I don’t know what gets us out of this hole, but something tells me we aren’t going to see the massive surge in manufacturing like we did in the 1940’s that got us out of the Great Depression.

Looks like education wasn’t in fact a huge portion of the bill. Here is the breakdown. There is also the fact that educational institutions move slowly. Money that hasn’t really been distributed yet can’t really be used yet. It will still be some time before we see the effects of the stimulus in education.

Good question. The answer to that question could make a person very rich person. Personally, I think that while the intense inflationary policies enacted will provide a parachute to the economy, it will not be enough to overcome the gravitational forces that are pulling it down. At the end of the day, fundamentals always prevail.

In fact, I have serious doubts as to the effectiveness of the ’stimulus’. Wasn’t education not a huge portion of the bill?…yet colleges across the country are facing enormous budget deficits….doesn’t seem to add up.

I think it will be interesting to follow median incomes over the next couple years.

What’s your prediction on how this will affect asset prices and wages in the short, mid, and long terms?

Thanks :)

1. we are a nation built and dependant upon credit. Credit may not be gone, but it will NEVER be as attainable as it was in the boom ever again (at least not in our lifetime) as the banks have certainly learned their lesson.

2. Real Estate will not bottom until significant numbers of people realize they are better off renting than owning as their payments would be significantly lower, there would be no taxes, and no upkeep expense. This will lead to foreclosures and bankruptcies that are unprecendented. Right now, many are still holding out for a ‘rebound’. We may (doubtful in real estate) get a small one, but I don’t expect it to last long or be substantial.

3. Where are the jobs going to be created from? Solar (who can afford huge expenditures on solar??) The govt? Good luck basing an economy on govt jobs/ spending.

4. Stock market earnings are a joke right now. The ‘rebound’ has been based primarily on bank earnings. No other industries have posted positive numbers this Quarter. If you follow the market, you know these earnings are a joke due to the TARP, TALF, and repeal of mark to market. These banks would all be insolvent without these tools that are pulling the wool over the eyes of the tax payor.

5. Bottom line: the lifestyles of Americans will be forever altered by this crisis. I still don’t belive that many grasp the enormity of some of the underlying problems from the commercial real estate collapse that is imminent to the collapse of retail. Many business owners are holding on to a thread right now. In time, they will have to let go when they realize that the ‘rebound’ is not coming.

6. I won’t even go into the municipality struggles as a result of diminished tax collections, the social security problems (to put it nicely), and the printing of money that is going to eventually kill the dollar.

I hate to sound outrageously pessimistic, but that is the bed we have made for ourselves. On the bright side, people will care more about friends and family…and value the truly important things in life once again. …in a socialist America.

“The jobless rate also rose in the Seattle metro area, to a seasonally adjusted 8.1 percent, from a revised 7.6 percent in February.”

I’m guessing Tim’s chart shows what analysts predicted prior to counting all the data. You are referring to the real-world rate of what happend when the real-world data was analyzed and counted. Clearly, you are correct, and the Seattle rate is not slowing nor is WA state as a whole. We are bleeding jobs at a rate not seen since the 80’s, which was a back breaker. Looking at the data, it’s my opinion that there is no slowdown in sight. If April turns out to be another month like last month, we’ll be over 10% and set a 4-month streak not even seen in the 80’s.

The data is bad. It’s really, really bad. I’m surprised people are judging these numbers as favorable. They’re terrible. I see absolutely nothing in this data that shows we’ve even slightly slowed from the prior record tying months.

WA dropped 9/10’s of a point in March after February’s adjustment. This is in line with the massive bleeding We’ve been seeing all along.

Unemployment in OR is 12.1% matching it’s record peak set in the 80’s. WA topped out at 12.2% in 1982, and we are steadily heading back to that point at the rate of just under a 1% increase per month.

Month………WA………OR………National
Oct08………5.9……….7.2………6.6
Nov08………6.1……….7.8………6.8
Dec08…… ..6.5……….8.3………7.2
Jan09………7.8……….9.8………7.6
Feb09………8.4………10.8……..8.1
Mar 09……..9.2………12.1……..8.5

WA job losses are not slowing down.

