Geithner Predicted Recession Unemployment
by Hiland Doolittle
A month ago, Treasury Secretary Timothy Geithner summed up his view of employment trend of the Great Recession: “The typical pattern of recovery is that growth recovers, growth starts to turn positive, people start to spend more, businesses hire more, they invest more, before you see unemployment peak. In past recoveries, the world sort of depended on the American consumer to spend the world into recovery. That’s not a healthy, balanced way for us to do this. We need the countries around the world to be moving with us.”
Geithner’s Face the Nation interview revealed the administration’s view of the recession on national, global and unemployment fronts. On the employment front, Geithner’s prediction is certainly bearing true.
Chrysler and GM are helping to contribute to the unemployment mess. Chrysler began shutting plant doors on May1. The company announced their plan to terminate franchise agreements with 789 dealerships. Meanwhile, GM has until June 1 to consummate a voluntary re-organization plan or the government will force the nation’s biggest automaker to file for bankruptcy protection.
While mass layoffs are amassing, there are disturbing, less noticed unemployment notices circulated every day. High-end retailer Abercrombie and Fitch has announced the closing of ten stores. Nike reported that revenue fell by 2%. The company promptly cut 1500 jobs. 500 of those jobs were at corporate headquarters in Eugene, Oregon.
CEO Mark Parker explained Nike’s move; “Our new structure sharpens our consumer focus globally to drive continued growth while positioning Nike competitively in today’s marketplace.” While the auto industry, construction and housing industries have endured record unemployment, retailers are now adding to the crises.
637,000 New Unemployment Claims
Analysts were too quick to jump on last week’s decrease in new unemployment applications. For the week ending May 9, first-time applications increased to 637,000. The trend is showing no signs of a turnaround as the number of persons staying on unemployment after the first week set record highs for the 15th consecutive week.
“The economy is probably declining at a slower rate, but it’s not reached a turning point,” said Steven Ricchiuto of Mizuho Securities. Delicately stated, the reality is that a continued escalation in unemployment will lengthen the downturn.
The total number of Americans receiving unemployment now stands at a staggering 6.56 million. In May 2008, unemployment stood at 3.10 million. The insured unemployment rate rose 0.1% in one week and now stands at 4.9%.
Prices Spike
In March, the Producer Price Index (PPI) actually fell 1.2%. This decline was interpreted as an easing and perhaps even a bottoming of the recession’s trend. But, early reports indicate that the April PPI climbed 0.3%.
April food prices rose 1.5%, the biggest rise since January 2008. Meanwhile, other than food, the PPI fell 3.7%, the biggest decline since 1950.
Main Street is not spending money. The evidence is clear at every shopping mall, car dealership, appliance center, restaurant and theater in the country.
Main Street is acquiring home-related entertainment services and products, but they are driving hard bargains and staying within household budgets. This commitment to fiscal responsibility is new to most American families.
Credit card defaults are at their highest levels, but credit card usage is decreasing. And, the word is out, nationally and internationally.
The Obama administration is letting the world know that it will not be business as usual in terms of international trade, or anything else. Thus far, the U.S. taxpayer has funded the world recovery and the administration is determined to protect the investments. Every aspect of American business, including corporate compensation, is subject to review.
Geithner’s message that, “we inherited a terribly difficult situation. And, we have to work or way out of it. It took years to get into it. It’s going to take more than months to get out of it” paints a real picture of the Secretary’s view of where the Great Recession recovery really stands.
Demand Avoids the Dollar
Caution is the word. The DOW rose 46.43 points, the S& P 500 gained 9.15 points and the Nasdaq rose 25.02 points, but the perception of a Bear Market still prevails. Institutional investors seem comfortable and are moving back to equities.
At the same time crude oil prices tried to break the $60 barrier, the International Energy Agency announced that global demand would undergo its sharpest decline since 1981.
Germany’s report that GDP shrank 3.8% drove the euro down against the dollar which fell against the yen. The dollar index .DXY is ready to post its fourth consecutive weekly decline. Investors continue to shift to higher yielding currencies.
The Time for Stimulus Stimulation is Now
Administration officials revealed that the stimulus package has plenty of money to spend. A meager amount of the $750 billion package has been released. The government is in the process of evaluating approved projects and expects to release funds within the next few months.
The stimulus package has jobs. Team Obama has projected the creation of 5 million green technology and construction jobs within the next ten years. Taxpayer patience is wearing thin.
Economists are wary of the long-term effects of the stimulus package. But, the short-term effect interests Main Street who simply wants to get back to work and figure out the long-term solution at a later time.
About the Author - Hiland Doolittle
Hiland is a professional writer with extensive entrepreneurial experience. He is a graduate of St. George’s School Newport, RI and the State University of New York at Albany where he majored in history. He has been active in the real estate business for 30 years and has founded and sold several businesses.
Hiland currently writes for several financial sites and is a published author of the novel The Last Parade. He has recently completed a manuscript for a children’s book entitled Sami and The Minnow Man.
