...this blog kills fascists...

Thursday, June 12, 2008

Competing Economic Headlines

Two Reuters pieces which hit the wire simultaneously:
Retail sales rise much more than expected

WASHINGTON (Reuters) - Total sales at U.S. retailers rose a full percentage point in May as many consumers had more spending cash in their wallets from government rebate checks, a report on Thursday showed.
Good, right? Consumers are out there, doing their duty, spending their birthday money from Uncle George.

And then the other one....
Jobless claims rise more than expected

WASHINGTON (Reuters) - The number of U.S. workers filing new claims for jobless benefits rose more than expected last week while those remaining on benefit rolls hit a four-year high, the government said on Thursday.
Ouch.

So good and bad, right? Balances out. Wrong.

The stimulus checks were a one time event, with no long term impact. Well, aside from pushing our already out of control deficit further toward the cliff's edge:
A flood of economic aid payments pushed the federal budget deficit to $165.9 billion, the highest imbalance ever for May.

The Treasury Department reported Wednesday that the May deficit was more than double what it was in May 2007. Some $48 billion in payments went out as part of the $168 billion economic relief effort to revive the economy and keep the country from a deep recession.

For the first eight months of the budget year, the deficit totaled $319.4 billion. That is slightly below the record for this period, $346 billion, set in the 2004 budget year.

The Bush administration estimated in February that the deficit for this year would be $410 billion. That would be just under the all-time high of $413 billion in 2004. But many private economists believe this year's deficit will top it, reflecting the economic aid program but also weaker government receipts.

Through the first eight months of this budget year, which began on Oct. 1, receipts have totaled $1.67 trillion, a small 0.3 percent increase from the same period a year ago ...

Outlays, however, are up a sizable 9.7 percent to $1.99 trillion, reflecting the stimulus payments and also the ongoing costs of fighting wars in Iraq and Afghanistan.
The "economic stimulus plan" will produce but a momentary upward tick in retail sales, one that will dissipate when the money's gone and people continue to struggle under rising food, energy and other costs. On the other hand, the jobless claims, and the real world impact they have on the economy and American families will stretch far beyond this week's competing reports. And unemployment is increasingly becoming a long term affair for out of work Americans. From the same Reuters report:
The number of people remaining on the benefits rolls after drawing an initial week of aid rose 58,000 to a greater-than-expected 3.139 million, a four-year high, in the week ended May 31, the most recent week for which data is available.

It was the seventh straight week claims were above 3 million, evidence that unemployed workers are having a hard time finding a job.
So, while we can expect the talking heads on the business channels to spend a news cycle talking about the effectiveness of the stimulus plan, and how it lends credence to Fed Chairman Ben Bernanke's pipe dream wishful thinking not-so-silent-prayer projection regarding the economic outlook, to quote PE, Don't Believe the Hype.

As I've been wont to say so often these last six months, we haven't even really begun to see the impact of the financial mess, brought on by business Über Alles policies and a blind eye to such dirty words as oversight, regulation, and good sense. It's going to get a lot worse before it starts to get better.

Hate to be the bearer of bad news, but them's the facts, ma'am.

For good insight into the day-to-day realities of our economic situation, y'all should check out Calculated Risk. And add it to your feed reader/blogroll. They stay on top of it.

2 comments: to “ Competing Economic Headlines

  • Blabrmouth
    June 12, 2008 9:10 AM  

    And I thought I was a doomsday proponent! It is going to get worse...much!

  • Mitch
    June 12, 2008 9:34 AM  

    Unfortunately, we're in agreement blabrmouth. Especially when you consider the fact that a veritable tsunami of ARMs will be resetting in April of next year....combined with the Fed making noise about raising interest rates (which is necessary to offset inflation, but will also make it far less likely that those ARM holders will be able to refinance their way out of looming foreclosures).

    It'll be 2010, at the earliest before the market begins to stabilize, let alone rebound.

    Thanks for the comment. I'll be checking out your blog.

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