ON THE ROAD TO RECOVERY?

by Leslie Davis

As 2009 winds down, there is no question that this has been a tumultuous year economically. Though there are now more headlines lauding a stabilized economy than a year ago, the ranks of unemployed and underemployed have increased dramatically over the last 12 months.

Often my cynical perceptions are not assuaged by the optimistic headlines heralding recovery. The statistics and market segments cited are often offered as isolated variables rather than as part of a larger mechanism. There is no way of gauging whether the system is sound while simultaneously infusing billions into the economy via governmentally subsidized programs.

The merits and shortcomings of the TARP program have received considerable attention this year. The Congressional Oversight Panel, created to review the current state of financial markets and the regulatory system, maintains that TARP stopped the financial panic of 2008 and stabilized the banking system. However they admit that bailout programs have fallen short in many areas. The panel even suggests that TARP may have done harm by making some banks and firms, considered too big for regulators to allow them to fail, even bigger and by creating a new expectation that big banks will always be saved. The panel wrote that “implicit government guarantees pose the most difficult long-term problem to emerge from the crisis.”

UNEMPLOYMENT HITS 10.2%

Presented by Leslie David of Atlanta Mortgage Examiner

Whereas last week politicians, pundits, Wall Street and economists heralded headlines touting 3.5% growth in GDP and 640,000 jobs created by the stimulus package, unemployment reports continue to be the wet blanket stifling economic recovery on Main Street. Today’s job report indicates more of the same.

In October the nation’s unemployment rate rose above 10% for the first time since 1983, a much worse jump than expected as employers continued to trim jobs from payrolls. Economists had forecast an increase to 9.9%.

According to the Labor Department there was a net loss of 190,000 jobs in October, an improvement from a revised estimate of 219,000 job losses in September. This was the 22nd straight month of job losses.

Government efforts to staunch job losses have had minimal success, though the Obama administration estimated that 640,000 jobs were created or saved by the federal stimulus package. That number has been disputed, but regardless it is modest compared to the 7.3 million jobs that have been lost by the economy since the beginning of 2008.

From CNN Money (excerpt): Jobs are known as a trailing or lagging indicator, meaning that they change in response to other economic events, rather than predicting changes the way a leading indicator, such as the stock market, does. That’s because even after a recession has ended, employers are slow to add staff until they’re sure that demand has returned.

According to a survey by the National Association of Business Economics, the consensus forecast of 44 top economists is for an addition of only 12,000 jobs a month in the first quarter of next year.
The economists surveyed also indicated they don’t expect monthly job gains to top the 150,000 level — which is generally thought of as what is needed to keep pace with population growth — until the end of 2010.

And in the most troubling sign, more than a half of the economists surveyed said they didn’t expect a recovery to pre-recession levels in the job market until 2012 while a third said they didn’t believe a full job recovery would occur until 2013 or beyond.

The auto industry, construction and finance sectors were major employment engines heading into the recession, responsible for one job out of every 11 in the country. But they have all gone through major shifts.

Together, those three industries have shed 18% of their work force since the start of the recession. By way of comparison, the remaining sectors in the economy have only lost 4% of their workers.

Today’s job report comes one day after Congress voted overwhelmingly to extend unemployment benefits by up to 20 weeks. There are now a record 5.6 million people who have been unemployed for six months or longer, as the average time an unemployed person has been out of a job hit 26.9 weeks. A million Americans are expected to run out of unemployment insurance benefits at the end of the year.

The new unemployment legislation gives 14 more weeks of benefits to the nation’s jobless. A additional 6 weeks of unemployment compensation will be provided to individuals in states with an unemployment rate of 8.5% or higher, including Georgia. The extension of benefits will cost $2.4 billion, and will be paid for with an extension of the federal unemployment tax (FUTA).