Most economists had predicted that retail sales would rise by 0.2% after a 1% decrease a month earlier.

Bill Cheney, who is the chief economist at John Hancock Financial Services Inc. said in an interview that, “The second quarter is going to be tough. Consumers are losing their jobs, concerned about losing their jobs and losing wealth”.

Mike Niemira who is the chief economist at ICSC was a little bit less downbeat and said, “We’re still working our way through the slowdown. I think it will get better as the year progresses. The month of May will still be tough and I suspect by the summer that things will be a little broader in terms of the improvement”.

Clothing sales fell by 0.5% and sales at general-merchandise stores fell by 0.1%.

Auto sales unexpectedly gained by 0.2% after dropping by 2% in March, with automobiles selling at a 9.3 million annual pace in April, compared with a 9.9 million rate in March.

Chrysler, whose U.S. whose sales were down by 48% from the same month last year, started offering rebates of up to $6,000 on May 6 and the offers will continue until the end of the month.

The Labor Department reported last week that payrolls fell by 539,000 workers last month making it the smallest drop since October, but it took the unemployment rate to 8.9%, which is the highest level since 1983 and economists expect it to average 9.6% in 2010.

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Median home-sale prices in March were around $7,000 higher than in February.
But they are still far lower than they were a year ago.

Some banks have started returning bailout money amid reports of better than expected profits in the first quarter of 2009, and the stock market has rebounded since early March.
But, the value of the Dow Jones Industrial Average is still at around 60% of what is was a year ago.

The administration claims that 2,000 new transportation projects have already been approved under the stimulus package.
But the construction sector lost 626,000 jobs between December 2008 and March 2009.

And whilst we’d truly love to believe that the economic crisis has bottomed out, the IMF (International Monetary Fund) estimates that the global economy will contract by 1.3% in 2009 and the U.S. economy by 2.8% which would be the most since 1946.

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The Commerce Department said yesterday (April 16th) that builders broke ground at an annual rate of 358,000 on single-family homes in March, which although unchanged from the previous month, suggests that the housing market may have reached bottom, and The National Association of Home Builders/Wells Fargo confidence index also rose this month to its highest level since October.

James O’Sullivan, who is a senior economist at UBS Securities LLC in Stamford, Connecticut said, “The economy has started to show signs of improvement. Given all the policy action and mortgage rates coming down, we are starting to see less pessimism”.

Other encouraging news is that reports by the Philadelphia Fed and New York Fed earlier this week showed manufacturing shrinking at a slower pace this month, and according to the Labor Department, the number of Americans applying for first-time jobless benefits unexpectedly dropped last week to the lowest level in almost three months.

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PMI, is the second largest U.S. mortgage insurer and the company’s chief economist, David Berson, said “21 of the 50 biggest U.S. metropolitan areas have more than a 75% chance of lower home prices in two years. Six others have more than a 50% chance. Prices will lag because of the large number of homes for sale and those that are vacant but not yet on the market, and we’ll see sales start to recover before the job market”.

The present economic collapse was caused by subprime lending to the riskiest U.S. mortgage borrowers, which in turn fueled a five-year housing boom and drove the median U.S. home price to an all-time high of $230,000 in 2006. The housing collapse led to more than $1 trillion in write-downs and credit losses, by the financial institutions that packaged the toxic loans into securities, and then sold them to investors.

Stats issued by the Chicago-based National Association of Realtors show however, that a record number of foreclosures have so far forced overall prices down by 28%, bringing the average price of a house down to $165,400.

Berson went on to say that, “The ten areas with the highest probability of lower prices in 2010, each with a 99 percent chance, include Miami, Fort Lauderdale, Tampa, Orlando and Jacksonville in Florida; Los Angeles, Riverside and Santa Ana in California; Las Vegas and Phoenix. Risky lending and speculators in “sand states” led to rapid property appreciation that is now correcting. The suburbs of New York and D.C. are high-cost areas that had substantial run-ups in prices. They are the next group down from the sand states”.

The city most at risk is New Jersey, and the Edison-New Brunswick area has an 89%, and Newark an 84% likelihood of lower prices over the next two years. Nassau-Suffolk in New York has a 78%; Washington an 88% and Baltimore has an 84% chance.

The areas that are least likely to suffer a drop in house prices are Pittsburgh; Cleveland; Columbus, Ohio; Dallas; Houston and Memphis, Tennessee which is mostly because prices didn’t surge so much or at all during the boom.

