More Bad Economic News

There's more bad news that shows the economy, already in recession, could be heading for a deeper recession. This time it comes from the housing sector and shows there are still a lot of homeowners in trouble. For the third quarter of this year more than one in five homeowners (21.5%) nationwide have a negative equity in their homes (meaning they owe more than the home is worth).

This is a bad thing because negative equity is one of the two leading indicators of impending foreclosures on homes, second only to a loss of income (joblessness). The figure is slightly down from the second quarter figure of 23.3%. But don't be fooled, since the drop is not due to an improvement in the economy. Most of it is due to foreclosures which put some negative equity homes back into the hands of banks (and therefore off the list).

With the jobless situation being so bad and the wages stagnant for the remaining jobs, these 21.5% of homes with negative equity are prime candidates to add to the foreclosure problem. Economist Stan Humphries spoke about the negative equity problem. He said, "It is the paramount challenge facing housing markets. We already have had record levels of foreclosure and, combined with high unemployment, negative equity is very toxic to the market."

Here are the places where the housing has the highest negative equity ratings:

Las Vegas...............73.9%

Phoenix...............66.8%

Orlando...............64.6%

Reno...............61.9%

Speaking of joblessness, that situation may get worse soon also. In the past few months government jobs have been the one bright sector in employment. Last month saw a drop in American jobs because of the laying off of census workers. That was expected, but it now looks like some other government jobs will be disappearing.

Secretary of Defense Gates has just announced a restructuring of the Defense Department. The military budget is about $700 billion each year. But thanks to our two unending wars, the military needs to cut about $100 billion and transfer it to use it to repair our fighting forces in case of a new war. Gates announced that 5,000 jobs will be eliminated in Norfolk, Virginia.

And that will not be the end of it. It is expected that thousands more job losses will follow. This is very bad news in light of very weak private employment numbers -- numbers that many economists expect to get worse as the country slips into a deeper recession -- what they call a "double dip" recession.

President Obama is trying to get more job stimulus funds into the economy, but Republicans are fighting this every step of the way. They don't mind deepening the deficit (by extending tax breaks for the rich), but won't do it to create jobs for ordinary Americans. This became very obvious when they blocked new loan money ($30 billion) and new tax breaks ($12 billion) for small businesses -- legislation approved by conservative business groups like the U.S. Chamber of Commerce.

The Republicans still think they can blame the recession on President Obama and the Democrats and use that to win the 2010 elections. They are doing everything they can to make sure the economy doesn't improve before the elections.