Third quarter GDP numbers have no relation to reality says John Williams of Shadow Stats. He believes that unemployment hasn’t really recovered from the 2001 recession. GDP has become a nonsense number, worthless in terms of having any meaning in terms of the real economy.
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15 million Americans are unemployed and looking for work. Discouraged workers that are not seeking employment are not counted in that total. The U.S. economy added 162,000 jobs in March, the biggest monthly net gain in three years, even though the published unemployment rate remains at 9.7 per cent.
The chart above shows job changes in this recession compared to recent ones, with the blue line representing the current downturn. The line has ticked upward, but still has a long way to go before the job market fully recovers to its pre-recession level.
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The measure of U.S. consumer confidence fell in February to the lowest level since April 2009 as the outlook for jobs diminished. This is an obvious sign spending will be slow “as the economy recovers.” The banking community is gridlocked and recent short-term gains in the business community indicate an upturn. Meanwhile, a real recovery depends on consumers. Why?
Since consumer spending accounts for approximately 70 percent of overall U.S. economic activity depressed consumer confidence will undoubtedly lead to less consumer spending and sluggish growth in the economy. The economy that I refer to is the real economy as opposed to the Wall Street economy. The fact remains that if consumers have a lack of confidence in the economy, they are not likely to engage in spending sprees if they can and they certainly won’t make major purchases like appliances, houses and automobiles.
Despite media hype and the government spending, Americans are not seeing any real change in the economy. Politics seems to continually pin its hopes on Wall Street and stock market as a measure of confidence. Wall Street, now absorbed into the banking system, continues to function within the same dynamics as before the meltdown. Bundling securities continues unabated even though this, in large measure, has resulted in substantial reverses in resolving bank debt and cleaning up the meltdown mess. Lawmakers remain weak willed even though hands have been figuratively slapped for financial illiteracy by the Federal Reserve, the new kingpin of financial law.
This is no different from allowing the “Big 3” Credit Tracking Agencies to run the show in managing consumer credit, a definite conflict of interest since these businesses and the Federal Reserve have so much to gain from the system in place. This is illustrative as to why so little has been accomplished. The system has its’ hands in its’ own pockets. Corporations have adopted functions of government as lines continue to blur. The system grows with little benefit to anyone as corruption further stagnates the system. Politics is working in the same way to involve health care on a larger level. The government may have a system of checks and balances, but the founders of the country did not count on the corporate oligarchy now in place.
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In less than two months, 20 American banks have been closed by the FDIC. A staggering 174 U.S. banks have hit the skids since the collapse of Wall Street giant Lehman Brothers in September 2008, which has sparked one of the worst financial crises in modern times.
What is to blame? A high unemployment rate has resulted through increased defaults at small and medium size community banks.
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Unemployment is at a “26-year high” with 17.5 percent of formerly employed Americans that are no longer looking for work or underemployed. The unemployment rate for workers aged 16 to 24 is at 19 percent. The unemployment rate for young African-Americans at 30 percent. The average length of unemployment is at a record high as the ratio of job seekers to open positions is currently 6 to 1. This is dismal news for Americans. As their “patriotic duty” many firms are now telling their employees that hours must be cut in order to save jobs. No less than 60 million American households are living at or below the poverty level. The nation is not seeing real ideas or action that even remotely resemble the urgency and aggressive action when banks and investment firms needed saving.
Behind the scenes, political powerhouses and their talking heads hope that cheerleading will do the trick. Surely the talent of the American people will save us says the court jester of economics, Warren Buffett. I cite the CNBC party show that is sure to insult your intelligence. The economy and the American people don’t need upbeat civic cheerleading about greatness. The nation needs serious action outside of more wars overseas. We need to realize that we have war going on right here.
The nation can expect weak recovery of consumption and economic growth coupled with larger budget deficits. The nation can expect greater delinquencies in real estate and the continued fall in real estate prices. The nation can expect greater losses for banks and financial institutions across the board in all sectors and a corresponding rate of bank failures.
Noriel Roubini’s Global Economonitor says: “we can expect that job losses will continue until the end of 2010 at the earliest. In other words, if you are unemployed and looking for work and just waiting for the economy to turn the corner, you had better hunker down. All the economic numbers suggest this will take a while. The jobs just are not coming back.”
Mr. Roubini says “that the unemployment rate will peak close to 11% and will remain at a very high level for two years or more.” This will put the real unemployment rate soundly past 18%. Last year, I predicted a real unemployment rate of 25%. Either way, the nation has some suffering to go through since the political powers that be firmly refuse to bail out the American people. The land of politics continues to bail out the world with free handouts and political programs. We can bankroll and void toxic debt for freewheeling investment bankers and financial geniuses that abused the system, but we can’t risk lowering the debt or responsibility of the American people without making them homeless. Clearly, the American people are simply too talented. Politics still needs slaves to grist the mill. We need martyrs for the cause. The nation has them while China gains mastery over the national economy. What will politics sell next?
You can now appreciate why the world of U.S. politics doesn’t want to end the wars in the Middle East. With all the men and women in the armed forces coming home, we really would be a nation without work.
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These are “official” labor department statistics. This does not reflect disenfranchised workers or those that have lost unemployment benefits. Actual unemployment is much worse.
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