Highly-respected economic pundit Bill McBride, the Publisher of
Calculated Risk, served up a triple-whammy of inconvenient realities over at his blog on Saturday. The usually even-handed and normally optimistic McBride tells us, as far as the economy's concerned, we're in for a very "
Negative News Flow" in coming weeks. Obviously, this is more bad news for Democrats. And, as far as the DKos community's concerned, this means the cacaphony of cognitive dissonance will grow even louder, the closer we get to Election Day.
McBride points out:
HOUSING...
--on August 23rd, the existing home sales report will verify that sales "collapsed" in July, and we're told that's virtually inevitable since it's already being demonstrated in the regional reports for the period;
--existing months-of-supply (i.e.: inventory of homes on the market) will traverse into double-digits, which will all but verify that we are yet to reach a bottom in the residential real estate marketplace;
--in hand with the two realities, noted immediately above, "house prices are probably falling again," but due to a lag in the release of this data we may not be made aware of this until as late as sometime in October.
GROSS DOMESTIC PRODUCT (GDP)...
--the second (first-revision) estimate of Q2 2010 GDP will be released on August 27th;
This will probably show a significant downward revision from the preliminary estimate of 2.4% annualized growth. The downward revision is due to lower construction spending than the BEA initially estimated, less contribution from inventory adjustments, and the June surge in exports.
And, as I noted it in my post on Thursday, and earlier in the month, on August 4th, the likelihood of Q2 2010 GDP being cut in half, or worse, to below 1%, bodes quite ominously for the next few months' numbers on our economy, in general.
UNEMPLOYMENT...
--the unemployment rate will probably get worse, and/or the rate of people that actually participate (i.e.: "the participation rate") in the nation's job force will drop.
Early last night, McBride elaborated on his comment about joblessness increasing in coming months, in: "Why do I expect the unemployment rate to increase?"
Why do I expect the unemployment rate to increase?
by CalculatedRisk
8/14/2010 05:21:00 PM
...Here are a few reasons why I think the unemployment rate will increase (some overlap):
1) The main reason is the general slowing economy. There is a general relationship between GDP and the unemployment rate (see Okun's Law), and since I expect a 2nd half slowdown (from a sluggish 1st half), I also expect few payroll jobs to be added in the 2nd half - and that suggests the unemployment rate will rise.
2) With the end of the housing tax credit, I expect residential construction employment to decline further over the next few months.
3) The 4-week average for initial weekly unemployment claims has increased recently. This is the highest level since February.
CHART: Unemployment Insurance Weekly Claims and Recessions
--SNIP--
4) Few teens joined the labor force this summer. Perversely this low level of teen participation appeared to push down the seasonally adjusted unemployment rate. If this did impact the unemployment rate (it isn't clear), the impact will be unwound over the next couple of months.
5) The Labor Force Participation Rate decreased from 65.0% in May to 64.6% in July. This was a key reason the unemployment rate decline to 9.5% in June from 9.7% in May.
McBride noted that the most recent weekly unemployment claims report was the highest "...since February and suggests weakness in the labor market."
INFLATION/DEFLATION...
Rounding out McBride's economic commentary, he points us to the current downward trajectory of our nation's inflation rate. And, while he's on record in previous posts as saying he's doubtful that we'll experience a double-dip recession, comments from other leading economists and economic pundits over the past few days -- and as I've noted in many posts, including my diary on Thursday -- indicate the likelihood of: a.) the overall Great Recession formally continuing, and/or b.) the possibility that the National Bureau of Economic Research will be acknowledging that we've officially entered into a double-dip recession, has increased over the past few weeks.
And, also from Saturday, here's former Clinton administration Labor Secretary Robert Reich telling us that we may, simply, still be in an exceptionally long Great Recession: "Forget a Double Dip. We're Still in One Long Big Dipper."
Forget a Double Dip. We're Still in One Long Big Dipper.
