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The U.S. Department of Commerce offered yet another clue that, with any luck, the panic and the recession will someday merely be bad memories. According to Commerce, the U.S. GDP contracted at a 1 percent annualized rate during 2Q09, less than expected. The rate was also considerably less than the annualized rate of contraction seen in the first quarter, 6.4 percent, and the rate of contraction during the fourth quarter of 2008, 5.4 percent.
Business inventories dropped $159.2 billion in the second quarter, more than previously estimated and a record quarterly drop. But for the impact of shrinking inventories, the U.S. GDP would have grown at an annualized rate of 0.4 percent. Consumer spending also dropped at an annualized rate of 1 percent during 2Q09. People are still nervous, but maybe not quite as nervous as six or even three months ago.
Separately, the government reported that the number of U.S. workers filing new claims for jobless benefits fell to 570,000 during the week ending August 22, a drop of 10,000. It's only a weekly number, which tends to fluctuate, but it might also mean that the "quick, fire some more people" strategy for dealing with the recession is nearly over.
The aftermath of the recession, however, isn't over at all. Bondholders of the Tribune Co., which was taken private by real estate mogul Sam Zell and went bankrupt late last year, are asking the bankruptcy court to take a closer look at that $8.3 billion takeover--to look for financial shenanigans, or at least a bad business plan. The bondholders are claiming that “the unsustainable debt burden imposed on a business already in a secular decline" pushed the media company over the bankruptcy edge.
The number of troubled banks hit 400 for this year so far on Thursday, according to the Federal Deposit Insurance Corp. That's the most since 1994, and more troubles followed by failures are expected for the rest of the year and beyond--especially as bad commercial real estate loans continue to haunt the banking industry, particularly smaller banks. Earlier this week, the FDIC made it easier for private equity firms to buy banks, perhaps as a way of getting some of the bad banks dealt with short of government-enforce liquidation.
So the pain will linger on in real estate. Still, some investors are looking toward the next real estate rebound by quietly buying up redevelopment opportunities. In Chicago, an unidentified non-American husband and wife team has reportedly put in a winning $40 million bid for the old post office downtown, a vacant 3 million-square-foot structure that has stubbornly resisted redevelopment since the U.S. Postal Service left the building in the mid-1990s.
Wall Street managed yet another up day on Thursday, with the Dow Jones Industrial Average ending up 37.11 points, or 0.39 percent. The S&P 500 gained 0.28 percent and the Nasdaq advanced 0.16 percent.