The Collapse of the U.S. Economy

New York Times Insists Economy in “Recovery”

April 9, 2010

Infowars’ note: Ask the record number of unemployed what they think of Obama’s recovery. This is shameless propaganda, typical of the New York Times, the same newspaper that spread lies about Iraq’s illusory WMDs and supported the invasion that killed more than a million people. Unemployment numbers are rising. The Fed has admitted jobs will not return anytime soon. Meanwhile, the Wall Street casino, otherwise known as the stock market, is doing fine — for now. Apparently, for stock gamblers at the NYT, this represents a recovery.

The New York Times - The American economy appears to be in a cyclical recovery that is gaining strength. Firms have begun to hire and consumer spending seems to be accelerating.

Usually you can depend on the White House to view the economy with the most rose-tinted glasses available. But it was not until last week, after a strong employment report, that President Obama started to sound a little optimistic.

“The tough measures that we took — measures that were necessary even though sometimes they were unpopular — have broken this slide and are helping us to climb out of this recession,” he said in a speech at a factory making battery components in North Carolina.

Note, however, that he seemed to believe the country remained in recession. It is virtually certain that is not accurate, as least as will be determined by the arbiters of recession at the National Bureau of Economic Research.

“The recession is over,” one of those arbiters, Jeffrey Frankel of Harvard, wrote this week.

But the White House is unwilling to make that claim.

Why is good news being received with such doubt? Why is “new normal” the currently popular economic phrase, signifying that growth will be subpar for an extended period, and that the old normal is no longer something to be expected?

It is possible, of course, that I am wrong and the prevalent pessimism is correct. Many economic indicators, including Thursday’s retail sales report, are looking up, but that does not prove the recovery will be self-sustaining. There are issues relating to over-indebted consumers and local governments. The housing collapse will have an impact for some time.

But there are, I think, a number of reasons for the glum outlook that are unrelated to the actual economic data ...

The employment report for March, released a week ago, was a milestone that has been little noted. The household survey, from which the unemployment rate is calculated, showed a gain during the first quarter of this year of 1.1 million jobs, the best performance since the spring of 2005.

True, the more widely reported numbers from the survey of employers are not as good. But those numbers are subject to heavy revision as better data becomes available. At the turning points for employment after the last two downturns, those numbers turned out to be far better than was reported at the time.

Employment is a lagging indicator. Employers can be slow to cut back when business turns down, and slow to rehire when it picks up. It stands to reason that when employers cut back sharply — as happened in this cycle — they will have to rehire faster than if they had been slow to fire, as was true in the two previous downturns ...

The stock market’s recent performance may be sending a similar message. Prices have been rising, but there is not much volume. Why? A lot of money managers are fully invested, but many investors remain fearful and are not putting cash into mutual funds. To judge from anecdotal evidence, some of the buying now is short-covering by hedge funds that expected the economy to be much weaker than it is, and thought corporate earnings reports would devastate investors. Instead, they are hearing from companies that business is stronger than expected.

Some Americans are in deep trouble, to be sure, and the days of paying for second homes by refinancing the mortgage on the first will not return soon. But many Americans — both individuals and businesses — who cut back sharply when fear was at a peak a year ago are now finding that they overreacted. The businesses need to hire to meet demand, some of it coming from individuals who are less fearful now of losing their own jobs.

In 1982, Democrats scoffed at a surging stock market and thought a severe recession would last for a very long time. They were confident that the economy would doom Ronald Reagan’s re-election campaign in 1984. All they had to do was make clear they offered a stark alternative to the failing policies of the incumbent.

Change a few words (Reagan to Obama, Democrats to Republicans, 1984 to 2012) and you have an accurate description of the current political climate. Could the Republicans be as wrong now as the Democrats were then?

Initial Jobless Claims Increase Unexpectedly

April 8, 2010

AP - The number of newly laid-off workers seeking unemployment benefits rose last week, a sign that jobs remain scarce even as the economy recovers.

The increase also may result from the difficulty the Labor Department has in seasonally adjusting the claims around the Easter holiday, which falls on different weeks each year.

"This is ... a volatile time when the numbers move around quite a bit," a department analyst said.

The Labor Department said Thursday that first-time claims increased by 18,000 in the week ended April 3, to a seasonally adjusted 460,000. That's worse than economists' estimates of a drop to 435,000, according to a survey by Thomson Reuters.

California also closed its state offices for a holiday on March 31, which likely held down the claims figures. On an unadjusted basis, claims rose by 6,500 to nearly 415,000.

Initial claims have dropped four out of the past six weeks and many economists say they are likely to soon resume their decline.

"Not everything goes in a straight line," Jennifer Lee, senior economist at BMO Capital Markets, wrote in a research note. "Definitely not the claims data."

Separately, retail sales jumped last month as warmer weather and the Easter holiday brought out shoppers in droves.

Discounter Target Corp., department store Macy's Inc., clothier Gap Inc. and Victoria's Secret parent Limited Brands Inc. posted double-digit increases that beat Wall Street analysts' expectations.

