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Glimmers of Economic Hope: Coming into Focus?
Aug 7th, 2009 | 17 responses
This post is in three parts.
First, the bad news about the economy.
Second, the economy according to Fox News.
Third, those glimmers of economic hope.
The bad news:
Today’s “good” news that the unemployment rate fell to 9.4 percent—the first rate drop in 15 months—as the U.S. economy “only” shed 247,000 jobs in July, is of course no comfort to the millions of Americans who are still unemployed, and especially to those who have lost all hope of finding a job and to those who have, or are about to, run out of unemployment benefits. Nearly 1.5 million Americans will exhaust their extended unemployment benefits by the end of the year.
According to the Huffington Post: “…in a grimmer development, the number of long-term unemployed — people who’ve gone without a job for 27 weeks or longer — rose by 584,000 to 5 million, from 4.4 million in June. Three out of 10 unemployed people have joined the ranks of long-term unemployed.”
According to Christine Owens, director of the National Employment Law Project: “Never in the history of the unemployment insurance program have more workers been unemployed for such prolonged periods of time…An unprecedented 5 million — one out of three jobless workers — have been unemployed for six months or more, and their families are straining to meet basic needs in an economy that has not yet begun to produce jobs.”
Their situation is tragic and no amount of positive economic indicators, short of a miraculous and sudden turnaround in this critical part of the economy, will help these unfortunate people out.
The news according to Fox:
Fox News and other naysayers made it quite clear today that the stimulus is not working and pointed out all the relevant and irrelevant negative indicators. For example, that this “infinitesimally small” drop in the unemployment rate is statistically insignificant, which may be right—but gee whiz, try to see at least “a glimmer of hope.” That the Obama administration is managing expectations. Of course, that the “cash for clonkers” program continues to be a total failure. They also emphasize—almost to the exclusion of everything else—what is not included in the numbers: the tragic high number of people no longer looking for work, etc.
Fair enough.
According to the New York Times, the Republicans had to throw cold water on the good unemployment news: ”No one would argue that the stimulus has done nothing, but it certainly does not look like we are getting our money’s worth,” said Douglas Holtz-Eakin, an economic adviser to John McCain during his presidential campaign.
A little bit of sour grapes, but, again, fair enough.
Now for those glimmers of economic hope.
The 9.4 percent unemployment rate is indeed good news, regardless of the caveats and the nay saying. Plus, we have to keep reminding ourselves that unemployment is a lagging indicator of the economy.
President Obama himself said today that “We’re pointed in the right direction” and “We’re losing jobs at less than half the rate we were when I took office,” but he also cautioned that the road to recovery will be a long one, and that “We won’t rest until every American that is looking for work can find a job.”
What do the markets and the experts have to say?
Well, the short answer today is “plenty of good things.”
Responding to an unemployment report that was better than expected, the Dow Jones industrial average rose 114 points (198.46 for the week) to 9,370.07, capping its fourth straight weekly gain, and staying at the highest levels since since President Obama was elected on Nov. 4, 2008.
Not bad for those “meaningless market fluctuations.”
The good unemployment report, the wild success of the “cash for clonkers” program (that has been so maligned and ridiculed by Republicans), and good news about manufacturing, construction and banking, sent the Standard & Poor’s 500 index over 1,000 this week, for the first time in nine months, closing at 1,010.48. This is 49.4 percent from its 12-year low in early March, the steepest surge since the Great Depression.
The Nasdaq composite added 21.75 for the week ending at 2,000.25.
About 2,300 stocks rose on the New York Stock Exchange, and financial and retail stocks also rallied today with the good economic news.
And what do the experts say?
The Wall Street Journal tells us that:
Most economists view the easing as a sign that the slump, which has erased two million factory jobs since the start of the recession in late 2007, has finally hit bottom, though they still don’t expect the sector to begin adding jobs soon.
“This tells us that the recession is slowly grinding to a halt — but it hasn’t ended yet,” said Dan Seiver, a finance professor at San Diego State University.
