We are still in a recession with job losses still on the rise and more foreclosures going into bank inventory.  The Obama administration just like its predecessor the Bush administration is making promises it can not keep.  I would like to hope the economy will get better. I truly do and my heart wishes that it does.  But my brain tells me otherwise and logic dictates that it will get worse.

Many economists and financial experts declared  last quarter and the previous quarter that the recession was over and things were already on the mend. Yes, that false hope sent the stock markets up like a rocket, but those forecasts have done nothing to improve the economy which is the reality most of us live in.

In regards to jobs, the current unemployment rate shocked the forecasters because it was higher than predicted.  Are we seeing green shoots or yellow weeds?

According to this Yahoo AP article:

However, the rise in the unemployment rate from 9.4 percent in May wasn’t as sharp as the expected 9.6 percent. Still, many economists predict the jobless rate will hit 10 percent this year, and keep rising into next year, before falling back.

All told, 14.7 million people were unemployed in June.

If laid-off workers who have given up looking for new jobs or have settled for part-time work are included, the unemployment rate would have been 16.5 percent in June, the highest on records dating to 1994.

On the housing front, there is a ton of empty homes that the banks haven’t foreclosed on because they are busy trying to cook the books and make their numbers look better.  The banks are not modifying the majority of people who are underwater living in their homes.

LA Times:

That much talked about “next wave” of foreclosures is on the horizon, according to a report by The Times’ Don Lee:

Amid rising unemployment and falling home prices, mortgage defaults have surged to record levels this year. Until recently, many banks have put off launching foreclosure action on the troubled properties, in part because they had signed up for the Obama administration’s home-stability plan, which required them to consider the alternative of modifying loans to make it easier for borrowers to make payments.

Just how big the foreclosure wave will be is unclear. But loan defaults are up sharply. And with many government and banks’ self-imposed foreclosure moratoriums expiring, the biggest lenders indicate that they are likely to move more aggressively to clear up a backlog of troubled mortgages.

… rising foreclosures will depress home values, pushing more homeowners underwater. Mark Zandi of Moody’s Economy.com estimates that 15.4 million homeowners — or about 1 in 5 of those with first mortgages — owe more on their homes than they are worth.

Out-of-work homeowners aren’t going to qualify for loan modifications.

California accounts for an outsized share of mortgage loan defaults. A stunning 135,431 homeowners in the state were hit with notices of default in the first quarter, an increase of 11% from the earlier peak in the second quarter of 2008, according to real estate information service MDA DataQuick.

On top of state IOUs, budget woes and a statewide moratorium on housing foreclosures, California will be working its way through this for a long time.

That reason of not modifying loans listed above coupled with recently reduced total household income is producing record number of delinquencies.

NY Times:

Lenders and their representatives, however, don’t like to modify loans through interest rate cuts or principal reductions because, of course, it reduces the income they receive from borrowers. No surprise, then, that loan modifications have been a trickle amid the recent foreclosure flood.

Enter the government, with the program it announced in March to encourage modifications. It offers incentives to loan servicers to change mortgage terms, providing $1,000 for each loan they modify. The program focuses on making payments more affordable through lower interest rates, but delinquent amounts and late fees are typically tacked onto the mortgage balance. “Making Home Affordable” does not compel lenders to reduce mortgage balances.

Servicers signed on to the program in April. The program’s early months were not covered by the O.C.C.’s first-quarter report. But other figures on modifications conducted in April, May and June are available. And they show a decline in modifications, not an increase as the government hoped.

The latest analysis from Nouriel Roubini aka Dr. Doom who has been one of the few who correctly forecast the economy is blunt but accurate.

RGE Monitor:

It’s clear that even if the recession were to be over anytime soon – and it’s not going to be over before the end of the year – job losses are going to continue for at least another year and a half. Historically, during the last two recessions, job losses continued for at least a year and a half after the recession was over. During the 2001 recession, the recession was over in November 2001, and job losses continued through August 2003 for a cumulative loss of jobs of over 5 million; this time we are already seeing more than 6 million job losses and the recession is not over.

The details of the unemployment report are even worse than the headline. Not only are there large job losses right now, but as a way of sharing the pain, firms are inducing workers to reduce hours and hourly wages. Therefore, when we’re looking at the effect of the labor market on labor income, we should consider that the total value of labor income is the product of jobs, hours, and average hourly wages – and that all three elements are falling right now. So the effect on labor income is much more significant than job losses alone.

It is not the end of the world, but we definitely are living in hard times now and will go into even tougher times. Don’t be naive and think hope alone will feed your family and keep a roof over their heads. Plan for the future to become worse and prepare for the worse. Live within your means and start saving whatever you can. Buy the necessities in bulk, reduce your bills like cable and cell phone plans, and definitely stay positive and keep the faith. But most of all just be prepared.