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The figures were compiled by the forecasting firm Macroeconomic Advisers, using ADP payroll data from 400,000 businesses and it covered around 24 million workers.

The ADP report showed a reduction of 327,000 workers in goods-producing industries, and employment in manufacturing dropped by 206,000 whilst service providers cut 415,000 jobs.

A Labor Department report that is due out April 3 is expected to show that payrolls at companies and government agencies shrank by 658,000 in March, and that unemployment rose to a 25-year high of 8.5 percent.

In related news, President Barack Obama says that he believes that a quick, negotiated bankruptcy is the most realistic and likely way for General Motors Corp. to restructure itself, and to become a competitive automaker. He also said that he is prepared to let Chrysler LLC go bankrupt and to be sold off piecemeal if it’s unable to form an alliance with Fiat SpA.

If GM files for bankruptcy it will mark the fall of a corporate symbol that in 1962 controlled 51% of the domestic car market, and in 2004 posted a $2.8 billion profit, after which it all went wrong and it posted losses of $82 billion in the last four years.

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The cause for such jubilation?

The Commerce Department announced a rise of 0.2% in consumer spending in February, and the University of Michigan’s index of consumer confidence edged up slightly in March, whilst remaining at near historic lows.

Richard T. Curtin, who has run the University of Michigan survey for decades, said in a just published report, “The good news is that the free fall in confidence has ended. The bad news is that consumers expect their financial situation to remain dismal for the rest of 2009″.

House prices are still falling, the stock market is way down for the year and unemployment continues to rise, but there are a number of economists who believe that consumers who are still delaying the purchase of major items such as a house, a car, or new appliances will soon be forced into buying them, which will in turn create a bounce in the broader economy.

It is totally unclear to me however why the consumer will suddenly feel that he must buy a new car, a new house or a new appliance etc. and I would strongly agree with Howard Davidowitz, who is the chairman of the retail consultancy Davidowitz & Associates who said, “When you’ve got exploding job losses like we have, how would that lead to any improvement in consumer spending? If you don’t have jobs, you cannot possibly have a change in psychology”.

Perhaps ironically, if the consumer’s confidence and appetite do grow, it could well create new problems because the purchasing of big-ticket items in large numbers could create a snap-back in gross domestic product, followed by another recession because of business conditions that are still extremely weak, companies that are still not investing, and weakness in the rest of the world’s economies.

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The findings of the survey also deviate strongly from the forecast that was presented by the Obama administration when it submitted its budget proposal last month. The White House forecast projected a 7.9% unemployment rate next year, and a higher unemployment rate might mean that the $787 billion that it requested will not be enough.

The U.S. economy has already lost 4.4 million jobs since the recession began in December 2007, and employers recently cut 651,000 workers from payrolls, making the unemployment rate in February the highest since 1983.

Michael Feroli, who is an economist at JPMorgan Chase & Co., in New York said, “Even if things become less apocalyptic it doesn’t mean the unemployment rate will come down. It’ll be a long term restraint on growth. Even when the economy gets back to normal, what’s normal is going to be defined down”.

Federal Reserve policy makers predicted in January that the U.S. economy, which is the world’s largest would shrink by 2.5% this year, which would be the biggest loss since 1946, and then expand by 1.8% the following year and both figures were less than last month’s estimates.

Rosenberg then went on to suggest that the federal government give a $1 trillion interest free loan to state and local governments, which account for around 13% of the economy and employ about 20 million people, “This comes down to the heart and soul, the fabric, of the national economy; cops, teachers, school custodians, firefighters, highway construction workers”.

Kay Krill who is President of the Ann Taylor Stores Corp., said,
“The financial crisis and rising unemployment especially hurt our company as did extremely weak macroeconomic fundamentals, including historically low consumer confidence and a broad-based decline in consumer spending”.

Robert Carnell, who is Chief International Economist at, ING Wholesale Banking in London, also believes the jobless rate will continue to rise into 2011 and said, “The efforts may still fall short, resulting in a very anemic recovery that will deliver very few jobs. The unemployment rate will tick up slowly but surely and people coming into the labor force looking for a job will find it very difficult”.

Major U.S. companies that will be adding to the rise in unemployment include,

Dow Chemical Co. that recently announced that it will lay off 3,500 workers following its merger with Rohm & Haas Co.

General Motors Corp. says it will cut a further 47,000 jobs globally.

FedEx Corp. which is the second-largest U.S. package-delivery firm says that it will be cutting another 900 jobs in addition to the 1,100 that it made last year.

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