The Associated Press reports that jobless claims -- at 455,000 -- hit a six-year high in July. Analysts underestimated the total by 25,000, as they forecast 430,000 such claims. When combined with this morning's disappointing July retail sales results, the economy appears to be doing worse than experts expected.
AP reports that many companies announced layoffs recently. These include General Motors Corp. (NYSE: GM), Weyerhaeuser Co. (NYSE: WY), Starbucks Corp. (NASDAQ: SBUX) and Bennigan's restaurants. More such layoffs are likely to be announced as the economy prepares a recessionary banquet of woes for the presidential candidates.
The lesson for those interested in economics is pretty clear. You can create the illusion of prosperity by borrowing lots of money. If someone lends me $100 million and I buy a big estate on Long Island, people will think I am rich. But if I can't pay back the loan, the bank will kick me out of the house and suddenly I won't look so well off.
That's what the banks are doing now across wide swaths of the economy. And it will be years before the mess is cleaned up.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter
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Reader Comments (Page 1 of 1)
8-07-2008 @ 12:31PM
william lindblad said...
"That's what the banks are doing now across wide swaths of the economy. And it will be years before the mess is cleaned up."
Astute observation.
Unfortunately, the banks never intended to be in the REAL real estate business. Now they are the homeowner and are responsible for maintenance, taxes and insurance, so their cost does not end with the write down and the legal cost to foreclose.
The resulting credit crunch and fuel at high cost for the last six months are the obvious cause of the layoffs. More are in the cards.
The fed blew it, they should have raised a 1/4 and kept oil on a down slide. Bernanke is a lousy general, he had the enemy on the run and did not pursue. Brings to mind McClellan.
8-09-2008 @ 12:53PM
Adrian said...
Two new job sites where just added to the About.com top ten employment site list:
http://www.linkedin.com
http://www.realmatch.com
Good luck