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Title: Parents Pull Kids From Day Care (And Other Deflationary Topics)
Source: [None]
URL Source: [None]
Published: Nov 14, 2008
Author: http://globaleconomicanalysis.blogspot.c
Post Date: 2008-11-14 20:54:04 by tom007
Keywords: None
Views: 645
Comments: 7

Parents Pull Kids From Day Care (And Other Deflationary Topics)

Here is an interesting deflationary twist on the state of the economy: Parents Pull Kids From Day Care as money tightens.

The nation's economic troubles play out one family at a time at the New Horizons Learning Center in this struggling city two hours northwest of Chicago. Some parents have been laid off and must pull their children out of the day care center until they can find a job. Others' employment hours have been cut, so they reduce their kids' attendance to a few days a week.

And the stress shows on the faces of the children who can't understand why their friends, without explanation, stop coming. "They act out more, cry a lot more," said Diane Kesterton, director of New Horizons, where a 38-child enrollment has been halved to 19 in just three months.

Day care costs average between $3,380 to $10,787 a year for just one preschooler, according to the National Association of Child Care Resource & Referral Agencies.

Even before this year's economic perils, the cost had climbed 5.2 percent between 2006 and 2007, said Linda Smith, the association's executive director. And in every state in the country, the monthly child care bill for two children is higher than median rent payments and as high or higher than a mortgage.

"We are driving people into an unregulated system," said Peggy Liuzzi, executive director of Child Care Solutions, a resource and referral agency in Syracuse, N.Y. An example, said Liuzzi, was the woman in New York who, unable to find anyone to care for her 4-year-old daughter while she went to work in a shoe store, simply left the girl outside in a car with a sandwich and water, checking on her every hour.

The woman's decision, which came to light when someone spotted the child and called authorities, underscores the desperate situations facing a growing number of parents. "People need to work," Liuzzi said. "They can't let their jobs go and they will make choices they will regret."

State Of The Industry

1) Enrollment is going to crash 2) Cost of day care will drop 3) Numerous day care centers will go out of business

Retail Sales Worst In Decades

A miserable holiday shopping season is underway with Retail Sales Worst In Decades.

Retail chains posted the worst October sales results in more than three decades as consumers cut spending sharply, stunned by a financial crisis that has derailed the U.S. economy.

The International Council of Shopping Centers called the retail sales environment "simply awful" and said the October results were the worst it had seen for that month in 35 years.

The ICSC said it pared its forecast for what were already expected to be dismal holiday season sales. It now expect sales in November and December to rise 1 percent, down from its prior view for a gain of 1.7 percent.

[Mish: Anyone forecasting a rise in sales year over year with unemployment soaring and consumer sentiment the worst on record must be forecasting from an alternate universe.]

Thomson Reuters said its October same-store sales index fell 0.7 percent, worse than its estimate for a 0.3 percent drop. Based on results from 34 retailers, 56 percent missed estimates.

In a fresh sign of trouble, women's apparel retailers Talbots Inc and AnnTaylor Stores Corp said they would restructure operations after posting steep sales drops.

Same-store sales fell 16.6 percent at upscale department store chain Saks Inc and dropped 15.7 percent at Nordstrom.

Saks said its shoppers were buying discounted items instead of full-priced merchandise, hurting its margins in the just-ended and current quarters.

At high-end teen apparel chain Abercrombie & Fitch, which has said it would not lower prices in an effort to maintain the status of its brand, same-store sales fell 20 percent, worse than the 14.4 percent drop analysts expected.

The tough environment snagged Costco, the largest U.S. warehouse club operator. Its October same-store sales fell 1 percent, hurt in part by fewer purchases of discretionary items like jewelry or toys. Thomson Reuters said the results were the worst since it began collecting estimates for Costco in 1997.

Target's same-store sales fell 4.8 percent, worse than the 2.8 percent drop forecast by analysts. It forecast a drop of 6 percent to 9 percent in November same-store sales, attributing part of the decline to a calendar shift that leaves it with fewer busy holiday shopping days in the month.

The only bright spot in the report was Wal-Mart which posted a 2.4% rise in sales. The amazing thing to me is how many people are still clinging to foolish inflationista views.

