Friday, June 4, 2010

Dip, Double Dip, Trip...?

The second leg down in the US economy has begun, a few months earlier than I expected. I suspect 60 days is pretty irrelevant on a macroeconomic level, but not to an unemployed American. A closer reading of the May employment report shows the work force actually shrank by 35,000. The reason the figures look at all good mathematically is because the civilian labor force dropped by 322,000 units. Um, that's the denominator...decreasing it acts as a multiplier for the numerator.
The big number was the 390,000 jobs created by the federal government, most of them short term, temporary census jobs.

Robert Reich has been cautious in his prognosis, until now. Paul Krugman has cautioned of the double dip possibility, mainly due to a lack of aggressive follow up by the Obama fiscal policy makers. A jobless recovery is an oxymoron in an economy where consumption drives ~ %70 of the activity. The US governments pronouncements on the economic recovery have had the transparency of a Goldman Sachs prospectus. There are lies, damned lies and statistics, none of which pay the electric bill. America is still waiting and getting more angry.

The obvious question is the ultimate shape of this particular event. The US has a failed economic model which has subsisted on lies, fraud and government complicity for more than a decade. Fixing that will take more than an increase in the supply of paper money.

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