Philly manufacturing index negative 30.7, newly unemployed 408,000, Bloomberg consumer confidence negative 34, Dow down over 400, but don't worry because President Obama says we're not in danger heading back into another recession.
President Obama said in an interview on Wednesday that he doesn’t think the economy will dip back into another recession.
Here was his response to CBS’s Anthony Mason in Illinois:
“I don't think we're in danger of another recession, but we are in danger of not having a recovery that is fast enough to deal with a genuine unemployment crisis for a whole lot of folks out there. And that's why we need to be doing more.”
The New York manufacturing index was negative for the third straight month. Every other time in history New York has reported consecutive negative manufacturing index values, the U.S. has been in recession.
The Federal Reserve Bank of Philadelphia’s general economic index plunged to minus 30.7 this month, the lowest since March 2009, from 3.2 in July. The August gauge exceeded the most pessimistic projection in a Bloomberg News survey in which the median estimate was 2. Readings less than zero signal contraction in the area covering eastern Pennsylvania, southern New Jersey and Delaware.
The Bloomberg Consumer Comfort Index’s monthly expectations gauge dropped to minus 34, the weakest since March 2009, from minus 22 in July. The weekly measure of current conditions was minus 48.3 for the period ended Aug. 14 compared with minus 49.1, which was the worst reading since mid-May.
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New York-area manufacturing contracted in August for a third straight month, the Federal Reserve Bank of New York’s so- called Empire State Index showed Aug. 15. The gauge, which covers New York, northern New Jersey and southern Connecticut, has only contracted in consecutive months when the world’s largest economy has been in a recession.
‘Sit on Cash’
“Right now, until the markets shake out and we understand really where the economies are going globally, I think it behooves us to sit on cash, to hold it, in case there is a really, really bad recession that takes place,” John Craig, president and chief executive officer of EnerSys, said on an Aug. 11 call with analysts.
Because U.S. unemployment is rising while consumer confidence is falling, corporations anticipate a drop in consumer spending. Therefore, corporations are hoarding cash instead of hiring new workers. To get corporations to stop sitting on several trillions in hoarded cash the government must fund programs that give people jobs. Instead, austerity enacted by Republicans at the state and local level is cutting jobs, just when government needs to be hiring.
UPDATED: Roubini: Is Capitalism Doomed?
The recent credit rating downgrade and Eurozone debt crises are slowly showing signs of The Great Depression 2.0.
Nor could monetary policy help very much. Quantitative easing is constrained by above-target inflation in the eurozone and UK. The US Federal Reserve will likely start a third round of quantitative easing (QE3), but it will be too little too late. Last year's $600bn QE2 and $1tn in tax cuts and transfers delivered growth of barely three per cent for one quarter. Then growth slumped to below one per cent in the first half of 2011. QE3 will be much smaller, and will do much less to reflate asset prices and restore growth.
Currency depreciation is not a feasible option for all advanced economies: they all need a weaker currency and better trade balance to restore growth, but they all cannot have it at the same time. So relying on exchange rates to influence trade balances is a zero-sum game. Currency wars are thus on the horizon, with Japan and Switzerland engaging in early battles to weaken their exchange rates. Others will soon follow.
Meanwhile, in the eurozone, Italy and Spain are now at risk of losing market access, with financial pressures now mounting on France, too. But Italy and Spain are both too big to fail and too big to be bailed out. For now, the European Central Bank will purchase some of their bonds as a bridge to the eurozone's new European Financial Stabilisation Facility. But, if Italy and Spain lose market access, the EFSF's €440 bn ($627bn) war chest could be depleted by the end of this year or early 2012
Because the President just signed a budget deal that prohibits a strong Federal jobs stimulus, the economy is in a situation similar to 1937 when premature efforts to balance the budget dragged the economy back into depression.
The President needs new economic advisers. Steiglitz, Krugman & Roubini have all proved to be correct on the economy. He needs to listen to their advice. Tim Geithner has a record of repeated failure over the past 5 years. Geithner's advice has been disastrous to the economy. President Obama's economic approval rating of 27% reflects the public's perception that his economic team just doesn't get it.
We need jobs.