“Washington’s seasonally adjusted unemployment rate increased to 9.2 percent in March 2009, up from February’s revised rate of 8.3 percent, according to the state Employment Security Department.”

I say to that though, who cares about GDP figures if people don’t have jobs? for me the economy is about people not about GDP figures.

NOTE: this post is in know way meant to disparage the awesomemess of “the tim.”

There is an article there that i will try to link here:
http://biznik.com/articles/why-entrepreneurs-rule-the-world

Long story short it talks about how there used to be small business everywhere and that the industrial revolution made more employees than employers.

I see a shift coming. How many of you are really going to trust your employer to know what they are doing? Why are people shovelling money into banks that just nickle and dime you to death? The stock market is a joke if you really consider that rumor, or good news boosts the market place more than solid economic realities. Am I really reading that profit projections are the basis of good news? How about profits in the first quarter after write downs in the last quarter?

I see a shift coming from a global market wary of feel good economics.

Agreed that government investment is better than just more spending, but both pale in comparison to private investment, as a higher percentage of the dollar total for government investment goes to non productive administration. The government must first collect the money (taxes) and then decide how to administer and distribute the collected funds. All entail non productive administrative costs.

If the government really wanted to get the economy going, it would cut taxes. Tax cuts put money in both consumer and corporate pockets where it can be immediately spent on a wide variety of goods and services, as well as invested in projects with potential future returns. It is one of the great ironies of our age that although it is well proven that tax cuts lead to greater revenue and more productive investment, our political structure and common understanding emphasize just the opposite. I firmly believe the current administration is much more interested in expanding government power and dependency than it is in curring the economy’s ills. Unfortunately, they chose to make their move (or more accurately got the opportunity) too late in the current cycle. The economy, and the political strategies of the current office holders are both doomed to fail for reasons beyond their control.

And what do you base your projections on?

Huh? The article says it went up from 7.6% to 8.1% … which is actually worse than the national increase.

Thank you for those links to the charts. The first one was new to me but makes perfect sense and the second is very important for understanding where we are today.

I hope I’m not parsing words too much by agreeing that government spending will not save us but I also think that government investment can help. The distinction in my mind is that money is gone once it is spent: whereas with investment you are getting some kind of productive asset in return.

To illustrate, the auto industry has capacity to build 18 million cars a year but is only selling 8 million, hence subsidies to GM brings zero long-term benefit. There is too much capacity and some car companies need to shut down. Alternatively, the billions spent on GM could have invested in building commuter rail. This second choice would have reduced traffic and outflows of cash to the Middle East. I think our leaders have chosen poorly, moreover, we let them do it.

http://paul.kedrosky.com/WindowsLiveWriter/U.S.TotalCreditMarketDebtbySector1929200_93C7/debt-trend-breakdown_2.jpg

P.S.- If you think government spending is going to save us, see my post above this one and check out that graph again…

Social Security’s cash flow will go negative by the end of this year, not 2011 as budgeted.

$60 trillion in unfunded federal commitments over the next 25 years.

Interest rates headed for zero, and so are the returns. It’s hard to see how a slowdown in the
unemployment numbers turns this whole mess around.

http://market-ticker.org/uploads/debt-contribution.jpg

Trade, Transportation and Utilities -29%
Construction -27%
Manufacturing -22%
Professional and Business Services -16%
Financial Activities -9%
Leisure and Hosptiality -4%
Natural Resources and Minng -1%
Information -1%
Other Services 0%
Government 5%
Education and Health Services 5%

Top job loss industries are not too surprising: Retail, Construction, and Manufacturing are over 3/4 of the total.

In my opinion, taking the short-term pain of a corporate bankruptcy is like a broken leg; it hurts like crazy but gets better soon. Bailouts for insolvent companies are like treating a slow moving cancer; you get addicted to all kinds of medications with strange side effects and never get better.

To anyone who has recently become one of the statistics on unemployment: Remember, you are not your job, you are not your house, and you are not the things you own. You are a capable human being who is adaptive and resilient. The economy may get worse, but the worst for you has already passed.

