The number "5 million" doesn't seem like much in a world of billions and trillions.

But it's a lot when you're talking about the U.S. job market. That's because five million represents the number of jobs the U.S. economy would have to create to achieve what the U.S. Department of Labor calls "full employment."

The manager of the world's largest bond fund, PIMCO, has laid-out in unambiguous terms the problem facing the global economy in the quarters ahead: The U.S. and global recession will worsen -- with a "second wave" of turmoil -- unless governments increase fiscal stimulus and spending plans.

"The economic setback is still in its early stages," Koyo Ozeki, head of Asia-Pacific credit research at Pimco's Tokyo office, wrote in a report published on PIMCO's web site. "Any further decline in housing prices could accelerate the downturn, intensifying the pernicious feedback loop and possibly leading to a second wave in the financial crisis in the next six to 12 months."

When they had the capacity to do so, they refused to increase production, preferring instead to reap ever higher revenue - - essentially extracting as much money for energy as possible out of the U.S. and global economies.

The result: Oil Shock III - - aided by the leverage financing boom - - which sapped disposable income, helping trigger the current U.S. and global recessions.

OPEC miscalculated and simultaneously choked-off oil demand - - and, once again, 'killed the goose that lays the golden egg.'

Now global oil demand is falling - - including real consumption declines in the United States, and, incredibly, flat demand in emerging markets. And the price of oil? Despite a record $100 plunge in one year, it continues to fall - - currently trading around $41 per barrel.

It's not as bad or as large as it looks is how one economist put it, but try convincing U.S. taxpayers of that.

The U.S. budget deficit soared to a record $485.2 billion in the federal government's fiscal first quarter, (October-December 2008), the U.S. Treasury Department announced, as the government implemented its financial system stabilization plan.

The December 2008 budget also increased to $83.6 billion from $48.3 billion a year ago.

Further, the deficit is on-track to total more than $1 trillion this year, fiscal 2009. The Congressional Budget Office (pdf) is projecting a $1.2 trillion deficit for the current fiscal year.

In addition, the $485.2 budget record for fiscal Q1 already exceeds last year's budget deficit for the full year of $454.8 billion.

Record-high U.S. budget deficit? Declining corporate earnings? Unemployment likely to rise through at least May?

Don't mention those potential scenarios to the foreign exchange, as currency traders sent the dollar rocketing higher versus the euro early Monday, up 3 cents -- an enormous move in the currency market -- on the belief the Obama Administration's fiscal stimulus package will help the U.S. economy recover from the recession.

The dollar strengthened 3 cents to $1.3566 versus the euro and rose 1.64 yen to 93.50 versus Japan's yen. The dollar has rose 3 cents to $1.1097 versus the Swiss franc, and strengthened about one-half cent to $1.4494 versus the British pound.

Currency trader Andrew Resnick told BloggingStocks Monday trading desks are back at full strength after the holiday and they're clearly signaling that they expect the worst of the U.S. recession to be over by mid-year.

Manufacturing conditions in the Philadelphia region deteriorated in October, signaling that the U.S. economic slowdown undoubtedly is worsening.

The Philly Fed Diffusion Index fell to -37.5 in October from a +3.8 in September, the Federal Reserve Bank of Philadelphia announced Thursday (warning: link is a PDF file).

Further, it was the lowest reading for the Philly Fed index in almost two decades.

Readings below zero indicate a contraction. Economists surveyed by Bloomberg News had expected the October index to fall to -10.0.

The new orders index fell to -30.5 from +5.6, while the shipments index declined to -18.8 from +2.6. Also, the current employment index fell 17 points to -18.0.

Economist David H. Wang told BloggingStocks Thursday the Philly Fed statistic does not bode well for the U.S. economy. "This is a horrible number. Manufacturing is weakening, the recession is worsening, and lay-offs are likely to continue at a steady pace, as a result" Wang said. "We're seeing a weakening of both domestic and international demand, which suggests at least a two-quarter recession. Given this level of manufacturing decline, we will be quite fortunate to have just a two-quarter recession."

Economic Analysis: One bright spot in the October report -- inflation pressures moderated during October. The prices paid index fell 24 points to 7.2 from 31.5, and has now fallen 68 points over the past three months. Still, some may interpret the lessening inflation as a sign of reduced pricing power in the system, which would be another negative for the economy, if the trend continued.

