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Real Economy Continues to Sink Despite Economic Stimulus and Bear Market Rally

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Crewleader Donating Member (1000+ posts) Send PM | Profile | Ignore Sat May-02-09 10:55 PM
Original message
Real Economy Continues to Sink Despite Economic Stimulus and Bear Market Rally

Economics / Recession 2008 - 2010 May 02, 2009 - 01:11 AM

By: Mike_Whitney



The economy continued to shrink in the first quarter of 2009 at an annual pace of 6.1 percent, making it the worst recession in more than 50 years. Gross Domestic Product slipped into negative territory from January to March for back-to-back quarters of negative 6 percent growth. The news of falling GDP was preceded on Tuesday by a dismal housing report which showed that housing prices have continued their historic downward plunge with only modest improvement. Since their peak in July 2006, housing prices have dropped 31 percent, falling 18.6 percent in the last year alone. The rate of decline has decelerated slightly but--on their present trajectory--prices are on target to tumble 45 to 50 percent from their 2006 highs. Another 20 percent loss in home equity means another $4 trillion loss for US homeowners.

The news on the employment-front is equally bleak. In the week ending April 25, initial jobless claims increased by another 631,000, bringing the 4-week moving average to 637,000. Ongoing unemployment claims are now at 6.27 million, an all time record.

According to the Associated Press:

Unemployment rates rose in all of the nation's largest metropolitan areas for the third straight month in March... The Labor Department reported Wednesday all 372 metropolitan areas tracked saw jobless rates move higher last month from a year earlier."

Consumer spending also fell more than forecast with purchases decreasing 0.2 percent in March and wages and benefits rising at the slowest pace in three decades.

http://www.marketoracle.co.uk/Article10397.html
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Warpy Donating Member (1000+ posts) Send PM | Profile | Ignore Sat May-02-09 11:00 PM
Response to Original message
1. They still haven't figured it out, that they killed the goose
that laid the golden eggs by offshoring good jobs and leaving us with nothing but the McJobs and now they're trying to outsource as many of those as they can.

People know their jobs aren't safe and there is no way they're going to take more debt on, the only way they can possibly pay for big ticket items from cars to washing machines to houses to college educations.

This economy won't improve until the fools in their ivory towers have this simple fact brought home to them: no bailout in the world is going to save any company that is out of customers.

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Crewleader Donating Member (1000+ posts) Send PM | Profile | Ignore Sat May-02-09 11:06 PM
Response to Reply #1
2. Well said Warpy!
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wuvuj Donating Member (874 posts) Send PM | Profile | Ignore Sun May-03-09 07:35 AM
Response to Reply #1
5. Except....
Edited on Sun May-03-09 07:38 AM by wuvuj
...that the multinationals don't totally depend on the US consumer?

I'd bet that fair number of the recently lost jobs will end up overseas?

That's what the "ownership society" thing was all about...you might not have a job...but your mutual funds will still go up when people in other countries use your former wages to buy stuff?

Before the economy and the market tanked...the MSM was all over it....telling us how the Chinese were real happy to have our jobs and how we should feel good about that.

You are a corporate girl and you're living in a corporate world.....??????????

...........

"This economy won't improve until the fools in their ivory towers have this simple fact brought home to them: no bailout in the world is going to save any company that is out of customers."

...........

http://www.frontlinethoughts.com/article.asp?id=mwo0501...


Today, there are those who say the stock market will start rising six months before the economy does. And maybe it will. I don't know. The predisposition of this market is down. Valuations are not at a level that has spawned major bull markets in the past. At the beginning of real bull markets, volume is strong and rising. Now it is weak (modest at best) and shows no real sign of becoming strong, especially going into summer.

Further, this rally has all the earmarks of a major short squeeze. Regulators have recently (and correctly) been enforcing short selling rules that require stock to be delivered and settled on short trades. This may be a one-time event. When the short squeeze is over, the buying will stop and the market will drop. Remember, it takes buying and lot of it to move a market up but only a lack of buying to create a bear market.

Corporate earnings are likely to go even lower, as consumer spending is likely to get weaker in the coming months. Capacity utilization is at its lowest point since they began tracking it. The National Federation of Business says a recent survey shows none of the responders plans to raise prices, which is not a sign of business strength.

Banks are not yet lending, and the past quarter's positive performance was mostly accounting gimmicks.
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Warpy Donating Member (1000+ posts) Send PM | Profile | Ignore Sun May-03-09 11:42 AM
Response to Reply #5
6. The US market is their largest market
and the developing world is in no way able to take up the slack now that this market has crashed.

It's a nice dream, that abandonment of the American market. It's just nowhere near being a reality.

They need us. They just haven't realized it yet. They're too busy blaming us for supporting them by taking on debt we had no way to pay.
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northernlights Donating Member (1000+ posts) Send PM | Profile | Ignore Sun May-03-09 06:30 PM
Response to Reply #5
7. based on the myth of a billion Chinese customers
How many freakin' articles did I see perpetuating that lie. They assumed that a billion Chinese peasants would turn overnight into American-style consumers, based on jobs taken from Americans and given to them. They were wrong.

It somehow never dawned on them that the vast majority of the billion Chinese peasants would still be peasants. And that the newly-minted Chinese middle-class might continue to be frugal, given many generations of living hand-to-mouth, a frugal culture, government control of the media, the simple fact that not everybody loves McDonalds, and that the newly-minted middle class might be totally aware of where their jobs came from and how they would just as easily disappear.
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barb162 Donating Member (1000+ posts) Send PM | Profile | Ignore Wed May-06-09 02:18 PM
Response to Reply #1
8. Oh they have it figured it out; they're just keeping their mouths shut about it
But anyone who actually expects employment of well-paying jobs to somehow increase in the months ahead has some real screws loose and is stupid to boot. If and when this recession ends, any jobs created would be immediately offshored. I'm tired of economists who consistently are "surprised" by the US job loss numbers. Like how many dozens of months are these idiots consistently surprised?
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phantom power Donating Member (1000+ posts) Send PM | Profile | Ignore Wed May-06-09 04:06 PM
Response to Reply #1
9. After 30 years of pimping trickle-down economics, they fell for their own PR.
Big mistake.
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Double T Donating Member (1000+ posts) Send PM | Profile | Ignore Sat May-02-09 11:09 PM
Response to Original message
3. Sure sounds like a glimmer of hope for the economy to me.
Unbelievable BS! One day we'll all wake up and our entire economic and financial system will have collapsed. Many will look at each other and say "How did this happen" while the rest of US will already know. Denial about our economic and financial reality will have led to our demise.
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Mind_your_head Donating Member (1000+ posts) Send PM | Profile | Ignore Sat May-02-09 11:45 PM
Response to Original message
4. You've said it perfectly!
This economy won't improve until the fools in their ivory towers have this simple fact brought home to them: no bailout in the world is going to save any company that is out of customers.

:thumbsup:
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