Unfortunately, I believe that the recovery will be short-lived, and come the winter, and early 2010, we will see all the gains lost, and begin to explore even deeper troughs for everything from stocks to real-estate and unemployment.

In the meantime (i.e. while the recovery lasts), there will be plenty of people who proclaim the “bottom” has been reached, and that now is the time to jump back into real-estate before prices go to the moon again…

And, 500 of those jobs may just be jobs that go unfilled, so its not as bad as the initial news.

I imagine that this economy will be weak for years because of the current recession. There’s only so much consumers can cut spending and I think people have found very few places left to do it in their budget (and still live the lifestyle they can tolerate).

At the same time businesses are downsizing and becoming ultra-efficient to absorb the lack of consumer spending. At some point we’ll hit a bottom and begin to grow very slowly, in my opinion. There’s always the chance that the society falls apart and we all turn into savage beasts, but there are far better chances that we go through a prolongated recession and come out okay in 5-7 years.

If you’re looking for “good news” on the economy, re: unemployment, you need not look no farther than The Tim’s horrifying spike on his chart.

You will hear later today that the banks all passed the phony [Dr Roubini states] government stress tests, with phony unemployment rates, etc inserted in the math S./W. Lipstick on the pig, that doesn’t mean a thing.

Read the Beige Book account of the economy through early April, as is states in part:

“…Almost all sectors were contracting or slowing in almost all regions, the Beige Books said. Manufacturing weakened, retail spending was “sluggish,” the housing markets were “weak” and banks reported rising delinquencies and deteriorating loan quality….”

The rest of the URL:

http://www.marketwatch.com/news/story/us-economy-still-contracting-everywhere/story.aspx?guid=%7B33DD5B9D%2D0C0E%2D4E4A%2D8D68%2D7D2ECE8687FE%7D&siteid=bnbh

P.S., Dr Roubini allegedly turned down a cabinet job with Obama; because he likes being as clear, pragmatic and honest as he can [even he uses lipstick on the pig too], as an almost free man on his RGE website.

I doubt it. The University of Washington will be laying off a whole bunch of it’s work force, and I expect many more layoffs to be announced at other Seattle/Washington agencies and businesses.

I’m trying to do both. Prepare for the worst. Hope for the best. And include plans for a nominal future. This means stocking up on survival skills and supplies, enjoying day-to-day life, and continuing to fund my 401k (even though the government will probably confiscate these if things get much worse). If things go bad, I’ll be prepared. Meanwhile I’m having fun day-to-day. And if we continue to see normal ups and downs for 30+ years, my 401k might actually be worth something.

I suspect we haven’t peaked yet but it is probably close.

PI layoff tracker hasn’t updated in about 2 months so I guess that has died with most of the rest of the paper.

In the former case you could convince me that economic activity may pick up and that things will go back to “normal”

However the longer term prospects for the USA are dire. We have massive current account deficits that will more than double with the total deficit exceeding the total GDP of the USA by 2015 or so. Less than 50% of the US population will pay income taxes. The USA doesn’t produce much of value anymore and we generate $59 billion plus a month in trade deficits primarily with Japan, China and Germany. China, Japan and Germany are financing our outlandish lifestyles and as the USA tries to inflate it’s way out of its obligations the dollar will collapse. It is uncertain how much longer our creditors will continue to loan us money to keep the ponzi scheme going. At minimum, they will demand higher interest rates to provide them with a real return on their investments. This will dramatically curtail economic activity by significantly raising interest rates.

So what do you do? Continue to live your life or prepare for the coming economic Armageddon? On the upside, it is nice having a president that knows how to use a prompter and sound half intelligent. On the downside, our new leader is not proposing anything that will right the structural flaws in our trade, environmental and workplace policies and bring the intermediate portion of the economic value chain back to the USA, creating opportunity for the middle class.

I guess personally, I play it conservatively and will continue to pay down my debt – mortgage and car – with the intent of being debt free within 7 years. At the same time you only get to live once so I will try to balance that in a way that provides me with some enjoyment although that probably means downgrading from Napa Cabernet to the Costco blend.