Lisa Simpson
Jul 27,2009
In: Finance

Faith and Hope in Stimulus Plan are by Themselves Sufficient to Keep Economy Chugging

Mere faith and hope in stimulus plan are not by themselves sufficient to keep the engine of the economy chugging. The actuaries of USA Bureau of Labour Statistics or BLS suddenly find the camera is focused on them. Hitherto their employment figures released in the first week of every month drew scant interest except for the career economists and journalists keeping a tab on labour to assure Wall Street that the weather in the real economy was fine.

But it is not so anymore. The job market is bleeding and the employment report flashes across the front page of most of the newspapers. It is also being taken seriously by the flippant television news channels.

All this is happening despite the foghorns of the Obama administration giving the all clear signals. But BLS apprehends that the country is not as yet half way through the unemployment storm. The numbers of June are alarming. An extra 460,000 have been added to the list of the unemployed. This brings the total to be more than six million as the official rate inches towards 10%.

The figures quoted do not however give the true picture. Many private firms and government offices have reached agreements with the workers to opt out of work without pay for one day in a week or for some days in a month. This is known as underemployment and means less money in the pockets of consumers for spending.

In an economy driven by consumer spending these figures are cold and dampening. In April the consumer figures were not positive and those of May did not provide much comfort despite the tax rebates and many other incentives offered by Washington.

Hundreds of those unemployed are not only without jobs but without a home either. According to the Comptroller of the Currency, foreclosures spiked by 22% touching 844,389 postings. It calculated to an increase of 73% over the previous year’s rate. It shows that neither the weak response of Bush crisis nor the much hyped moves by the Obama government has had any sizeable impact on the economy. Obama has been promising carrots and sticks but to no avail.

In June this year banks made over 32,000 repossessions accepting on an average losses counting to 64.7% on an average loss on the original loan due. The lenders now prefer to foreclose rather than accept less monthly amounts. Their target now is to pocket whatever they can by selling the houses.