent as consumers started to realize the savings in stocking up on frozen sale items. Also, remember to shop for an ENERGY STAR freezer to save even more on energy costs.
Water filters—Use a water filtration system in your refrigerator instead of buying bottled water. This practice will save you money, and will help the environment by reducing the number of plastic bottles that clog landfills.
Portable electric heaters—Turn down the heat and use portable heaters in rooms that are used frequently. Keeping the thermostat down will save money while portable heaters provide direct and quick warmth.
Cook at home—An electric oven turned on for 1 hour on 350ºF only uses 2kWh of electricity, costing just 24 cents. The cost of dining out can add up quickly. Try cooking at home for a low-cost meal.

For more tips for saving money and energy around your home, visit www.aham.org/consumer.

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Monthly Economic Review, January 2009:
“It's a new year, but not a new economy.”
By Joel L. Naroff, TD Bank Chief Economist

I hope everyone had a wonderful new year. Unfortunately, the economy continues to deteriorate at an alarming rate. Jobs are being lost at a breathtaking pace, the unemployment rate is surging and confidence is…well, it isn’t even on the radar screen. Into this mess walks our new President Barack Obama. As he takes office, let’s wish him well – he will need it.

The economic numbers have been awful, led by the full retreat in the labor markets. When the going gets tough, the tough cut payrolls – and in December, another 524,000 jobs were lost. The unemployment rate surged to 7.2%, the highest rate in sixteen years and undoubtedly it is going a lot higher. It would have been much worse if an awful lot of people hadn’t simply given up looking for work.

All across the economy, firms are thinning out the ranks and the only areas which added workers were health care and education. Meanwhile, manufacturers took out the meat cleaver and construction firms largely shut up shop. For people looking for any kind of work, the most disconcerting fact was that temp agencies, the employers of part-time workers, are finding little demand and they have been cutting back sharply.

Meanwhile, the rest of the economic problem children, especially housing, continued to behave badly. With money for mortgages still scarce, home sales continued to plummet and prices remained in a downward trajectory. Builders, facing reality, took their shovels and went home, and housing starts collapsed.

The economy has deteriorated so quickly that the growth rate at the end of 2008 was probably the weakest since the deep recession in early 1982. The first part of this year is not likely to be much better. So what should Mr. Obama and his economic advisors do? The key is likely to be the consumer. Yes, we need to stabilize the housing market and get more credit into the hands of households and firms, but those policies will take time.

Where the new president can make a dent quickly is on the confidence side. Consumers will ultimately start adjusting to the economic situation. Moving quickly to get a fiscal stimulus bill passed, one that the public believes was crafted not for Congressional interests but for economic needs, will go a long way toward improving confidence. Once that happens, households will start spending again and the recovery will begin.

At the same time, we need to understand that in the past, we often didn’t know we were in a recession until we were well out of it. Firms would still be cutting payrolls twelve to even eighteen months after the economy had already starting rebounding.

Now, businesses and households get economic data on a real time basis. Everyone knew months ago that the economy was in trouble, and consumers started hunkering down well before the recession was officially called. Similarly, firms understood this was not a garden variety slowdown and moved rapidly to cut costs and workers. The shortening of the adjustment time frame has made the data uglier than in other downturns. But it also holds out hope that conditions could turn sooner.