Bad News Summary

Some of you think I am being unduly pessimistic. So I am going to borrow from the Wall Street Journal – admittedly something I am loath to do under normal circumstances – and summarize the state of play as expressed in our latest statistics. Here goes:

1. GDP has just gone through six months of gloom. The economy grew less than 1% in the first half of 2011. In 2010 it grew about 3%. That’s called backsliding. The loss of wealth in 2011 will be around $350 billion as a result. Not chump change.
2. The latest revision shows that the decline in GDP during the recession was about 5% deeper than originally measured. That makes the decline the steepest since the Great Depression. WE all knew that, but it was worse than we thought.
3. Announcements of layoffs at large businesses have accelerated to a 16 month high. This is hardly the stuff of great growth.
4. Payrolls are expanding in general, but at about half the pace needed to reduce unemployment significantly. In many recent months the additions to jobs have been less than population growth, meaning we are going backwards, not forwards.
5. Manufacturing – as measured by the ISM index – has started to slow down sharply. It is now at a two year low.
6. So have services, also measured by the ISM index. This sector is at a 17 month low.
7. Consumer sentiment – as measured by the University of Michigan index – is at its lowest since March 2009.
8. Personal consumption is essentially flat – it was at a 9 month low in June.
9. Sales of existing homes slipped for the seventh straight month in June.
10. Home prices have fallen back again.
11. The trade deficit rose 15% in May despite lower oil prices.
12. Worldwide activity is declining – in some countries it is now back to 2009 levels.
13. Europe is mired in a fiscal crisis as large, if not larger, than ours.
14. And: the Chicago Fed’s broad gauge of indices – it includes 85 such measures – is now back to its October 2009 level.

And I am being pessimistic?

This is a sorry tale indeed. Were it not for the crisis we would all be worrying about the likelihood of an impending recession. Meanwhile our politicians have gone down the debt reduction rabbit hole and are risking making this horrible situation much, much, worse. To say this is bad policy is such an understatement it isn’t worth the effort. For those of you interested in possible outcomes I recommend taking a look at the history of the 1930’s, complete with the civil unrest that the economic failure of policy makers back then engendered. This week’s eruption of black shirted rioters in Greece, and the recent ability of the far right to take the US government hostage are not exactly the portents one looks for in happy times.

Sorry if that all sounds miserable, but that’s the dead end into which we have driven. It will take courage, imagination, new ideas, and plenty of hard work and time to escape. The first three of which we lack completely in our elite.

Hence my opinion: we are stuck.