By almost all accounts, the defeat of the bailout / rescue bill stunned those both inside the beltway, on Wall Street, and across the nation.

Many political analysts projected that the bill would be approved by the U.S. House of Representatives by about a 80-100 vote margin. The reality: bill defeated, 228-205 and the stock market plunged a big seven zero zero and more.

Public policy analysts, professional and otherwise, will spend ample time investigating the reasons why the bill failed, but in a crisis such as this one, congressional leaders, save for reviewing their mistakes, do not have time for the stuff of graduate seminars in public policy: they need to get a rescue bill passed.

Now what?

Well first, don't panic. As George Bailey (Jimmy Stewart) said during the bank run on the the Bailey Building & Loan in the movie, It's A Wonderful Life, "Now just remember that this thing isn't as black as it appears. Now, we can get through this thing all right. But we've, we've got to stick together."

With the latest credit market jolts leading to Lehman Brothers Holdings Inc. (NYSE: LEH) decision to file for bankruptcy and the Bank of America Corporation's (NYSE: BAC) move to acquire Merrill Lynch & Co., Inc. (NYSE: MER), it may seem like a misapplication of analysis to discuss oil.

Not so, says one energy trader. "Oil can be a factor in righting the markets and the U.S. economy," Energy Trader Jim Dietz told BloggingStocks Monday afternoon.

How so? "A substantially lower oil price will increase disposable income, help put a lid on rising business costs for transportation and heating, and lower the U.S. trade deficit. These are all good things, shots in the arm for the U.S. economy," Dietz said. "And right now we'll take any shot in the arm we can get." Dietz added that he was currently short oil, with a monthly contract.

Oil Monday afternoon was down $4.25 to $96.93 per barrel, continuing a two-month trend of lower oil prices. Oil hit a record high of $147.27 per barrel in July 12.

Initial U.S. jobless claims increased 25,000 to 384,000 for the week ended June 7 -- considerably worse the consensus estimate, the U.S. Labor Department announced Thursday. Claims for the previous week were revised 16,000 lower to 359,000.

Economists surveyed by Bloomberg News had expected this week's initial jobless claims to total 365,000.

Also, the four-week moving average increased 2,500 to 371,500. Economists view the 4-week average as a better indicator of unemployment conditions, as it smooths-out anomalies for strikes, holidays, or other idiosyncratic events.

Economist Peter Dawson called the weekly rise in unemployment claims troubling. "Falling claims must occur before the economy can rev back up," Dawson said. "The data indicates the economy is not moving in the right direction. Job conditions are not improving."

In the final analysis, the European Central Bank may not attend the Fed's rate cut party, after all.

ECB President Jean-Claude Trichet said Thursday the ECB may increase interest rates as soon as next month to check euro-zone inflation, Bloomberg News reported Friday.

On Thursday, the ECB kept its key, short-term interest rate at 4%. That pause, combined with the U.S. Federal Reserve's rate cut pause, suggests that the world's two strongest central banks believe there may be enough monetary stimulus in the system to avert a regional recession prompted by the worst housing slump in the United States in more than 15 years.

Trichet: the hawk of hawks

The Fed has cut short-term interest rates by 325 basis points to 2% since September 2007. Further, while some economists had forecast a mild ECB easing in mid-2008 to stimulate euro-zone growth and avert a regional recession, throughout the Fed's easing cycle Trichet has maintained his notoriously hawkish stance and has repeatedly underscored the need to check oil-fed inflation in Europe.

Inflation is running about at 3.1% annual rate in the euro-zone, and May data indicated inflation continues to trend higher. Trichet's Thursday comments represent the most specific signal to-date from the ECB that the bank's bias concerns checking inflation, not stimulating growth, given its read on economic conditions.

Economic Analysis: Trichet's stance is not surprising, but in this case he may be hitting the monetary policy brake too soon. The legendary inflation hawk would dearly love to get out of this economic slowdown without an interest rate cut, but it may not be possible. Economic growth in the euro-zone's border economies is slowing, while the U.S. economy is barely showing a pulse. If the euro-zone falls into a recession, Trichet's hawkish stance will be viewed as a needless -- and avoidable -- monetary policy error.