And Paul Ashworth, Capital Economics, says:
July’s Employment Report is the gift that keeps on giving. Nearly every element of it is positive. Most notably, non-farm payrolls fell by a more modest 247,000 last month, the smallest decline since August 2008. Admittedly, a decline in employment of that magnitude still seems hard to square with the growing speculation that the recession ended around mid-year. Looking back, however, the economy lost 265,000 jobs in the first month of the recovery in 2001 and 226,000 jobs in the first month of the recovery in 1991.
Finally, still Bloomberg.com:
The market’s rebound restored almost $4 trillion in value to U.S. equities, according to data compiled by Bloomberg, after 2008 marked the worst year for stocks since the 1930s. Reports this month showed better-than-estimated sales of cars and pending contracts to buy existing homes, while service industries contracted less than economists forecast.
The pace of U.S. job losses slowed more than forecast last month and the unemployment rate dropped for the first time in more than a year, the clearest signs yet the worst slump since the Great Depression may be ending.
Today’s report also showed the average work week expanded to 33.1 hours in July from 33 hours in the prior month. Average weekly hours worked by production workers increased to 39.8 hours from 39.5 hours, while overtime held at 2.9 hours for a second month. That brought the average weekly earnings up to $614.34 from $611.49.
According to the New York Times:
Last week, the government announced another significant improvement — the overall economy contracted at an annual rate of only 1 percent in the spring quarter, vastly better than the fall and winter months.
“The labor market, like the overall economy, is beginning to stabilize, with the expectation that job losses will approach zero by the end of the year,” said Chris Varvares, president of Macroeconomic Advisers, who expects that the unemployment rate will peak at less than 10 percent.
July’s unemployment figures may in fact be a flash in the pan. Even so, there are now too many glimmers of hope that make it difficult to totally pooh-pooh the notion that our economy is improving, albeit it may be doing so ever so gingerly.
17 Responses to “Glimmers of Economic Hope: Coming into Focus?”
I hate to break the news to you that no one is telling the truth about how bad things really are. There will be a double dip recession and the second one will be worse than the first. Briefly, commercial real estate will be the next bomb to hit. The banks still have those lovely toxic assets improperly valued on the books. Long term unemployment continues. The stock market is being “pumped” once again by the market makers. Finally, the consumer makes up 70% of GDP, and they (we or us) are in debt up to the eyeballs. I am not left or right, I like to keep things in perspective.
Thanks for the good news, jclmeme. I needed that
(BTW, with your insight and prognostic capabilities, you should be able to make a killing in the market—and I mean this seriously)
Thanks, really!
Dorian
jclmeme777 you appear to have a wealth (pun intended) of knowledge on the current economy… are you a 'degreed' pessimist or just a novice pessimist working a hunch?
jclmeme777
Didn't mean to be flippant. On second thought, what I said about your insight, could also be said about all those who I quote in my “optimistic” posts—if they were so good at prognosticating, they also could be “making a killing.”
I guess, the bottom line is, that no one knows what the future holds. We can just hope for the best, as many of us do.
As Paul Harvey used to say, and now, the rest of the story: Inflation Ahead
You may be right, AR.
Sometimes, inflation is the price we have to pay for recovering from a recession.
As USAA says:
“The government is spending trillions of dollars using a broad swathe of initiatives to fight deflation, which is the opposite of inflation. And therein lies the rub. Should the government's efforts succeed, and there are some signs that they may, the huge new debt issuance that's supporting them could lead to a spike in inflation that we have not experienced since the 1970s”
Dorian
DE as I said last week I thought the SPY breaking to 98 was bullish and so far I've been right, which in itself is amazing since I have been wrong so many times predicting the stock market. On the larger question of the economy it's still so hard to say. Unemployment is still high. Yes I know it's a lagging indicator but in order to spend money people have to earn it first.
The deficit continues to worry me. It's like the Sword of Damocles hanging over the recovery. Eventually it will have a negative effect, the question is when and how much.
