Two economic reports just out suggest that the fundamentals may not be solid. Jobless claims spiked and durable goods orders were worse than expected. People without jobs have a harder time supporting economic growth -- they bear two-thirds of the burden for that. And if businesses -- which are big buyers of durable goods -- shoulder the other third, it would not be too surprising if GDP was shrinking.
Jobless claims increased by 32,000 to 493,000 in the week that ended September 20 -- 50,000 claims were due to Hurricanes Ike and Gustav -- from a revised 461,000 the prior week. Economists in a Bloomberg News survey got it wrong -- expecting a drop to between 450,000 from 455,000. Through August, the economy has lost 605,000 jobs. It is likely that more job losses are on the way.
Meanwhile a 4% drop in durable goods bookings was more than twice the drop that economists had projected. According to Bloomberg News, 74 economists it surveyed expected a 1.9% decline after previously reporting a 1.3% increase in July. Since companies generally take out financing to purchase durable goods, the clenching of credit markets could be contributing to the larger than expected decline.
The right thing to do is to encourage the natural process of cleaning the excess out of the bubble economy. The sooner we get through this pain, the faster we can start to rebuild.
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)
9-25-2008 @ 11:01AM
w tim said...
Just pass the bill, tax payers are already in pain. Every business that goes down a tax payers lose a job and there goes another home with new issue. The fight about who's wrong is in the way. The fight to be rite is in the way. Come together pass the bill cut putting America on hold. 700000000000 is a number a repairing number, a number to say we can fix this or get close to fixing it. The money can be allocated once it's out there , however the time is now. Tomorrow is another day and as an Americans, we learn how to fight for life; but the fight for life can come to a end then we are lost of the time we had. No one specific person will gain but the world will be one step forward in where we are going.
The key is looking ahead and not forgetting yesterday.
9-25-2008 @ 11:07AM
Dan Barnett said...
So your prescription, Dr. Cohan, is to let the disease run its' course & hope the patient gets better?
9-25-2008 @ 11:31AM
ynot said...
Finally someone who has it right. The market is no longer based on fundamentals and the bailout is going to make things worse. Today is a good example of this fact. Unemployment up, durable goods down, housing prices still dropping and G.E. loweres forcast and the market is up. The market needs to go down to its proper level where ever that is and then we start to rebuild.
9-25-2008 @ 5:48PM
tom said...
i hear from all the experts on wall street who are for this ripoff of the taxpayer for the $700B bailout.
the only people who want this bailout to go through are those who have signifcant money in stocks, bonds etc.
they say it is good for the taxpayer.
well the people i speak with, middle class america who will fund this lining of the wallets for corporate america are saying they do not want this ridiculous bailout.
we are extremely angry that this is even being discussed!!
president bush is attempting to pull the wool over our eyes one last time before he sails off into the sunset.
something smells fishy here with the bush administration.
of course the talking heads on msnbc and other stations want it. of course the experts who were called in to "discuss" this issue want it.
they will all profit from it. you think we are so stupid to fall for this.
well i'm not. i'm not going to stand for it. you think i care that your portfolio may suffer without this bailout?!?!
tough. you made your bed.
every politician that votes (forces) this issue into law will be voted out of office!!!
hear the american people!!!!! represent the american people and vote against this absolute ripoff of the american people!!!!
here's an idea!!!! do nothing instead. most politician are good at that anyway!!!!!!!!!!!!!!!!
9-25-2008 @ 2:52PM
Uhohchongo said...
Let the witch hunts commence:
1st up-Greenspan and the Fed
I wrote an editorial 4 years ago stating that the Fed needed to raise interest rates immediately before they destroyed our economy. I saw the feeding frenzy in real estate and knew that middle class Americans were in store for a huge bloodbath.
How could I foresee a lot of this chaos with only a minor in Economics? LOL