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I am only going to post a small amount of this article as it is VERY LONG. It is a very interesting read, so I encourage you to follow the link and read the entire article.
Massive Job Loss in March Shows Businesses Girding for Depression
Monday, April 06, 2009
Commentary by Peter Morici, Ph.D.
The Labor Department reported that the economy lost 663.000 payroll jobs in March. The economy is shifting to permanently lower levels of production and employment, as the recession nears turns into a depression.
Unemployment reached 8.5 percent. Adding in discouraged adults who have left the labor force and part-time workers who would prefer to work full time, the real unemployment rate is closer to 17 percent.
Simply, investors and employers lack confidence in the overall likely effects of Treasury Secretary Geither’s plans to stabilize banks and President Obama’s stimulus package and budget proposals.
Lacking confidence that the demand for what Americans make and sell will recover significantly, anytime soon, businesses are girding for a long siege -- slashing employment and dividends and engaging in other hunkering down. They are preparing for a depression -- and the eclipse of American economic and political leadership in the world.
The economy has shed 5.1 million jobs since December 2007, as the full weight of the banking crisis, imported oil, and the trade deficit with China punish employment in autos, other manufacturing, construction, and the broader economy. These factors drive down employment, wages, and consumer spending and create a negative feedback cycle that threatens to cast the U.S. economy into something akin to Japan’s lost decade -- or worse.
Fundamental structural problems—poorly managed banks, wasteful uses for imported oil, and the lopsided rules for competition with China and other Asia mercantilists—have come home to roost and threaten to topple American prosperity.
Unemployment is headed from its current 8.5 percent to 10 percent. In 2009, unemployment and the trade deficit are reducing GDP by some $400 billion or about $2,500 per worker.
A Permanent Contraction and Double Digit Unemployment
The economy contracted at about a 6.3 percent annual rate in the fourth quarter of 2008, and will contract further through most of 2009. The huge stimulus package will lift GDP a few percentage points in 2010 and 2011, but it will likely not prove enough to halt contraction over all. Even if the economy grows for a time, thanks to stimulus spending, it will fall back into recession.
The stimulus package will temporarily add about 2 to 2.5 million jobs, and only slow the pace of job losses. Unemployment will shoot past 10 percent once the effects of stimulus spending wears off in 2012, and perhaps sooner. Increasingly, the economic slowdown looks more like a depression than a recession.
Recessions are like stock market corrections—after a time, equity prices rebound without government intervention. Federal Reserve interest rate cuts together with stimulus spending and tax rebates shorten recessions and ease their impact. However, those policies will not end the current slump, because it is grounded in fundamental structural dysfunctions in U.S. banking, energy, and trade policies -- which in turn cause dysfunctionality in the overall world economy..
A depression, unlike a recession, is not self-correcting. The economy shifts down to permanently lower levels of production and sales, high unemployment rates become chronic, and federal deficits become narcotic, that is they dull the economic senses but don’t cure the disease.
Employers in high tech, retailing, manufacturing, publishing, and elsewhere are not temporarily furloughing workers; rather they are restructuring employment downward, permanently, for what they expect to be smaller markets for their products for several years.
Without systemic reforms, the more than six million jobs lost in 2008 and 2009 will not be regained for many years. The current crisis requires quick and bold action, and it requires more than a politically conceived stimulus package. It also compels radical changes in how Washington regulates banks and fosters international competition and wealth creation.
Unfortunately, the stimulus package is poorly structured and will prove too expensive for the 2 to 2.5 million jobs it creates for two years, which then disappear again. The banking and trade policies President Obama is pursuing will drive the U.S. economy deeper in debt to Middle East oil exporters, China and other foreign creditors, thereby throwing the economy deeper into recession. These policies will ultimately destroy as many as 10 million jobs before the calamity has completely run its course by the middle of the next decade.
The Face of a Modern Depression
The economy need not reach the depths of the Great Depression to encounter permanent stagnation and evoke the pathos of vanished dreams—leaving older Americans without retirement incomes and scrounging for menial jobs, and young workers without hope of promising careers.........
