The Labor Department reported that initial claims for unemployment rose to 551,000 from 534,000 in the previous week, much more than the 5,000 economists had expected. The number remaining on the rolls fell by 70,000 to 6.09 million, but this statistic likely is unreliable because of all the people who have exhausted their benefits.

Congress has added 53 weeks of benefits on top of the the usual 26 weeks. Now with thousands of people having exhausted their benefits, Congress is considering extending benefits for another 13 weeks.

The deflation drumbeat continues. As prices drop, businesses produce less and they cut the people doing the producing. With the exception of stocks and oil, it seems that nowhere are prices falling faster than in houses -- slashing $10 trillion in consumer wealth. And the spike in foreclosures adds more supply to the market for houses, just as demand keeps falling.

The foreclosure forecasts and initial unemployment claims figures released today are indeed sobering. The spike in foreclosures is expected to come from Pay Option mortgages, which let borrowers pay less than they owe each month and add that amount into the principal. But the Pay Option resets the rate upward when the new principal rises above 110% of the original amount.

Thanks in part to a 63% -- or $1,053 -- monthly increase in the current $1,672 average payment, foreclosures are expected to rise 125% to 3.6 million by 2010 over the three million that have occurred since 2006. Meanwhile, initial applications for jobless benefits rose to 573,000 in the week ending December 6 -- 9% more than the expected 525,000 -- from 515,000 the week before.

If this is what an Ownership Society is all about, maybe it's time to forget about Ownership and create an Affordership Society where people live within their means instead of borrowing to buy things they can't really afford.

Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.

The Philadelphia Fed Survey of Manufacturing in the tri-state area came in at -12.7. This was an improvement from the prior month's reading of -16.3, and slightly ahead of expectations. Initial unemployment claims were 432,000, which was also an improvement from the prior week's reading of 445,000, and better than expected.

Despite these improvements, these numbers are still quite negative. We may be in the process of forming a short-term bottom. Much of this will depend upon what happens to oil prices. If oil prices stabilize or continue to drop in the near future, this will offer some much needed relief to our consumer-driven economy. However, if the recent drop in oil is only a minor correction, the economic news will get worse.

• Even if oil stabilizes and if the economy starts to form a bottom, I do not believe that we will experience a substantial rebound. There are too many economic pressures which will not be resolved overnight:
  The housing crisis is very similar to the one experienced in the late 1980s and early 1990s. This took a decade to resolve.
• The current banking and credit crisis also resembles the Savings and Loan debacle of that earlier era. This eventually required massive intervention by the Federal government in the form of the Resolution Trust Corporation (RTC) to repair the financial system.

Those people expecting a quick recovery like 1998 will be sorely disappointed.

Doug Roberts is the Founder and Chief Investment Strategist for ChannelCapitalResearch.com, and is the author of Follow the Fed® to Investment Success: The Effortless Strategy for Beating Wall Street. He previously held executive positions at Morgan Stanley Group and Sanford C. Bernstein & Co.

There was a double play in economic reports this morning, and the news was not good. CPI and Initial Jobless Claims both came in higher than expected. Equity futures turned negative across the board after the news was released.

CPI was expected to come in at 0.4% but came in at 0.8% for July. This was still less than the 1.1% number for June. The problem is that Core CPI was 0.3%, ahead of the 0.2% that was expected. This was the same as the 0.3% reported for June and indicates that inflation is not limited only to oil and is working its way into the system.

There was no relief on the employment front either. Initial jobless claims for the week came in at 450,000, which were ahead of expectations. This was down slightly from the prior week but still indicates an extremely weak employment situation.

The focus now shifts to oil, which has recently experienced a substantial decline from its recent peak price. If oil prices continue to decrease, or at least stabilize at this lower price, it takes pressure of the Federal Reserve to raise interest rates. The Fed realizes that the U.S. economy is far too fragile to raise rates. As long as oil prices remain tame, the Fed can minimize the recent CPI numbers and claim inflationary pressures are easing.

However, if oil rallies again, the Fed is in a very uncomfortable position. In addition, a rise in oil prices would not only increase inflationary pressures but also weaken an already battered consumer. For these reasons, the focus is now on oil!

Doug Roberts is the Founder and Chief Investment Strategist for ChannelCapitalResearch.com, and is the author of Follow the Fed® to Investment Success: The Effortless Strategy for Beating Wall Street. He previously held executive positions at Morgan Stanley Group and Sanford C. Bernstein & Co.