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    The Recovery That Isn't

    October 3, 2009

    For those market boosters who are prattling on about the possibility of a "jobless recovery," I offer an invitation to join me for a breakfast of "fat-free bacon," "eggless omelets," and "no-carb bread." As unappetizing as such a meal may sound, it would nevertheless offer more substance than the oxymoronic concept of an economic resurgence without job creation.

    Those who do cling to the absurd belief that, absent exponential productivity gains, the economy can expand while workers are being laid off will undergo a massive test of their convictions now that it's clear the employment picture is bleak. Today's weaker-than-expected report on non-farm payrolls revealed that employers shed 263,000 jobs in September. The losses propelled the headline unemployment rate to a 26-year high of 9.8%. U6, the Bureau of Labor Statistics' most complete measure of unemployment, has risen to a dismal 17%. This figure includes those people who want to work full time, but have simply given up looking, or who have accepted part-time work in the interim. As it is similar to the methodology used during the Great Depression, U6 offers better historical perspective on the severity of our current crisis.

    Taken together with yesterday's larger-than-expected pickup in unemployment claims (first time claims rose by 17,000 to 551,000), today's report makes it certain that the job market is still contracting, even while some indicators like GDP and consumer confidence are moving in the opposite direction.

    There is no question that the sense of panic has temporarily subsided. In recent interviews, Treasury Secretary Geithner has been almost giddy in his descriptions of the recovery – all the while crediting his own policies for averting disaster. Americans are once again taking the government's bait by spending money they don't have to buy things they can't afford. Evidence of this trend was contained in data released earlier this week which showed that even while income growth was largely stagnant, U.S. consumers showed the biggest month-over-month increase in personal spending in ten years! With the same report showing a 25% drop in the savings rate, the source of the spending money is clear. But depleting savings and increasing borrowing does not a recovery make.

    To really recuperate, the government must allow market forces to restructure our economy. The government and individuals must rein in their spending; we must replenish our stock of savings, allow interest rates to rise, asset prices to adjust to economic reality, insolvent businesses to fail, and wages to reflect productivity. To accomplish these goals, subsidies that distort market forces must be removed and regulations that undermine our competitiveness must be repealed.

    None of this can be accomplished without a degree of short-term economic pain. However, if we endure it, the payback will be a real recovery with plenty of new jobs that don't rely on government stimulus money. If we refuse to allow the economy to experience a real recession, we will never have the benefit of a real recovery. Instead, we get the "jobless recovery," a veneer of apparently positive indicators that merely obscures the underlying rot.

    Over the last few decades, our industrial job market has atrophied while service- and public-sector jobs have grown unsustainably. We must restore balance. New jobs will have to come from areas that produce goods; bloated service and government sectors must be allowed to shrink. By propping up the sectors that need to contract, and running staggering budget deficits, the government cuts off the capital necessary to fund sectors that need to expand.

    In truth, many of the service-sector jobs that exist today, such as real estate sales, mortgage finance, home improvement, and auto sales, were created in an environment of ever-increasing home equity, rising stock prices, and almost unlimited access to cheap consumer credit. With home equity gone, stock markets flat, and credit depleted, Americans find themselves needing to save rather than spend. But Washington has put through policies that have counteracted our good instincts.

    While we were focusing our economy on consumer spending, much of the rest of the world was saving for the future. As such, we must begin to produce more for export, so that we can sell goods to those who have the savings to pay for them. That is the only way we can repay our debts, replenish our savings, repair our infrastructure, and rebuild our industrial base.

    Another prerequisite to any real economic expansion is the potential for business owners to earn profits. With increased regulation and higher taxes on the way, these incentives are being diminished. In fact, via a phenomenon called "regime uncertainty," our current policy path is actually encouraging businesses to contract in order to prepare for a more hostile business environment.