DG: “On the larger question of the economy it's still so hard to say.”
I agree, but we can hope…
“The deficit continues to worry me. It's like the Sword of Damocles hanging over the recovery. Eventually it will have a negative effect, the question is when and how much”
Again, I agree. I just hope that once we begin to climb out of the recession, we may be able to addres the deficit
Dorian -
Sometimes, inflation is the price we have to pay for recovering from a recession
High inflation is a drag on recovery from recession, something that has to be overcome, not a stimulus or an indication things are improving. Moderate inflation is certainly acceptable and a sign iof a healthy recovery and economy, but the Fed bailing out Treasury Bond sales is not a sign of coming mild inflation. It is a sign that devaluation of currency has already started to occur, that inflationary pressures have exceeded the ability of the market to bear, but that it is being actively covered up.
We are in our current state of economy exactly because of efforts to hide the weaknesses of key underlying fundamentals. When those types of house of cards fall, they fall completely, and they fall very hard. That is the concern.
This is not sustainable. This is exactly the type of activities that lead to the real estate crisis, the pumping of cash into Fannie Mae and Freddie Mac, that lead to the implosion.
You are a smart guy Dorian, and I know you like to be an optimist, but really, doesn't this repeating of the past mistakes, in such another key part of the financial sector, fill you with ANY fear of what is coming?
AR:
“You are a smart guy Dorian, and I know you like to be an optimist, but really, doesn't this repeating of the past mistakes, in such another key part of the financial sector, fill you with ANY fear of what is coming?”
Thanks, AR, but really I am not when it comes to the economy. That's why I always/most of the time caveat my posts as just an optimist (sometimes a naive) expressing his hopes, looking at the bright sise (sometimes very hard to distinguish).
And, of course I am apprehensive, as most Americans are, as to “what is coming.”
But, I am curious as to what you would recommed our nation do to recover from this economic disaster. And I ask this very sincerely
Thanks
Dorian
Dorian – the answer to your question is simple.
Stop the proliferate new spending programs, stop borrowing TRILLIONS of new dollars, let the financial markets actually correct and stop propping them up.
There will be a year or two of financial pain from such actions, but what will emerge from that will be the basis for a true economic recovery. All we are doing now is extending the length and eventual depth of the recession/depression.
The commercial real estate collapse is just beginning, is unstoppable, and will make the personal real estate collapse pale by comparison. The current government actions have now started the twin economic killers of currency devaluation and hyper-inflation, as evidenced by the Fed propping up Treasury Bond sales.
Nothing will make things significantly better, except for traders, in the next 12 -18 months or so. But what we are seeing Congress and the Obama Administration due will make it last 3 – 5 years, maybe longer. IMHO.
Sometimes, less IS more.
Thanks AR.
The question begs, if it is so simple, why haven't the so–called experts thought of this.
Oh well, let's see if what they are doing works
Dorian -
Many, many economic experts have called for just this type of action.
But, a) it doesn't poll well; b) it doesn't meet the political criteria of appearing to do SOMETHING; and c) it is not based on the economic theories of those who believe in government control of the economy, and they indeed own the levers of power right now.
Steve K, I am only reading what is right in front of anyone who chooses to look behind the numbers. If you will recall, we (Americans) were blindsided by the financial collapse of the “too big to fail banks.” This was after the fact, many of our elected officials and CNBC guru's, were telling us everything was OK. I basically was non-political and only kept one eye on the financial state of our economy. But since the disastrous 2008 events, and the election, I told myself that I would not sleep on the health of our country. I spent six months at home with a broken ankle, so I had a lot of time to find legitimate sources of information. I choose the mantra,”trust, but verify.” There is MAJOR thievery going on in this country, and I am amazed at how they are able to get away with it, because WE choose to look the other way.
For anyone who likes to read, one of the economists that represents the voice hollering in the forest:
http://market-ticker.org/archives/1314-Americas…
Quite a thought-provoking–if not provocative, in the stimulating sense–article, jclm Thanks
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