Why Not Hyperinflation?

One person who gets it right is Professor Depew at Minyanville in his post Five Things You Need to Know: Why Not Hyperinflation?

Almost every day I get notes wondering, "Why not hyperinflation?"

This is a good question. I'll try and explain why I believe a deflationary debt unwind is now underway, and why I believe it will be many years before we should start worrying about inflation again. In fact, by the time inflation becomes a legitimate concern, I expect the vast majority of people will find it as outrageous to worry about inflation then as found it outrageous last year when I made deflation one of my Five Themes for 2008.

While it is true, as those anticipating hyperinflation argue, the Fed and global central banks are making record amounts of credit available, that is only one side of the credit equation.

The assumption is that this record-breaking credit expansion means risk assets (stocks, commodities, etc.) will all skyrocket and the U.S. dollar will get destroyed. But what hyperinflationists fail to realize is that for an inflation (of either the tame or hyper variety) to take place, one must have both the means (credit from the fed and banks) and the motive (the desire to take on more debt) for credit expansion. For over a year now we have had record amounts of the former, but none of the latter. ...

I concur with that opinion and by now it would seem that inflationistas would have caught on. But they haven't. Nor will they. And articles about shrinking day care, collapsing retail sales, rising unemployment, record foreclosures, massive credit card defaults, bankrupt insurers, collapsing auto sales, sinking commercial real estate, plunging commodity prices, and dozens of other things will not change their minds either including an implosion in China.

For more on China and a decoupling theory now totally blown out of the water please see Peter Schiff Hugely Right, Enormously Wrong as Hard Landing Hits China.

The latest chart that has the inflationistas going gaga looks like this.

Base Money Supply

Chart Courtesy of St. Louis Fed Click On Any Chart For Sharper Image

>1.bp.blogspot.com/_nSTO-vZpSgc/SRVH0mQLxlI/AAAAAAAADs0/_HSBN4_OYXk/s1600-h/base-money.png">

I must admit that chart looks pretty scary. However, let's look at it another way.

Base Money % Change From A Year Ago

Now that looks even scarier. The only other times we have seen base money supply soar like this were in the Great Depression and World War II.

While on this subject let's look at the same chart as above one more way.

>1.bp.blogspot.com/_nSTO-vZpSgc/SRVLM8Kif0I/AAAAAAAADs8/Ad1Iwf_fPJ0/s1600-h/base-money-yoy-1.png">

The only other time since 1918 that the base money supply chart looks like it does recently was right before the great depression.

Mike "Mish" Shedlock globaleconomicanalysis.blogspot.com (2 images)

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Begin Trace Mode for Comment # 6.

#1. To: tom007 (#0)

Here is an interesting deflationary twist on the state of the economy: Parents Pull Kids From Day Care as money tightens.

Good. Raise your own kids parents.

Old Friend  posted on  2008-11-14   21:04:56 ET  Reply   Untrace   Trace   Private Reply  


#2. To: Old Friend (#1)

Good. Raise your own kids parents.

uh..parents have to make money to feed, clothe, and house them first. besides the large number of single parent families, there are few two parent families who can afford to live on one salary anymore.

christine  posted on  2008-11-14   21:43:33 ET  Reply   Untrace   Trace   Private Reply  


#5. To: christine (#2)

Christine. I know some single women have a hard time because their man left them, beat them or did them wrong. I know that it is sometimes an individuals only option. I have compassion for those people. But the goal should be parents raising their own kids.

Old Friend  posted on  2008-11-15   12:38:22 ET  Reply   Untrace   Trace   Private Reply  


#6. To: Old Friend (#5)

But the goal should be parents raising their own kids.

absolutely. i'm also a proponent of homeschooling. (in an ideal America)

christine  posted on  2008-11-15   14:06:40 ET  Reply   Untrace   Trace   Private Reply  


Replies to Comment # 6.

#7. To: christine (#6)

absolutely. i'm also a proponent of homeschooling. (in an ideal America)

Homeschooling is kewl by me. We did that one year for our eldest daughter. Just kindergarten.

Old Friend  posted on  2008-11-15 16:18:43 ET  Reply   Untrace   Trace   Private Reply  


End Trace Mode for Comment # 6.

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