Massive Job Loss in March Shows Businesses Girding for Depression
Monday, April 06, 2009
Commentary by Peter Morici, Ph.D.
The Labor Department reported that the economy lost 663.000 payroll jobs in March. The economy is shifting to permanently lower levels of production and employment, as the recession nears turns into a depression.
Unemployment reached 8.5 percent. Adding in discouraged adults who have left the labor force and part-time workers who would prefer to work full time, the real unemployment rate is closer to 17 percent.
Simply, investors and employers lack confidence in the overall likely effects of Treasury Secretary Geither’s plans to stabilize banks and President Obama’s stimulus package and budget proposals.
Lacking confidence that the demand for what Americans make and sell will recover significantly, anytime soon, businesses are girding for a long siege -- slashing employment and dividends and engaging in other hunkering down. They are preparing for a depression -- and the eclipse of American economic and political leadership in the world.
The economy has shed 5.1 million jobs since December 2007, as the full weight of the banking crisis, imported oil, and the trade deficit with China punish employment in autos, other manufacturing, construction, and the broader economy. These factors drive down employment, wages, and consumer spending and create a negative feedback cycle that threatens to cast the U.S. economy into something akin to Japan’s lost decade -- or worse.
Fundamental structural problems—poorly managed banks, wasteful uses for imported oil, and the lopsided rules for competition with China and other Asia mercantilists—have come home to roost and threaten to topple American prosperity.
Unemployment is headed from its current 8.5 percent to 10 percent. In 2009, unemployment and the trade deficit are reducing GDP by some $400 billion or about $2,500 per worker.
A Permanent Contraction and Double Digit Unemployment
The economy contracted at about a 6.3 percent annual rate in the fourth quarter of 2008, and will contract further through most of 2009. The huge stimulus package will lift GDP a few percentage points in 2010 and 2011, but it will likely not prove enough to halt contraction over all. Even if the economy grows for a time, thanks to stimulus spending, it will fall back into recession.
The stimulus package will temporarily add about 2 to 2.5 million jobs, and only slow the pace of job losses. Unemployment will shoot past 10 percent once the effects of stimulus spending wears off in 2012, and perhaps sooner. Increasingly, the economic slowdown looks more like a depression than a recession.
Recessions are like stock market corrections—after a time, equity prices rebound without government intervention. Federal Reserve interest rate cuts together with stimulus spending and tax rebates shorten recessions and ease their impact. However, those policies will not end the current slump, because it is grounded in fundamental structural dysfunctions in U.S. banking, energy, and trade policies -- which in turn cause dysfunctionality in the overall world economy..
A depression, unlike a recession, is not self-correcting. The economy shifts down to permanently lower levels of production and sales, high unemployment rates become chronic, and federal deficits become narcotic, that is they dull the economic senses but don’t cure the disease.
Employers in high tech, retailing, manufacturing, publishing, and elsewhere are not temporarily furloughing workers; rather they are restructuring employment downward, permanently, for what they expect to be smaller markets for their products for several years.
Without systemic reforms, the more than six million jobs lost in 2008 and 2009 will not be regained for many years. The current crisis requires quick and bold action, and it requires more than a politically conceived stimulus package. It also compels radical changes in how Washington regulates banks and fosters international competition and wealth creation.
Unfortunately, the stimulus package is poorly structured and will prove too expensive for the 2 to 2.5 million jobs it creates for two years, which then disappear again. The banking and trade policies President Obama is pursuing will drive the U.S. economy deeper in debt to Middle East oil exporters, China and other foreign creditors, thereby throwing the economy deeper into recession. These policies will ultimately destroy as many as 10 million jobs before the calamity has completely run its course by the middle of the next decade.
The Face of a Modern Depression
The economy need not reach the depths of the Great Depression to encounter permanent stagnation and evoke the pathos of vanished dreams—leaving older Americans without retirement incomes and scrounging for menial jobs, and young workers without hope of promising careers.........
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