    Robust economies utilize all spare capacity, or restructure it for better use. Having 17% of our able-bodied population sitting at home or working part-time at Cinnabon indicates that our present policies are weakening the economy – even if GDP is growing. There is no "jobless recovery," only senseless cheerleading.

    by Peter Schiff

    Peter Schiff is president of Euro Pacific Capital and author of The Little Book of Bull Moves in Bear Markets and Crash Proof: How to Profit from the Coming Economic Collapse.

    Recently by Peter Schiff: The Price of Pretense inPittsburgh For those market boosters who are prattling on about the possibility of a "jobless recovery," I offer an invitation to join me for a breakfast of "fat-free bacon," "eggless omelets," and "no-carb bread." As unappetizing as such a meal may sound, it would nevertheless offer more substance than the oxymoronic concept of an economic resurgence without job creation. Those who do cling to the absurd belief that, absent exponential productivity gains, the economy can expand while workers are being laid off will undergo a massive test of their convictions now that … Continue reading →

    #2
    Reminds me of the police chiefs and mayors who would fudge the "crime" numbers by under reporting.
    Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
    Status: (Auto) Discharged and Closed! 5/10
    Visit My BKForum Blog: justbroke's Blog

    Any advice provided is not legal advice, but simply the musings of a fellow bankrupt.

    Comment


      #3
      It like the saying I've heard all my life:

      Figures don't lie, but liars do figure.
      All information contained in this post is for informational and amusement purposes only.
      Bankruptcy is a process, not an event.......

      Comment


        #4
        Well, the concensus was that shortly after the election, the question mark surrounding the next president would disappear and we would begin some recovery. The treasury's expectation indicated a recovery in the second half of this year. Now they've pushed it back well into next year.

        The predictions of these economic psychics are just not coming to fruition.
        Filed Joint, No Asset, > $100,000 Unsecured Ch.7 6/7/13 ~~ 341 Meeting 7/15/13 ~~ Discharged 9/16/13 !!

        Comment


          #5
          the only way the economy is going to recover is if we undo the mortgage crisis. the jobs will never return. they are forever lost. so there will never be a recovery. maybe decades from now but i doubt it.
          Filed: 6-7-2010 341: 7-15-2010 DISCHARGED: 9/17/2010

          Comment


            #6
            When you take mfg jobs that pay well and export them. Then import cheap labor to do building trades jobs. Add service jobs that do not pay well, and pretend there are not enough EDUCATED people in our country to do jobs so implement a HB visa to import more people willing to work for less.. you have a problem. The only way we can work for less is if everything and everyone else accepts less. Longer credit terms will only make this worse which has been proven already. Financing cars for 5-7 yrs instead of 3, and homes for 30-40 years instead of 15 with two people working instead of one have been the ideas of the past. WE CAN NOT COMPETE WITH SLAVE LABOR COUNTIES AND EXPECT OUR WORKING CLASS TO NOT LIVE LIKE THE DO. Not shouting at you.. shouting at big business.. lol

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              #7
              I drive a LOT for my job (CHP)...I prefer the graveyard shift as it's quieter..As I cruise the freeways over the years in Southern California, all I ever saw being built was more new overpriced cracker box tract homes, more and more big box retail centers. The retail centers and the tract homes would replace former farmland and industrial business and former military bases. I'd always ask myself "Who is going to BUY this stuff ?", because the next logical question was always "Where are the jobs to support this ?"...You can't work at Wal-Mart and make a large mortgage payment or buy other stuff to keep the service sector going. I could see several years ago this type of "growth" was unsustainable for any length of time, but I, like many others ignored it and lived off my equity like all the rest. And now it's all come crashing down and America is undergoing it's painful financial "enema"..We DO have to bring more middle class jobs back to the United States. We have destroyed the "base" that started the middle class and we need to reverse that or accept Third World status.

