The Economy is Worse Than It Appears: America Bleeds Its Way Into 2009

[Omaha Steve]

http://www.counterpunch.org/sainath01022009.html

By P. SAINATH

On average, the United States has seen the loss of nearly 14,000 jobs each day since September 1. In 90 days from that date, close to 1.3 million Americans lost their jobs. After weeks of headline-grabbing events on Wall Street, these developments tend to recede into the background. Current estimates suggest over half a million Americans lost their jobs in November alone. This is omething not seen in a single month since December 1974.

Things are not as bad as they appear for the US economy. They're worse. As the data flow in, even estimates for earlier months have been revised sharply upwards. The September job loss figure was recorded as 159,000 two months ago. The Bureau of Labor Statistics now says the figure is 403,000. The first figure for October was 240,000 jobs lost Now it is 320,000. The unemployment rate for teenagers, at 20.4 per cent, is three times the claimed national rate of 6.7 per cent. (This does not include those who have given up looking for work in despair. Nor does it count those working far fewer hours than they need or would like to.) A measure that includes such factors would raise the unemployment rate to 12.5 per cent. Yet, even with this flawed count, the rate is at its highest in 15 years. There were 10.3 million jobless people in November and that was 3.1 million more workers unemployed than just a year ago. Worse, huge layoffs continue. Even the IT sector has lost thousands of jobs.

There are other icebergs ahead. This is winter, when at least two major sectors do not hire much: agriculture and construction. Come spring, there will be different benchmarks to test jobless figures against. There could also be a new round of layoffs (in retail, for instance) starting January after the last two major holidays -- Christmas and New Year -- get over. Things might improve if the new administration has massive programs running by spring that help millions return to work. Circumstances might force this administration to make choices that could in America be denounced as "leftist." Not impossible - but on current evidence, tough. Huge jobs stimulus programs, even if brought in, would take time to work through. If Obama's plan to create 3 million jobs over the next two years works, it would still barely recover those that vanished over the previous two.
The Federal Reserve has cut interest rates to between 0 and 0.25 per cent. (This lead one wit to declare that "the Fed is now the only institution truly attempting Islamic Banking.") They believe the positive results of this will be seen in time. However, this will not solve the credit crunch - the problem of banks fearful or unwilling to lend to those who currently need it. The mortgage and other crises show no major signs of a let up. Even if all the measures of the Bush and incoming Obama administration work, it won't be a return to business as usual. For tens of millions of people, life might never be the same again.

The housing mortgage crisis still burns. Six million people could lose their homes over the next two years. And the credit card crisis, already setting in, could strike sharply in a few months. That hit would encompass far more people than housing would, even if the amounts involved (and impact on the financial markets) are smaller. As Business Week puts it: "Making matters worse, the subprime threat is also greater in credit-card land. Risky borrowers with low credit scores account for roughly 30 per cent of outstanding credit-card debt, compared with 11 per cent of mortgage debt." This is a country where almost everybody uses credit cards (often several of them).

If job losses continue to mount at their present pace, then the card catastrophe will accelerate. Those out of work will not be able to meet their payments. They could also find it hard to purchase essentials and would likely fall deeper into debt. This was a sector already headed for crisis for quite some time. In some estimates, US credit card debt grew by 435% from $211 billion in 2002 to $915 billion by the end of 2007. When this house of cards falls, it will spur further the home mortgage mess and the recession already underway. There are those making their housing payments off their credit cards -- at huge interest.

FULL story at link.

[FirstLight]

1. very comprehensive so far, good to understand this mess on some level

BUT
there are still so many other areas that I haven't heard of, the cost of huge homeless and unemployed populations

people who are more desperate, people who will have to find other means to survive.
Will they come together as a cohesive community and create neighborhood gardens, etc?
Will we have food riots?

My bet is a little of both. Let's hope that Obama and his cainet can get a grip early on wih this part of the problem and use it to rebuild some better ideas into community and prosperity and sharing the fruits of one's eforts. I agre that we have become too "self-reliant" as a culture. The more interdependence we embrace the better we will be
because interdependence goes beyond money