The Continuing Myth Of Recovery
Everybody buckle up because Friday (2.5.2010) morning is going to be a doozy. Since the east coast is 5 hours ahead of my local time, I know there isn’t going to be any light reading with my morning coffee due to whatever the markets are doing worldwide, and the jobs report from the Bureau of Labor & Statistics.
Here is a preview of “how’s that reckless spending working out for ya?”
Doubts About U.S. Economy and a Debt Crunch in Europe Jolt Hopes for a Recovery
Concerns are growing that the world hasn’t seen the last of the economic crisis.
Jitters about the U.S. economy and signs that Greece’s debt woes are spreading across Europe roiled markets on Thursday, driving the Dow Jones Industrial Average briefly below the 10000 mark.
U.S. stock investors, waking up to a turbulent European trading session, were further unnerved by an unexpected rise in the latest report on initial claims for jobless benefits. Ahead of a key January employment report due out Friday, the claims numbers revived on-again, off-again concerns about the strength of the U.S. economic recovery.
The resulting selloff took the Dow below the psychologically important 10000 level in the final moments of trading. It managed to finish at 10002.18, but nevertheless had a 2.6% decline, led by big drops in financial stocks. The 268.37-point fall was its biggest one-day loss since last April.
Asian markets, which had eased modestly Thursday, opened sharply lower on Friday, underscoring the global impact of the market tremors.
In a blow that could come down on the Obama administration and U.S. economy like Thor’s Hammer, the US may have lost 824,000 more jobs than the government said it did between April 2008 and March 2009. According to Bloomberg, which provided the numbers for the possible adjustment, the revision would be posted by the Bureau of Labor Statistics tomorrow, February 5th. That would increase the number of jobs lost due to the recession from 7.2 million to 8 million.
The change in the numbers would be based on what is known as the “birth/death model” which has its foundation in the premise that most jobs lost at old companies are made up at new ones.
The numbers, if correct, would add a nearly unbearable load to the economic recovery which has caused huge deficits due to government programs led by the Obama $787 billion stimulus package. The package was meant to save or create 3.5 million jobs. Unemployment has risen above 10% despite the government spending. The Administration and some members of Congress have proposed that the government spend another $80 billion on jobs programs. These expenditures would be part of a federal budget which would create a $1.6 trillion deficit in the government’s 2010 fiscal year.
The higher unemployment numbers would also indicate that the number of people who are chronically unemployed is greater than expected. That would mean the efforts by Congress to extend unemployment benefits would have to be increased to accomodate hundreds of thousands of job seekers that the government did not even know existed.
Jobs have been especially hard to come by. Productivity numbers show that companies are getting more work out of fewer workers. Government data also show that the number of jobs available to the jobless is at a historic low. The number of people who have stopped looking for work or work part-time but would like full-time employment is also at a high-water mark compared to at any time since the Great Depression.
It is not difficult to guess the impact that the news will have on the financial markets which have recovered in large part due to the belief that the jobs problem has improved. If the data from April 2008 to March 2009 could be off by such a large margin, how inaccurate are the numbers from April of last year until now?
Douglas A. McIntyre
I’m the first one to say “don’t believe everything you read”, always look at what is happening around you. More stores shuttered, more people unemployed, more people carrying calculators and reading labels at the grocery store? When these day to day examples start turning around, THEN I will believe we are in recovery.