A preview of Friday's employment data for the United States economy shows job growth nearly flat for the months of July and August. ADP Employment Services suggested that only 38,000 jobs were created in August. This is pretty much in line with my own prediction a few days ago of only 20,000 new jobs. In other words, this is the slowest job growth has been since June 2003 when the country was still seeing job losses in that recession. As for July's data, this was revised down to 41,000 new jobs. That there have been two consecutive months of weak job growth offers more evidence that this is not an aberration, but that the credit crunch is having a deleterious effect on the economy.
In other economic news, the growth forecast for 2007 has been dropped again, from around 2% to 1.9%, which would seem miniscule, though this demonstrates growing concern that a recession is developing. Consider, Moody's Economy.com believes the odds of an inevitable recession have spiked from 12% in August to 40% just a couple of days ago. But this is hardly even the most dismal forecast, as numerous economists and former Federal Reserve officials have declared that the odds of a serious slump have risen astronomically over the weeks. Merrill Lynch, for instance, believes the odds are 65%. As I have said earlier, should a recession come, it would be very dangerous (millions of job losses, a sharp rise in poverty, a spike in crime and drug abuse, rising homelessness, and so on.) The GDP could fall 2 to 3% over the next few months, which (as you can see) is severe.
The recent Mattel Toys recall of over 840,000 toys made in China, aside from inherent concerns among consumers from the credit crunch, should damage consumer spending even more due to people's legitimate concerns over product safety. This should have a precipitous effect on consumer confidence, indeed the whole economy. Falling home prices will not only affect consumer spending, but also severely damage tax revenues for cities that have depending on real estate over the past few years. This would assuredly magnify inner city poverty and other social ailments, because a lack of tax revenue hinders a city's ability to fund schools, hospitals, public safety, parks, and so on. Much revenue has already been lost in the Baltimore and Washington regions, but since I am not completely aware of the situation in other regions, this same occurrence is more than likely to be happening nationwide, as this is a nationwide crisis.
Other housing data show pending existing home sales collapsing 12% in July, down from an estimated 2%. I should point out that this is a record drop. The stock market is acting appropriately negatively today, as the DOW is down a dismal 150 points only an hour into trading.
Source:
http://www.bloomberg.com/...