Saturday, August 6, 2011

Don't look now, but is that a double-dip recession on the horizon?

Don't look now, but is that a double-dip recession on the horizon? It is really hard to find any good economic news. Consumer sentiment is very low, the housing market is still crashed and unemployment remains stubbornly high. Often the stock market predicts what happens to the economy about 6 months down the road. Based on the massive sell-off of the last 2 weeks, I would say the markets are predicting a double-dip recession. The sad part is there is little President Obama and Congress can do about it. President Obama and democrats have already spent us broke on a stimulus and federal budgets that cost huge amounts, but were poorly aimed at job creation. We can't afford to 'buy' jobs with taxpayer dollars and bigger deficits. Businesses will have to greatly increase hiring. They won't do that while President Obama is in office. If Obama really want to reduce unemployment, he should resign or announce he will not be a candidate in 2012. Of course, President Obama is very unlikely to do this. A better bet would be Obama will continue to party like it is 1999 until the recession turns into a depression.

(MSNBC)- The U.S. has entered a second recession. It may not be as bad as the first. Economists say that the Great Recession began in December 2007 and lasted until July 2009. That may be the way that the economy was seen through the eyes of experts, but many Americans do not believe that the 2008-2009 downturn ever ended. A Gallup poll released in April found that 29 percent of those queried thought the economy was in a “depression” and 26 percent said that the original recession had persisted into 2011.

It is any wonder that many Americans believe that the economic downturn is still in progress? Home prices have fallen to 2002 levels. Values have dropped nearly 50 percent in parts of Florida, California, Nevada and Arizona. Property values are also down that much in parts of troubled big cities like Detroit. Estimates are that as many as 11 million homes have underwater mortgages. Banks have inventories of as many as 2 million foreclosed homes which have not even been released to the market. Home prices could fall another 10 percent if current trends persist.

Perhaps the most powerful argument that the recession never ended or that a new one has begun is the persistence of unemployment. Fourteen million people are out of work. A third of those have been jobless for more than a year. May employment data showed the jobless rate rose unexpectedly and that the economy added only 58,000 jobs. Experts believe that the unemployment rate will not improve significantly until the monthly gain in jobs is consistently 300,000 jobs or more. And, at that rate the gains would have to go one for more than two years to bring the economy back to what is traditionally considered a reasonable unemployment figure.

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