Aug 9, 2009

Good News, Everybody!

Only in the twisted world of doublespeak can the news of the elimination of another 247,000 jobs in July be turned into good news. It's as if those quarter of a million people WANTED to be fired. The unemployment rate, which has been rising for months, ticked down, to 9.4 percent from 9.5 percent in June. It was expected to touch double digits, which would have been politically devastating to Obama - just because the number 10 is so scary. However, no one has been keeping track of the number of people who are STILL unemployed, and how many people dropped out of the hunt for work, ceasing to list themselves as unemployed.

And let's pretend that there is a recovery coming from the Great Recession. Fine. But no one's hiring. There were still a quarter of a million people laid off. And they aren't all from Bears training camp.

And last week the government announced another significant improvement — the overall economy contracted at an annual rate of only 1 percent in the spring quarter! Wow! Contraction - good news! To their credit, it was vastly better than the fall and winter months. The New York Times says, "the two reports have convinced many forecasters that when the history of the Great Recession is written, these summer months will be the big turning point, when the economy started to grow again."

Or, what I think, it could be a slight pause in the hemorrhaging.

The fact is the Net Wealth of US Households has "declined from a peak of $22 trillion to just under $12 trillion in early March." The problem is compounded by the fact that Total US Household debt, as of first quarter 2009, amounts to roughly $13 trillion, and has stayed within that range for the last 3 and a half years.
"From the end of 2007 through Q1 of 2009, household equity has declined by 94%. Is it surprising that today's GDP number would have been a complete debacle if the consumer had been left alone to prop the U.S. economy, on whom 70% of the economy is reliant? Obama pulled a Hail Mary with the stimulus: without it there would be no debate America is in a depression right now." (more)
The boil down is that the consumer is out. Credit and home equity are all but dust and that's trouble for an economy that's 70% dependent on consumer spending for growth. Unless that fact turns around, don't start expect things to 'go back to normal' any time soon.

Add that to the trouble that the US Treasury is having in pawning our debt to China and other suckers - and then we'll start talking about inflation. Once inflation starts, you'll get your $500,000 back in your house equity - while you're buying bread for $10.

1 comment:

Anonymous said...

In May, Bloomberg quoted Deutsche Bank CEO Josef Ackermann as saying, “It's either the beginning of the end or the end of the beginning.” Bloomberg further pointed out that, “A piece of the puzzle that must be calculated into any determination of the depth of our economic doldrums is the condition of commercial real estate -- the shopping malls, hotels, and office buildings that tend to go along with real- estate expansions.” Residential investment went down 28.9 % from 2006 to 2007, and at the same time, nonresidential investment grew 24.9%, thus, commercial real estate was “serving as a buffer against the declining housing market.”