Overall, sales in stores open at least a year rose 9 percent in March, based on an index of 31 retailers compiled by the International Council of Shopping Centers.

The stock market dipped in midday trading. The Dow Jones industrial average fell 16 points while broader indexes also edged down.

Economists closely watch unemployment insurance filings, which are seen as a gauge of layoffs and a measure of companies' willingness to hire new workers.

The four week average, which smoothes volatility, rose to 450,250. Two weeks ago, the average fell to its lowest level since September 2008, when Lehman Brothers collapsed and the financial crisis intensified.

Jobless claims peaked during the recession at 651,000 in late March 2009.

The figures underscore that the job market remains weak even as the economy recovers. Federal Reserve Chairman Ben Bernanke said Wednesday that high unemployment is one of the toughest challenges the economy faces. While layoffs have slowed, hiring is "very weak," he said.

"We are far from being out of the woods," Bernanke said in a speech in Dallas. "Many Americans are still grappling with unemployment or foreclosure or both."

On a more positive note in the Labor Department's report, the tally of people continuing to claim benefits fell by 131,000 to 4.55 million, the lowest level since December 2008.

That figure lags initial claims by a week. But it doesn't include millions of people who have used up the regular 26 weeks of benefits typically provided by states, and are receiving extended benefits for up to 73 additional weeks, paid for by the federal government.

Slightly more than 5.8 million people were receiving extended benefits in the week ended March 20, the latest data available, a drop of about 230,000 from the previous week. The extended benefit data isn't seasonally adjusted and is volatile from week to week.

Other recent reports have indicated that employers are slowly ramping up hiring. The Labor Department said Friday that the nation added a net total of 162,000 jobs in March, the most in three years. The unemployment rate held at 9.7 percent for the third straight month.

Layoffs fell to their lowest level in three years in February, according to a separate government report Tuesday. But hiring remained about 40 percent below pre-recession levels.

Some companies are still cutting jobs. An oilfield services company, Denver-based EnerCrest, said this month it has closed five locations in four states, losing 225 employees. Business software company Computer Associates Inc. said Tuesday that it is cutting 1,000 jobs as part of a plan to reduce costs.

Some recipients of the extended federal aid could see their benefits disrupted this week, as Congress failed to approve a continuation of the federal programs before leaving for a two-week vacation at the end of March.

That could cut off benefits for more than 200,000 people this week, according to the National Employment Law Project, an advocacy group, but Congressional Democratic leaders have said they will make up for the lost checks when they extend the program later this month.

Bartering Helps Small Companies Survive When Cash is Tight

April 4, 2010

The Miami Herald - James Taylor doesn't need to pay full price for marketing materials. When his basketball training service needs event T-shirts, he'll get them half price by making the printer a sponsor. When he needs fliers, he'll get a discount by throwing in free advertising space on his website.

Taylor, the chief of Taylored Athletes in Boynton Beach, finds that bartering is widespread in South Florida -- and small business owners like himself find it a useful tool in a rocky economy.

"It played such a major role,'' Taylor said of bartering, which he began when he started his company in 2007. "Capital was hard to come by and it was how I had to start. . . . It gave you a sense of network and security. You never felt alone with bartering because you know other entrepreneurs are in the same place and want to work.''

As small businesses see their lines of credit shrink and struggle to get loans, exchanging goods ends up being a way to afford extra services and make sure time and products don't go to waste.

There are two types of bartering -- the kind Taylor does by making business deals on a case-by-case basis -- and "modern'' bartering through organized networks, which is what the International Reciprocal Trade Association measures to be a $10 billion to $12 billion industry globally.

In a slow economy, bartering typically isn't always the best business option, according to Peter Thompson, chairman of the Economics Department at Florida International University.

"It tells me what they're having is cash flow problems,'' Thompson said. "Some companies have their lines of credit drastically reduced.''

The nonprofit IRTA sets standards for modern bartering, which is conducted through trade associations. About 175,000 businesses in the U.S. belong to such groups -- usually by paying a membership fee. They can barter with anyone in the group by earning and spending credits.

IRTA president David Wallach has seen membership jump 15 to 20 percent in the past year, whereas normally it increases 5 to 8 percent annually.

"Businesses are looking for ways to survive,'' Wallach said. "If you have excess capacity to do it, why wouldn't you do it on barter?''

ITEX Payment Systems is one such network with 24,000 businesses. Local brokers bring in members and find good matches.

There are also free websites to post trades such as PayMeWithAChicken.com.

But not every business is always in the mood to make a deal.

"You get turned down all the time,'' Taylor said. "Some people, they don't see the win-win-win. They just see the dollar signs. You can't fault them because everyone needs to protect their own bottom line.''

For every two companies that tell him no, he finds one that will negotiate a trade.

"If it doesn't work out, I'm on the phone again with someone else who can give me the same thing,'' Taylor said.

There are plenty of firms that find barter deals advantageous ...