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The Calm before the Storm?

Posted by: Michael Mandel on August 07

This morning’s jobs report seemed to show a firming-up of the labor market, with the unemployment rate dropping a tad, from 9.5% to 9.4%. Job losses have slowed too, down only 247,000 in July.

But one month’s numbers do not make a recovery. I’m betting that this may be just a temporary pause before the labor market worsens again towards the end of 2009. What happened is that the government has poured an incredible amount of money into the economy, through both monetary and fiscal stimulus. Policymakers have managed to blunt the downward spiral, which is a tremendous achievement. No depression on Bernanke’s watch.

But consumers are still cutting back, and the personal savings rate still has more to rise. I would treat this as the eye of the hurricane, with more yet to come.

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Reader Comments


August 7, 2009 11:21 AM

Perhaps your prior post on sellers of fine food and art and gentlemen hosts in the cruise business helped spread the word about those unfilled job opportunities.


August 7, 2009 01:27 PM

I would tend to agree that it's government spending lifting the boats right now and that the private economy is not in recovery mode. But conservative critics of Obama continually say that most of the effect of the stimulus package has not yet occurred: it will be too late to do any good.

Wouldn't this counter your point in that we've got a couple more years of heavy government spending ahead of us to cushion the numbers?

Another fear is that the spending pattern imposed by government stimulus is not the same as the market ought to come up with: it itself may be imposing an economic "imbalance": a dependency with its own pending withdrawal symptoms.

Brian Krapohl

August 7, 2009 02:11 PM

More realistically thinking than any analyst in the media these days, this report is nonsense. True, the government has pumped trillions into the economy, yet, all of the real world signs, outside of the baseless market rally and analysts claims we have stabilized, point to the fact that this is the very beginning of the end for American economic dominance. In May, unemployment stats were down as well and the markets rallied and the consumer cheered, then in June, reality set in. Now, it's July and recovery is imminent, but come August, we will be back to our status in September of 2008. The fact is, any government report being released right now cannot be trusted and should not be a driving force behind consumer and investor decision making. Our GDP fell over 6% in the 1st quarter, yet only 1% in the second quarter, why? No one has any reason to cite. Which tells me, GDP will fall massively in the third or fourth quarter as true government stats can only be masked for so long. Eventually the truth will come out and all the great economic analysts of this country will find out the truth they should have known from the genesis...this depression is not one that we will fully recover from. We will come out of this as the backseat driver to China, India and possibly Brazil. We will come out of this with an inflated currency which causes more strife than the inflation of the 70's could even imagine. When unemployment does begin to swing back down, the jobs being created will be Walmart and Walgreens jobs and not anything solid or sustainable. Finally, as Fannie Mae posts a $14.8 billion loss the government reports claim that the housing industry has taken a turn towards normalcy. Doesn't quite add up does it? Then, AIG is claiming a near $2 billion profit for the quarter while not addressing the repayment of nearly $1 trillion in government injections. Where is the truth in their earnings report, let alone the government economic reports? There is none. Thus, for a regular American who is looking for work, capable of any type of employment and well educated, the nonsense being spewed on CNN, CNBC and every online investing or business publication does not even come close to being in the ballpark. When all is said and done though, the same analysts and pundits who know nothing except what they read on another news site earlier in the day will still maintain their jobs and will never speak to all of the nonsense and wrongs that they spewed throughout this downturn. In the end, one thing is for definite, there are only a few people in this country that actually know what is going on with the economy and those folks are working towards an end that is not being spoken truthfully to the American public, rather than working towards recovery. My belief is, our government is using the opportunity of depression, while only calling it recession, to depress Americans to the point of desperation and willingness towards any idea which may bode recovery. For example, global warming legislation, universal health care and new government regulators. This, in turn, will allow us to socialize and centralize our system in order to maintain the New-Western model of Democracy, just as our European allies have done. In conclusion, the jobs report is just one in a long list of fabricated and falisified government reports to give Americans a better feeling about the path we have taken towards recovery as well as to give the false impression that these same measures are working phenomenally. Most Americans believe the government still, even as they criticize their every step...this will change soon enough. Most Americans also believe what their favorite analysts on TV tell them also, this too, will change soon enough.


August 7, 2009 02:42 PM

So what's your idea Brian? Laissez-Faire?


August 7, 2009 03:33 PM

I agree unconditionally with Michael, for once :) Government is doing the best it can to blunt the impact of what would otherwise be a full out Depression. I'm torn as to what the long term impact of this deficit spending will be. One thing we can say for certain is that Keynesian budgets during periods of economic growth are inexcusable, as another economist put, the fiscal emergency alarms are coming pre-smashed from the prior administration.


August 7, 2009 03:43 PM

I agree with Brian Krapohl. Face it, the wealth is being transferred to China, even as we speak. All empires have their day in the sun. The Egyptians, Romans, English empire, we Americans, and soon China.


August 7, 2009 03:47 PM

Brian, if in fact what we're heading for is Western European style society...I'll take it! I had the opportunity to live and work in Germany and France and if that's the future for us, I will be quite happy. The higher taxes are more than compensated for by the higher quality of life and services. Yes, really.


August 7, 2009 04:51 PM

Michael, your overall assessment is correct. But in addition to that high level observation you have signaled how the weakness is to transpire. Consumers are not going to power anything for another year or two, maybe more when they get their new tax bills from expired cuts from the past and someone somehow forgets to patch the AMT. July results are not part of a trend. Retail jobs will go down further along with all things connected to commercial real estate crunch time. Temp help jobs will add to the reversal and govt except feds will run out of gas. Another stimulus will be the nail in the coffin admission of real conditions. Watch for the double dip after year end shopping season collapse and after the inventory rebuild fizzles out. Car industry trimming will now proceed and airlines will have to face the music or their bankers will go under. Oh and main street banks will go down more with commercial property and consumers. Have a nice day..... in the la la land of green shoots and hope.


August 7, 2009 05:17 PM

I suspect that most of the pessimistic comments I am reading here are from conservatives who actually WANT the economy to fail, for political reasons.


August 7, 2009 05:34 PM

Higher quality of life in Germany and France? What the ---- are you talking about? Why did you return to the states? I lived in those countries as well as three others and there is NO comparison, period.


August 7, 2009 05:51 PM

A second federal stimulus package will be needed, and the sooner, the better.


August 10, 2009 10:40 PM

This is a momentary lift soon it is going to tang again I would assume after september we are going to see a drop and thinks quickly hit the floor. I hope not but dang!


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Thank you for your interest. This blog is no longer active.



Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.

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