US Unemployment and Other Data Not Indicative of "Recovery"
There are two legs to American household wealth – jobs and housing. Here’s the latest on housing from The New York Times:
The long-predicted double-dip in housing has begun, with cities across the country falling to their lowest point in many years, data released Tuesday showed.
Prices in 20 major metropolitan areas fell 1 percent in November from October, according to the Standard & Poor’s Case-Shiller Home Price Index. The index is only 3.3 percent above the low it reached in April 2009 and has fallen fell 1.6 percent from a year ago.
Prices in Atlanta and Chicago fell more than 7 percent, exceeding even the drops in the perennially troubled Detroit and Las Vegas.
Housing is still going down. If you don’t mind, we’ll repeat what we said yesterday:
“House prices expected to decline for a fifth successive year,” says The Financial Times.
Foreclosures are rising and will continue to rise until March of 2012, according to the projections in the FT, wiping out possibly trillions more in household wealth. Sales are at a 13-year low.
Houses are Americans’ most important asset. And the average house is down about 25% since 2006. But that’s in terms of dollars. In terms of gold, the loss is over 60%.
Okay… Well, it looks like households are hopping on one leg. Now, let’s look at the good leg, employment.
Whoa… What’s this?
WASHINGTON (AP) – The unemployment rate rose in 20 states last month as employers in most states shed jobs.
The Labor Department says the unemployment rate rose in 20 states and fell in 15. It was unchanged in another 15 states. That’s nearly the same as in November, when the rate rose in 21 states, fell in 15 and was the same in 14.
The report is evidence that the job market is barely improving even as the economy grows. Most economists expect hiring to pick up this year, although the unemployment rate will likely remain high.
Employers in most states didn’t add any net new jobs last month. The number of jobs on employer payrolls fell in 35 states in December, the department said. Only 15 states reported gains. Layoffs have slowed dramatically in the past year, but hiring has yet to pick up.
This is not good news. Two gimpy legs. Household wealth is going to fall down.
But what do you expect? This is a Great Correction, isn’t it?
If you listen to the financial media, the State of the Union, or the stock market you’ll get a very different impression. Or just re-read the article above. It says “…the job market is barely improving.” In fact, it’s not improving at all. It’s getting worse. The population is growing. If employers don’t add new jobs, it means more people out of work.
Housing? Same story. It’s not “barely improving.” Houses are still losing value.
We could ask sarcastically: “So, where’s the recovery?”
But why bother? You know as well as we do that there is no recovery. And there’s not going to be a recovery.
Instead, the economy has to move on…to something new. If the financial and political authorities suddenly came to their senses, we could imagine that a couple of rough years of bankruptcies and losses would be followed by a long period of new growth.
But we weren’t born yesterday. This is not a dream. It’s reality. And if our new theory is correct, the authorities are not going to come to their senses. Because they’re paid not to. Ben Bernanke has to believe his crackpot activism will pay off. Otherwise, he’d have to renounce the whole project…and admit that he’s been a fool. He’d also be out of a job – because neither the bankers nor the politicians would allow the chips to fall where they may. Hey – they own those chips!
But couldn’t the feds all get a Ron Paul makeover and come to see that their interventions were actually making thing worse – by adding even more debt and delaying the necessary adjustments?
Nope. Not gonna happen. Remember, a government is the result of natural selection, not rational thought. Its primary objective is to survive. And it does so by protecting its niche – at all cost.
Peter Orzag, writing in The Financial Times:
Most fundamentally it is difficult to see how the medium-term federal deficit can be reduced to sustainable levels without additional tax revenues from those earning less than $250,000 a year. And yet it is equally difficult to see the political system embracing that reality without being forced to do so by the bond market.
The feds cannot suddenly stop rigging the system for the benefit of their favored groups and supporters. A flesh-eating dinosaur can’t suddenly become a vegetarian.
The elite, the privileged, the parasites and the zombies are the feds’ base of power. Lose them and the government is out of business.
Regards,
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