The U.S. has experienced a surprise drop in jobs in January for the first time since August 2003. Some economists have estimated that the U.S. had entered recession already in December of 2007. The recent GDP statistics of an abysmal 0.6% growth in the last quarter of 2007, as well as the weak 2% rate in consumer spending in the last quarter, certainly could back that up. Now, this 17,000 loss of jobs in January, which none of the 80 economists surveyed by Bloomberg had predicted (the median called for an addition of 70,000 jobs according to Briefing.com), further increases the odds the economy will fall into a recession. That is, if it hasn't already.
This, in turn, makes the odds of another Federal Reserve half a point interest rate cut next month even higher -- up to 82% from 68% -- as combined with a tighter credit, a housing correction and a stumbling stock market, are all signs that the U.S. economy is at risk.
On the plus side, unemployment rate declined to 4.9% from 5% in December and revisions for previous months increased total jobs gained. Also, hourly wages rose less than forecast, increasing 4 cents, or 0.2%, on average to $17.75 in January. Wages were up 3.7% for the whole of 2007. Economists had expected a 0.3% increase for the month and a 3.9% increase for the 12-month period.
The market, which is having another topsy-turvy session today, can't decide if to cheer the Microsoft-Yahoo! news, or to moan the state of the economy. Even with the odds of a recession increasing following this employment report, questions remain of how long the recession will be and how deep, especially considering the recent 1.25% rate cut by the Fed and the fiscal stimulus plan (which hopefully will eventually come to pass).
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Reader Comments (Page 1 of 1)
2-01-2008 @ 3:23PM
PHIL said...
"...from 1976 to 1984 the (cost of living adjustment) increases in Social Security were 75% over that period. If you made 10k in '76, you were getting 17.5k in '84. Similarly, pensions and job incomes were inflated as well. By the end of the inflation cycle people had higher incomes to pay off their (mostly) fixed debts. Now, in the last eight years (cost of living adjustment) has been 25% total. This is way below how high prices have gone for the average person."
It seems simple doesn't it? Yet none of the main stream media outlets seem to want to address the real issue. The talking heads expect you to believe that inflation is running at an acceptable annual rate of 2.6%. Do you believe that? Are you paying just $2.60 more for every $100 worth of groceries you purchased last year? Are you paying just $2.60 more for every $100 worth of heating fuel? Is just $2.60 more being deducted from your paycheck for every $100 worth of health insurance premium you paid last year? I could go on and on, but I'm sure that you get the idea.
The lesson here is simple, and I know that all of you will understand it. Someone has been lying to you about the increases to your cost of living. I probably don't need to explain that to you, because you have a bank account and you pay your own bills. I'm sure that you're feeling the pressure all too well.
Even now, the major media outlets expect you to believe that the housing market is crashing because banks and borrowers all got together and did something stupid. The truth of the matter is that we're just plain running out of cash down here on the lower rungs of the ladder.