Robert Reich
RobertReich.org
Saturday, August 14, 2010
It's nonsense to think of the economy heading downward again into a double dip when most Americans never emerged from the first dip. We're still in one long Big Dipper.
More people are out of work today than they were last year, counting everyone too discouraged even to look for work. The number of workers filing new claims for jobless benefits rose last week to highest level since February. Not counting temporary census workers, a total of only 12,000 net new private and public jobs were created in July -- when 125,000 are needed each month just to keep up with growth in the population of people who want and need to work.
Not since the government began to measure the ups and downs of the busines cycle has such a deep recession been followed by such anemic job growth. Jobs came back at a faster pace even in March 1933 after the economy started to "recover" from the depths of the Great Depression. Of course, that job growth didn't last long. That recovery wasn't really a recovery at all. The Great Depression continued. And that's exactly my point. The Great Recession continues.
Even investors are beginning to see reality. Starting in February the stock market rallied because corporate profits were rising briskly. Investors didn't mind that profits were coming from payroll cuts, foreign sales, and gimmicks like share buy-backs -- none of which could be sustained over the long term. But the rally died in April when investors began to see how paper-thin these profits actually were. And now the stock market is back to where it was at the start of the year...
# # #
Here are a couple of links/excerpts from two of my diaries in May and July of 2009...
July 3rd, 2009: "Parsing Krugman: 'Another Stimulus Now, Or We're Screwed.'"
May 28th, 2009: "Economic "Happy News" Doesn't Cut It Now. It Won't In 2010."
Economic "Happy News" Doesn't Cut It Now. It Won't In 2010.
by bobswern
Daily Kos
Thu May 28, 2009 at 03:58:03 PM EDT
The recent trend, by some, to embrace misleading happy news about our economy is going to bite Democrats in the ass bigtime in the 2010 mid-term elections.
Misinformation (aside from doing this supposedly-activist community a great disservice) is not going to cut it if Democrats expect to successfully defend their record next year.
The "reality talking point" is this: We are cleaning up a Republican mess of epic proportions created by eight years of their mismanagement of our economy.
The reality is it's still going to be a major mess, at the very least throughout most (if not all) of 2010 and, much more than likely, for quite some time thereafter.
Misrepresenting Paul Krugman's (or any economist's) position on this doesn't help us. (Hyperbole in a highly-rec'd diary here, yesterday, did just that.)
Providing contorted statistics (with qualifying words and statements in the fine print, thus enabling the purveyors of that drivel to provide "less lame" rebuttals to diaries like this which are critical of that behavior) may be an effective strategy for press placements in the MSM in the eyes of some, but around here it's little more than an insult to our intelligence.
An upwardly-inching unemployment rate that (within the next week) will soon be announced as somewhere around 9.1% to 9.2% (and that's just the US Labor Department's Bureau of Labor Statistics' U.3 Index; with their U.6 Index being almost twice that) is our reality; and, the fact is that'll most likely be in double-digits by Labor Day. That's our reality, as well.
As I write this, almost one in five adult Americans are either unemployed or grossly under-employed. In some age/ethnicity segments within our society that number is higher than one in three. As far as U.S. homeowners are concerned, one in every eight is now late on a payment or already in foreclosure.
Even referring to this as a "recession" defies the reality that we've never really been through anything like this before...at least not during the past 75-plus years.
Today's news, "Mortgage Delinquencies, Foreclosures, 30-Year Rates Increase," tells us unemployment just about trumps everything. From a political standpoint, as most already realize, this is simply the truth...
# # #
Yes, paraphrasing the headline of my diary from May 28th, 2009: "Economic 'Happy News' Doesn't Cut It On August 15th, 2010. And, It Won't On November 2nd, Either."
As long as our nation's facing economic headwinds of the sort we're facing today, it will NEVER be too late for Democrats to fight for greater economic stimulus for Main Street!
Peace!