Last month, the Federal Reserve released a report stating that the economy is creeping toward a "jobless recovery". To prop up this hypothesis, the report pointed to the fact that manufacturing and business investment is up. Unemployment is also "up", though, but, no matter. We're on our way!
We've heard this one before. The last recession, at the beginning of the 2000s, was just such a recovery. Older and wiser now, we all know what a load of hooey that was, as the entire house of cards came crashing down around us. Still, consumers managed to spend their way out of that recession. How did they do it? On borrowed money, of course.
Back then, credit was unencumbered by the restrictions of today. Credit cards arrived like clockwork in everyone's mail. Since housing was strong, values stayed high and home equity loans were the order of the day. No one worried too much about paying all these loans back, least of all the banks. People spent these borrowed funds, adding another smoky and reflective layer to the already teetering facade that we called an economy. Probably, consumers were just waiting until things improved, at which time they would be able to pay it all back. Well, we all know how that turned out.
Things are a little different now. Unemployment is expected to reach 10% any day now, the highest in nearly 30 years. Home values have fallen. People without jobs can't spend without credit, which remains incredibly tight. In an economy that is 70% consumer-driven, how exactly does that translate into a "recovery"?
The small upward glitches caused by the "cash for clunkers" program and Obama's stimulus program do not a sustainable recovery make. If businesses are reinvesting, then they are doing it on the backs of laid-off workers. A Jobless Recovery? Don't you believe it.
We've heard this one before. The last recession, at the beginning of the 2000s, was just such a recovery. Older and wiser now, we all know what a load of hooey that was, as the entire house of cards came crashing down around us. Still, consumers managed to spend their way out of that recession. How did they do it? On borrowed money, of course.
Back then, credit was unencumbered by the restrictions of today. Credit cards arrived like clockwork in everyone's mail. Since housing was strong, values stayed high and home equity loans were the order of the day. No one worried too much about paying all these loans back, least of all the banks. People spent these borrowed funds, adding another smoky and reflective layer to the already teetering facade that we called an economy. Probably, consumers were just waiting until things improved, at which time they would be able to pay it all back. Well, we all know how that turned out.
Things are a little different now. Unemployment is expected to reach 10% any day now, the highest in nearly 30 years. Home values have fallen. People without jobs can't spend without credit, which remains incredibly tight. In an economy that is 70% consumer-driven, how exactly does that translate into a "recovery"?
The small upward glitches caused by the "cash for clunkers" program and Obama's stimulus program do not a sustainable recovery make. If businesses are reinvesting, then they are doing it on the backs of laid-off workers. A Jobless Recovery? Don't you believe it.
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