leftchick
03-10-2008, 01:08 PM
http://www.counterpunch.org/morici03082008.html
BY PETER MORICI
On Friday, the Labor Department reported the economy lost 63,000 payroll jobs in February, after losing 22,000 jobs in January.
Governments added 38,000 jobs and private sector employment contracted 101,000. Businesses have become too pessimistic about the outlook for the economy, and the capacity of the Bush Administration and Federal Reserve to manage it, to be adding new employees or replacing those that leave.
The Labor Department reported a slight decrease in the unemployment rate to 4.8 percent. However, this statistic was greatly affected by the fact that so many adults have become discouraged and have stopped looking for work. Factoring in the decline in the number of adults participating in the labor force, the unemployment rate is closer to 6.8 percent.
These poor jobs data are the strongest evidence yet that the economic expansion has ended. The economy has slipped into a recession of uncertain depth and duration.
Weak retail sales and slow automobile sales indicate high gasoline prices and the subprime crisis have slowed down consumers. Along with weakness in housing and nonresidential construction, weak retail and automobile sales are causing businesses to trim second quarter production, investments in new capacity, and hiring plans.
Exports are lifting sales and employment in durable goods and materials industries that support those industries, but overall a weaker dollar against the euro and other currencies and the resulting increase in exports are not enough to lift industrial production and employment from recession levels.
Contribution of Federal Reserve Policy
Rising prices for food, energy, metals, and other materials are pushing up inflation, but the Federal Reserve can do little to curb rising prices.
The ethanol program is pushing up food prices, and robust growth in China and elsewhere in Asia are pushing up energy and raw material prices. The Fed could only marginally affect these pressures by constraining U.S. growth.
The Federal Reserve’s aggressive interest rates cuts will have a limited effect on GDP and employment growth, and the stimulus package is likely to be too little and arrive too late to head off a recession.
The stimulus package at $152 billion is only about half as large as the losses taken by the major New York banks and their customers on subprime securities. Its value will be to lessen the pain imposed by whatever slowdown or recession the economy endures, not to head it off entirely.
BY PETER MORICI
On Friday, the Labor Department reported the economy lost 63,000 payroll jobs in February, after losing 22,000 jobs in January.
Governments added 38,000 jobs and private sector employment contracted 101,000. Businesses have become too pessimistic about the outlook for the economy, and the capacity of the Bush Administration and Federal Reserve to manage it, to be adding new employees or replacing those that leave.
The Labor Department reported a slight decrease in the unemployment rate to 4.8 percent. However, this statistic was greatly affected by the fact that so many adults have become discouraged and have stopped looking for work. Factoring in the decline in the number of adults participating in the labor force, the unemployment rate is closer to 6.8 percent.
These poor jobs data are the strongest evidence yet that the economic expansion has ended. The economy has slipped into a recession of uncertain depth and duration.
Weak retail sales and slow automobile sales indicate high gasoline prices and the subprime crisis have slowed down consumers. Along with weakness in housing and nonresidential construction, weak retail and automobile sales are causing businesses to trim second quarter production, investments in new capacity, and hiring plans.
Exports are lifting sales and employment in durable goods and materials industries that support those industries, but overall a weaker dollar against the euro and other currencies and the resulting increase in exports are not enough to lift industrial production and employment from recession levels.
Contribution of Federal Reserve Policy
Rising prices for food, energy, metals, and other materials are pushing up inflation, but the Federal Reserve can do little to curb rising prices.
The ethanol program is pushing up food prices, and robust growth in China and elsewhere in Asia are pushing up energy and raw material prices. The Fed could only marginally affect these pressures by constraining U.S. growth.
The Federal Reserve’s aggressive interest rates cuts will have a limited effect on GDP and employment growth, and the stimulus package is likely to be too little and arrive too late to head off a recession.
The stimulus package at $152 billion is only about half as large as the losses taken by the major New York banks and their customers on subprime securities. Its value will be to lessen the pain imposed by whatever slowdown or recession the economy endures, not to head it off entirely.