Friday, September 17, 2010

Here's another

A line in the first paragraph of a story at on Wednesday tells the tale:
[T]he U.S. economy is still on rocky shoals.
GDP hit bottom in December 2008, when the economy was shrinking at a rate of nearly 7% a year. But after recovering in mid- to late 2009 due to massive government spending, it has stalled.
First quarter [2010] GDP increased by 3.7%. And in late August, the government reported that real GDP [for the second quarter] increased by just 1.6%, less than the 2.4% estimated initially.
This has raised the very real possibility that without more government spending - an unlikely prospect given the O-crowd's embrace of the Holy Church of Deficit Reduction - the economy faces years of slow growth and even a double-dip recession.

Meanwhile, the unemployment rate doubled from June 2008 to the fall of 2009 and has stubbornly remained at over 9% for over a year.
A recent Labor Department report shows there are about five job seekers for every available job in the U.S. Economists say that until job creation picks up, there can be no hope of prolonged economic growth in this country.
And that statistic is supposed to be a good sign: At the start of the year, it was six job seekers per job.

As a result, the Census Bureau reported yesterday,
[t]he ranks of the working-age poor in the United States climbed to the highest level since the 1960s as the recession threw millions of people out of work last year, leaving one in seven Americans in poverty.

The overall poverty rate[, covering all ages,] climbed to 14.3 percent [in 2009], or 43.6 million people....
That's more than a full percentage point and nearly 4 million people higher than in 2008 and the highest since 1994. And again, it was government spending - in this case a COLA for Social Security and extensions of unemployment insurance - that helped soften the blow. Without the latter, another 3.3 million people would have dropped into poverty in 2009, according to David Johnson, the chief of the Census Bureau's household economics division.

Meanwhile, the number of Americans without health coverage rose from 15.4% of the population to 16.7%, or 50.7 million people - the biggest single-year increase and the highest total number since the government began tracking the figures in 1987. And one more time it was government that kept it from being even worse, as some of the loss in employer-subsidized health insurance was taken up by expansions of Medicare and Medicaid.

On another front that has been a mainstay of the economy, home prices crashed between June 2008 and May 2009 and have recovered only a little since then. Following the end of federal homebuyer tax credits, which expired in April, home sales plunged so that in July they hit the lowest rate in nearly 50 years. This going on while the number of people losing their homes to foreclosure continues to climb. In fact,
[l]enders took back more homes in August than in any month since the start of the U.S. mortgage crisis. ...

August makes the ninth month in a row that the pace of homes lost to foreclosure has increased on an annual basis. ...

More than 2.3 million homes have been repossessed by lenders since the recession began in December 2007, according to RealtyTrac[, a company that tracks foreclosures]. The firm estimates more than 1 million American households are likely to lose their homes to foreclosure this year.
At the same time, initial default notices, the first step in the foreclosure process, have been dropping. That could indicate that things have finally hit bottom on this front and are starting to improve, if ever-so slowly - but with fewer than one-third of repossessed houses on the market for re-sale for fear of further depressing an already-depressed market, it could just as easily mean that lenders are simply biding their time, not bothering to try to seize properties they can't sell and that a new wave of foreclosures is in the offing as soon as unemployment starts to fall.

Obama called 2009 a tough year but added that "Because of the Recovery Act and many other programs providing tax relief and income support to a majority of working families - and especially those most in need - millions of Americans were kept out of poverty last year." As I already noted, that is likely true. But it's rather like telling someone just diagnosed with kidney disease to be glad it's not AIDS while proposing - à la the "Deficit! Deficit!" mantra - to treat the condition with bloodletting.

Oh, but hey, there's a bright spot: The price of gold hit a record high of $1,271 an ounce on Tuesday! The price is now nearly 50% higher than it was in November 2008 and is expected to hit $1300 an ounce before the end of the year. Great! Um, except that gold prices go up when investors are worried about the economy and are looking for a "safe haven" for their money. So what this really means is that despite the happy talk coming from some places, the wheeler-dealers are as worried as the rest of us.

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