Are the world's major central banks signaling an end to interest rate cut cycle?

Officials from three of the four major central banks - - all except the Bank of Japan - - have recently signaled their concern about rising inflation stemming from rate cuts implemented to stimulate demand following the credit crisis, Bloomberg News reported Friday. The U.S. Federal Reserve, Bank of England, and European Central Bank have commented, in various phraseologies, their concerns about prices and business costs.

Economist David H. Wang told BloggingStocks investors/traders can ignore comments out of the ECB, but not the Fed's or the BOE's - - which translates to at least a rate cut pause.

"[ECB President Jean-Claude] Trichet has been on the wires commenting on the need to contain prices, but he's been doing that since, I think, 1962, so ignore that," Wang said. "But the Fed comment blitz we had earlier this week and the Bank of England comments about rising prices I think are clear signals of a rate cut pause. The central banks have implemented enough monetary stimulus, for now."

The U.S. trade deficit unexpectedly widened in February 2008, the U.S. Commerce Department announced Thursday, as automobile and machinery imports offset record exports.

The February 2008 trade deficit increased to $62.3 billion - - its highest total since November 2007 - - and an increase over January 2008's revised total of $59.0 billion.

Economists surveyed by Bloomberg News had expected the February 2008 trade deficit to be $57.5 billion.

Excluding services, imports increased 3.5% to $180.2 billion, while exports rose 2.4% to $104.7 billion.

Exports shine

On the bright side, U.S. exports rose for the 12th consecutive month, representing one of the few solidly-performing dimensions of the otherwise anemic U.S. economy. Economists say the weaker U.S. dollar is assisting export sales, as it makes U.S. goods less expensive abroad. On Thursday, the dollar also fell to a record low $1.59 versus the euro.

Another bright point: the U.S. petroleum deficit decreased to $32.5 billion, its first decline in eight months. A decline in the quantity of oil imported offset a record oil price of $84.76 per barrel.

The U.S. economy shed 80,000 jobs in March 2008, the U.S. Labor Department announced Friday, as the world's largest economy continued to weaken amid a protracted, deep housing slump.

Economists surveyed by Bloomberg News had expected the U.S. economy to shed 50,000 jobs in March 2008. The U.S. lost a revised 76,000 in February 2008, up from the earlier 63,000 estimate, the Labor Department said.

Unemployment rate surges

Meanwhile, the unemployment rate surged to 5.1% in March 2008 from 4.8% in February 2008. It's the highest unemployment rate since September 2005. Economists surveyed by Bloomberg News had expected the March 2008 unemployment rate to increase to 5.0%.

Also, the number of unemployed persons increased by 434,000 to 7.8 million in March 2008. Since March 2007, the number of unemployed persons has increased by 1.1 million, and the unemployment rate has risen by 0.7 percentage points. The average work week lengthened to 33.8 hours in March 2008 from 33.7 hours in February 2008.

The trade deficit declined 6.9% to $58.8 billion in December 2007, as exports rose and imports fell, the U.S. Commerce Department announced Thursday. The figure was below the $61.6 trade deficit estimate.

For 2007, the trade deficit fell 6.2% to $711.6 billion, down from the record $758.5 billion recorded in 2006.

Monthly export record

December 2007 exports rose to a record $144.3 billion while imports declined for the first time in four months to $203.1 billion. Export activity remained strong to China, the Asia region, and South America. Exports of industrial supplies, civilian aircraft, capital goods, and consumer goods were particularly strong.

Economist Steve Affinito told BloggingStocks Thursday that in addition to a weaker dollar, which makes U.S. exports cheaper, the nation's exporters are demonstrating that they can find ways to maintain / increase international sales, even amid more-challenging economic conditions.

Trade: U.S. bright spot

"Across the board, companies are performing well on the export front, as U.S. goods, particularly high-value added items like aircraft, remain very competitive," Affinito said. "For the longest time trade had been a drag on U.S. GDP, but now it's starting to be a positive, which is good news for U.S. companies, employees, and the U.S. economy. The improving trade deficit picture is one of the few bright spots regarding the U.S. economy right now."