The March 2008 employment figures are in, along with adjustments to the January and February figures. Be afraid. Be very afraid.
Eighty-thousand jobs lost in March, seventy-six thousand in each of the two preceding months means 232,000 jobs were lost in the first quarter of 2008, not including the figures for April, with three major airline bankruptcies, and other closings of note, with thousands of jobs lost.
Such figures are astoundingly bad for the US economy. Clearly, these end any debate whether a national recession is in place. Our position, as economists is simple. We are on the very slippery slope to a full-fledged depression.
While Members of Congress were debating the issue of recession and the Bear Stearns acquisition before their Spring break, the public was growing increasingly restless and angry about the economy and the mishandling on all sides, from the Administration to Congress to the regulators.
Members, in their districts and meeting with constituents had their heads proverbially handed to them, and heard, first-hand, the absolute anger and disgust of the public about foreclosures, increased crime, decreased real estate values, job losses, business failures and a seemingly never-ending downward financial spiral, with little or no action in Washington to help the suffering public.
On return to Washington, it was the Members who were stimulated, having heard this message... "Do something to help us or take a hike". For the first time in half a century, we may actually see a dramatic change in Washington, with old, established names on Capitol Hill replaced by their constituents. Members of both the House and Senate know it, too.
This financial crisis is hitting so many people and is going to continue doing so, whether Congress takes immediate steps or not.
Our banking system is in turmoil, purely on the basis of greed and blatantly stupid deregulation. Businesses are in trouble; gasoline prices are on an upward spiral as the dollar devalues; employment is heading down, and personal income going with it, so where is this economy going?
Unfortunately, we're heading into a depression. In the 1920's, when Prohibiton was in full bloom, and the bootleggers replaced legal, state and local taxed liquor sales, the states felt the pinch of the reduced tax base. Today, the states and local governments are suffering substantial loss of revenues from reduced real estate, lower job figures, increased unemployment, increased state-financed health care, and operating costs rising.
To compound matters, business lending is in as much of a crisis as subprime lending. Foreclosures on businesses, as well as business closures and failures are at their highest levels since the end of World War II.
This current economic mess is historically unusual. Most economic recessions occur at the end of wars, not during the conflict when government is spending to deal with the war. This war, unlike most previous ones the US has fought has the bulk of its spending outside the country. During the World Wars, Korea and Vietnam, defense spending was mostly domestic, purchasing US made weapons for shipment abroad. Today, US defense purchasing is clearly not limited to US companies, and a substantial portion of funds are going directly to Iraq and Afghanistan to pay warlords and for redevelopment.
We should, by rights, be seeing an economic boom, were it not for the banking deregulation and subprime crisis. Instead, just as this site predicted in January, we're seeing runs on banks and a crisis of bank failures which still may happen, despite the speedy and sound policies of the FED.
This year's Congressional elections will see whether the public is so dissatisfied that they will remove long-term representatives that otherwise they would have considered very supportive.
