Friday, September 07, 2007

Recession on the Horizon?

Today, for the first time in four years the economy has experienced negative job growth. In August 2007 the economy reportedly lost approximately 4,000 private sector jobs. Of greater concern is the ob creation trend over the past few months­in January of 2007 the economy created 162,000 jobs, dropping quickly to only 69,000 in June, 68,000 in July, and finally to negative 4,000 in August, the lowest since August 2003.

The recent job creation patterns, working in tandem with troubles in the housing market, wide-spread fluctuations in the stock market, are raising a real possibility that the job market expansion may be nearing the end. Economists are still divided about the risk of a full-blown recession, but today's numbers seem to be pushing many over the edge as reported here in the New York Times. The US economy is in a tight balancing act--with the rest of the world's growth pull the US out of the hangover in the housing and credit markets. I think there is a real chance that world demand could inject enough stimulus into the US to pull us along in a state of slow growht versus recesson. However, Louis Uchitelle and others have written about the danger of an economy based on leveraged buyouts and re-organizations and short-term profits versus innovation. That's the kind of an economy that could short circuit when the credit bubble bursts.

If we do dip into recession, it will be one of the most disappointing expansion on record. For example, the nation’s factories have lost 215,000 jobs over the year and is still down 1.8 million jobs from the end of the last recession. By this point in the last recovery, manufacturing employment had completely recovered all of its losses.

We'll see in the next few months. Should job creation remain stagnant, decrease even further, or fail to keep pace with individuals seeking employment, the national unemployment level and unemployment rate will increase in the months to come (they were stagnant in August). I've noticed an uptick in the unemployment insurance figures in many states and the nation as well, there are already 2.55 million people collecting unemployment checks, which is 100,000 more than last year at the same time. One bright spot, as stated below, Congress has some real chances to take action while the storm clouds are gathering but the thunder has yet to begin.


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