Lots of discussion about the economy; is it good or is it bad, are we heading in the right direction or are we heading in the wrong direction, and last but certainly not least, no matter whether it is good or bad, right or wrong direction, how long can we expect the current situation to last? Depending on who you talk to you will get as many answers as you have people to talk with. Probably the 4 most important indicators are inflation, jobless claims, unemployment percentage and housing (starts and foreclosures). Let’s, in brief, look at each one of these indicators.
Inflation risk: in the short term (5 yrs out) the risk of deflation is probably much more significant than inflation. The reason is that we are a credit based economy; everyone borrows money, individuals, businesses, the government, everyone does it. Credit is currently plunging meaning that businesses won’t expand and hire, individuals don’t use their credit cards or buy houses and cars therefore business don’t sell as much and must lay off people, and the government gets less revenue to spend thus those in government jobs or government contracts get their benefits and pay cut or they get terminated. All of this effects prices and causes deflation. Read Mish “Inflation Expectation Noise” at http://globaleconomicanalysis.blogspot.com/2010/10/inflation-expectation-noise.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29&utm_content=Google+Feedfetcher.
Unemployment claims: claims are down about 11,000 from a 4 week moving average but because of their volatility it is better to look at moving averages. The 4 week average is still close to the peak compared to the last two recession telling us that there is a persistent weakness. There has been no improvement for the last 10 months excepts for the fake numbers that the Obama administration is putting out. No one hiring because there is no consistency in the Obama government; no one knows what he will do next and therefore no one is willing to risk what capital they have. Over the next 12 months watch for local, state, and federal employee layoffs or at least cut back in benefits. They have been out pacing the private sector but this will soon come to an end. Retail sales have been improving at a very low rate. Holidays sales this year could turn out to be a disaster for retailing. Thanksgiving is late this year cutting the holiday shopping season short. Christmas day is on Saturday and this is never good. All this is bad news for employment figures. Read for a complete discussion: http://globaleconomicanalysis.blogspot.com/2010/10/weekly-claims-drop-to-445000-4-week.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29&utm_content=Google+Feedfetcher
Housing numbers: nothing but bad news here; the projected foreclosure rate is expected to be 20% for the coming year. What more do you need to know.
Unemployment rate: recent Gallup survey shows that unemployment jumped from 9.4 to 10.1% in September. Couple this with the underemployment rate of 18.8% and you have people who are in real financial difficulties. Gallop concludes the following: Regardless, the sharp increase in the unemployment rate during late September does not bode well for the economy during the fourth quarter, or for holiday sales. In this regard, it is essential that the Federal Reserve and other policymakers not be misled by Friday's jobs numbers. The jobs picture could be deteriorating more rapidly than the government's job release suggests. http://www.gallup.com/poll/143426/Gallup-Finds-Unemployment-September.aspx
Again, what more do we need to know before we realize that we are in big trouble. Who do we blame for this? Rush Limbaugh says it is our “Jackass” president, B.H. Obama; that he is an economic illiterate, or that he is doing this intentionally because he is a Marxist anti-capitalist. I don’t know about all of this; but I can be certain in saying he is doing nothing to help the situation. How long can you expect the bad to hang around; the optimists are saying 5 years, the pessimists say it could be 10 years or longer; that gives you an average of 7.5 years or longer. Can you survive that long?
Have A Great Day
Skandalon
Follow My Blog at http://skandalonlibertas.blogspot.com/
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