              Comment


                #8
                This morning on NPR they were talking about our financial relationship with China. WE are so tied to this commie country! If we do not make this painful change now we will become like china. People kept ranting about socialism on the internet. They all seem to misunderstand what it really is. A loss of freedoms is what it means. Our forefathers set our republic up so we would educate children, all speak the same language and invent and grow. They set up a compassionate nation that accept all kinds of religious beliefs. We stopped practicing that decades ago, starting with the religion of the American Indian. To this day we have people so concerned about if they are going to tear down a cross when the real dispute was that not all WWI vets were christian so lets up up other icons like we have in ARlington... WE do not have just a cross there, we have all faiths represented. But the far right digs in its heels over these issues, and worries little about how people are being treated here or in China that we are freely trading with.. and the left, well, the left worries about the rights of people coming in here illegally. We are doomed as a country if we don't get our jobs back from China and if we don't stop illegals from entering... but no one in Washington is interested.

                Comment


                  #9
                  Numbers are only numbers.


                  I heard today that everybody in the US is going to get a raise...... a pretty good raise at that. "In order to get a 50% raise, everyone has to first take a 33 1/3% cut in pay."

                  Sounds good, eh?
                  Golden Jubilee was a year-long celebration held every 50 years in which all bondmen were freed, mortgaged lands were restored to the original owners, and land was left fallow: Lev. 25:8-17

                  Comment


                    #10
                    Latvian Hookers Signal No Recovery for Economy: Matthew Lynn
                    www.illicitencounters.co.uk

                    Comment


                      #11
                      84% of the country is not experiencing a recession while 16% unemployed are experiencing a recession.
                      Well, I did. Every one of 'em. Mostly I remember the last one. The wild finish. A guy standing on a station platform in the rain with a comical look in his face because his insides have been kicked out. -Rick

                      Comment


                        #12
                        The 16% is off. They say if the numbers were true it would be closer to 22%. That would include those who are working part time, and those who simply fell off the benefits role. With the numbers today of ONLY 511,000 new claims for unemployment lol.. I have to say they are way off. We have a ton of foreclosures, and the late accounts are growing. I would be 25% are wishing they had an income, 10% wish they had enough income to afford to pay their bills, and another 10% wish they had affordable healthcare as they are about to not be able to pay their bills when the next increase gets passed on to them. The remaining 55% are a mix of those on SS, those in the upper income bracket and maybe Nixons silent majority?? lol

                        Comment


                          #13
                          Can't be as high as 22%. I don't know anyone personally that is unemployed...
                          Filed: 6-7-2010 341: 7-15-2010 DISCHARGED: 9/17/2010

                          Comment


                            #14
                            Originally posted by nc73 View Post
                            Can't be as high as 22%. I don't know anyone personally that is unemployed...
                            About 1/3 of my immediate friends and family are either unemployed or terribly underemployed. I live in an area of Florida where the county figures that were just published peg us at 17% unemployment.

                            I guess you are fortunate to be in an area that hasn't been so badly affected, but it's real. I see these people every day, looking for work, worrying and wondering about their futures.
                            11-20-09-- Filed Chapter 7
                            12-23-09-- 341 Meeting-Early Christmas Gift?
                            3-9-10--Discharged

                            Comment


                              #15
                              I live in Northeast Ohio and the recession has hit Ohio very hard. Unemployment in the county we live in is 15%, home foreclosure rates are very high, I've never seen anything like this in my lifetime. People are leaving, there are NO signs of a recovery here. DH and I have lived here most of our lives, we lived in Columbus, Oh for 4 yr. while he attended Ohio State University. Since he lost his job of 19 yr. in 2007, he has not been able to secure a comparable job anywhere in Northeast Ohio. We are seriously considering moving either back to Columbus or out of state, there is nothing here and believe this area will not not see prosperity again in our lifetime.
                              Filed BK Chapter 7 - 11/12/10 341 Meeting - 01/07/11
                              Notice of no distribution - 01/12/11
                              DISCHARGED - 03/09/2011

                              Comment

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