The Great Depression Online

Great Depression Online Archive Issue:

Misreading the Economy...More or Less

Great Depression Online
Long Beach, CA
July 07, 2009

Inside This Issue You Will Discover…

*** Less Bad and Better than Expected
*** More Bad and Worse than Expected
*** Misreading the Economy…More or Less
*** And More

Less Bad and Better than Expected

The economy had been so amiable, affable, and agreeable over the last 3-months.  The DOW had rallied 33 percent from its March 9th low.  Credit had been made available and accessible to the big banks for practically free.  The resumption of ‘normal’ business activity was just around the corner…you could almost feel it.

Some, even, could already see it.

For on March 15th, Federal Reserve Chairman, Ben Bernanke, put his face down to the economic soil, poked around, squinted his eyes, and declared he saw “green shoots” of an economic recovery.  Then, on May 5th, he told Congress he expected “economic activity to bottom out, then to turn up later this year.”

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Team Obama was on the case too.  And they were much much smarter than the last guys.  They’d put the nation’s banks to a ‘stress test’ and concluded that with a little additional capital, the country’s largest financial institutions could all withstand the recession.

Everywhere economists looked, they saw economic numbers that were ‘less bad.’  What’s more, the numbers weren’t only ‘less bad,’ they were ‘better than expected.’

The general consensus was that the worst was behind us.

More Bad and Worse than Expected

Unemployment, exports, retail sales…with each passing month, they were all ‘less bad.’  The U.S Commerce Department even discovered that the whole U.S. economy was ‘less bad.’  So much so, they revised first quarter economic growth upward from minus 6.1 to minus 5.5.

Things were all going to plan.  Soon, everyone knew, this bothersome downturn would be behind us and we could all get on enjoying what FDR called, “the more abundant life.”

The economic data even said so. 

After losing 741,000 jobs in January 2009, each following month the number of job losses were ‘less bad.’  There were 681,000 job losses in February, 652,000 in March, and 519,000 in April.  Then in May, the number of job losses weren’t just ‘less bad,’ they were an even ‘better than expected’ 322,000.

But last Thursday something astonishing and unexpected happened… 

The Labor Department reported job losses for June that weren’t ‘less bad’…they were ‘more bad.’  And not only were they ‘more bad’…they were ‘worse than expected.’ 

According to the Labor Department, there were 467,000 nonfarm payrolls job losses in June…bringing the unemployment rate up to 9.5 percent.  On the news, the stock market panicked into the holiday weekend, dropping 223 points.  And suddenly the declaration of a ‘green shoots’ recovery became nothing more than guff and hot air.

Misreading the Economy…More or Less

The $787 billion economic stimulus bill President Obama signed into law in February was supposed to create jobs and limit the unemployment rate to 8 percent.  Yet, since then, the unemployment rate’s climbed to 9.5 percent and over 1.3 million jobs have vanished.

“The truth is,” said Vice President Joe Biden over the weekend, “we and everybody else misread the economy … We misread just how bad the economy was.”

Apparently it was more or less, ‘more bad’ as apposed to more or less, ‘less bad.’ 

Since the economic downturn began in December 2007, the U.S. economy’s lost 6.5 million jobs.  What’s more, the current downturn has eliminated the accumulated payroll growth of the last nine years.

Heidi Shierholz, an economist with the Economic Policy Institute, noted that “this is the only recession since the Great Depression to wipe out all the jobs growth from the previous business cycle.”

Perhaps that is because this isn’t a recession at all; but rather, as we’ve long contended here at the GDO…it’s a depression.


M.N. Gordon
Great Depression Online

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