DARKENING ECONOMY

Customer concern feeds downturn

11-08-2008 | DAVID YOUNG

dyoungstar@laestrella.com.pa

The U.S. economy is heading deeper into a recession and the rest of the world tags along. Warning signs in Panama.

Panama Star PANAMA. In the U. S. a vicious cycle of vanishing jobs and stresses on American consumers is spelling deeper trouble for the already sinking. economy.

In, Panama where the government seems to indicate that the country remains an island of prosperity, in a sea of collapsing economies, there are numerous indications of possible looming storms.

Upscale housing prices are falling with the glut of high priced condominiums, and recent car sales are following the pattern across the world with precipitous declines.

Participants in the recent car show at ATLAPA, have variously described it as poor, a waste of time, and a flop. Attendance and sales were markedly down against last year and the banks who participated were much less liberal in granting loans than in the past.

Four major banks opted out because of the number of outstanding car loans, and circulating stories that inflation hit customers were falling behind in their payments.

A banking source told the Panama Star that home mortgages are harder to come by now, and that some lenders will not provide funds in excess of $1,500 a square meter, which means that purchasers of properties valued at more than that will have to come up with substantial cash payments.

And although the government has moved to dramatically reduce gas prices, other factors, including gouging, have kept the canasta (the price of the basic food basket) on the rise.

One bright light is a recent report that visitors are up and spending more.

But one developer points out that many of them are here on business. If the economy declines, so will the number of visitors.

All the American economy's woes — a housing collapse, mounting foreclosures, hard-to-get credit and financial market upheaval — will confront President-elect Obama when he assumes office early next year and on the crucial jobs front, the situation is likely to move from bad to worse next year.

That can impact on the future of the pending U.S.- Panama Free Trade Deal (FTA), with strong opposition likely to build in Congress and the Senate.

The Panama-Canada FTA talks are in the early stages, and are progressing well, and the government of Prime Minister Steven Harper, is committed to expanding trade with Latin America.

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EMPLOYMENT

In the U.S. employers have slashed jobs in the first nine months of this year. A staggering 760,000 losses so far.

The government's monthly jobs report is due out Friday, and net job losses for October are expected to total about 200,000. The unemployment rate, now 6.1 percent, is expected to rise to 6.3 percent.

a 6.3 unemployment rate would match the highest logged after the last recession, in 2001. The jobless rate hit 6.3 percent in June 2003.

Many expect the jobless rate to climb to 8 percent, possibly higher, next year.

In the 1980-1982 recession, the unemployment rate rose as high as 10.8 percent before inching down.