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. He has no financial interest in the securities mentioned.

MOST NOTEWORTHY: Weyerhaeuser Co (WY), Jackson Hewitt Tax Service Inc (JTX), Hewlett-Packard Co (HPQ) and Coldwater Creek Inc (CWTR) were some of today's more noteworthy upgrades:

• UBS upgraded shares of Weyerhaeuser Co (NYSE: WY) to Neutral from Reduce citing the stock's recent weakness.

• Morgan Stanley upgraded shares of Jackson Hewitt Tax Service (NYSE: JTX) to Equal Weight from Underweight on valuation as the firm believes yesterday's sell-off was overdone.

• Hewlett-Packard Co (NYSE: HPQ) was upgraded to buy from Neutral at American Technology on valuation.

• Coldwater Creek (NASDAQ: CWTR) was upgraded to Buy from Neutral at Bank of America based on the company's favorable risk/reward.

OTHER UPGRADES:

• BB&T upgraded shares of Pacer International, Inc (NASDAQ: PACR) to Buy from Hold citing the company's operational changes and new $100M shares' repurchase.

• Goldman upgraded Spherion Corp (NYSE: SFN) to Neutral from Sell.

• SkyWest, Inc (NASDAQ: SKYW) was upgraded to Neutral from Underweight at Prudential.

• Bear Stearns upgraded shares of Sonic Corp (NASDAQ: SONC) to Outperform from Peer Perform on expectations of an acceleration in partner drive-in same store sales and system wide unit expansion.

• Citigroup upgraded Corinthian Colleges, Inc (NASDAQ: COCO) to Buy from Hold after a company visit as the firm believes expectations are finally low enough and recent initiatives are taking hold. Further, Citigroup believes takeover speculation will limit downside as their analysis suggests an LBO could work.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).