Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
UK Coronavirus Infections and Deaths Projections Trend Forecast Into End April 2020 - 28th Mar 20
DJIA Coronavirus Stock Market Technical Trend Analysis - 27th Mar 20
US and UK Case Fatality Rate Forecast for End April 2020 - 27th Mar 20
US Stock Market Upswing Meets Employment Data - 27th Mar 20
Will the Fed Going Nuclear Help the Economy and Gold? - 27th Mar 20
What you need to know about the impact of inflation - 27th Mar 20
CoronaVirus Herd Immunity, Flattening the Curve and Case Fatality Rate Analysis - 27th Mar 20
NHS Hospitals Before Coronavirus Tsunami Hits (Sheffield), STAY INDOORS FINAL WARNING! - 27th Mar 20
CoronaVirus Curve, Stock Market Crash, and Mortgage Massacre - 27th Mar 20
Finding an Expert Car Accident Lawyer - 27th Mar 20
We Are Facing a Depression, Not a Recession - 26th Mar 20
US Housing Real Estate Market Concern - 26th Mar 20
Covid-19 Pandemic Affecting Bitcoin - 26th Mar 20
Italy Coronavirus Case Fataility Rate and Infections Trend Analysis - 26th Mar 20
Why Is Online Gambling Becoming More Popular? - 26th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock Markets CRASH! - 26th Mar 20
CoronaVirus Herd Immunity and Flattening the Curve - 25th Mar 20
Coronavirus Lesson #1 for Investors: Beware Predictions of Stock Market Bottoms - 25th Mar 20
CoronaVirus Stock Market Trend Implications - 25th Mar 20
Pandemonium in Precious Metals Market as Fear Gives Way to Command Economy - 25th Mar 20
Pandemics and Gold - 25th Mar 20
UK Coronavirus Hotspots - Cities with Highest Risks of Getting Infected - 25th Mar 20
WARNING US Coronavirus Infections and Deaths Going Ballistic! - 24th Mar 20
Coronavirus Crisis - Weeks Where Decades Happen - 24th Mar 20
Industry Trends: Online Casinos & Online Slots Game Market Analysis - 24th Mar 20
Five Amazingly High-Tech Products Just on the Market that You Should Check Out - 24th Mar 20
UK Coronavirus WARNING - Infections Trend Trajectory Worse than Italy - 24th Mar 20
Rick Rule: 'A Different Phrase for Stocks Bear Market Is Sale' - 24th Mar 20
Stock Market Minor Cycle Bounce - 24th Mar 20
Gold’s century - While stocks dominated headlines, gold quietly performed - 24th Mar 20
Big Tech Is Now On The Offensive Against The Coronavirus - 24th Mar 20
Socialism at Its Finest after Fed’s Bazooka Fails - 24th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock and Financial Markets CRASH! - 23rd Mar 20
Will Trump’s Free Cash Help the Economy and Gold Market? - 23rd Mar 20
Coronavirus Clarifies Priorities - 23rd Mar 20
Could the Coronavirus Cause the Next ‘Arab Spring’? - 23rd Mar 20
Concerned About The US Real Estate Market? Us Too! - 23rd Mar 20
Gold Stocks Peak Bleak? - 22nd Mar 20
UK Supermarkets Coronavirus Panic Buying, Empty Tesco Shelves, Stock Piling, Hoarding Preppers - 22nd Mar 20
US Coronavirus Infections and Deaths Going Ballistic as Government Start to Ramp Up Testing - 21st Mar 20
Your Investment Portfolio for the Next Decade—Fix It with the “Anti-Stock” - 21st Mar 20
CORONA HOAX: This Is Almost Completely Contrived and Here’s Proof - 21st Mar 20
Gold-Silver Ratio Tops 100; Silver Headed For Sub-$10 - 21st Mar 20
Coronavirus - Don’t Ask, Don’t Test - 21st Mar 20
Napag and Napag Trading Best Petroleum & Crude Oil Company - 21st Mar 20
UK Coronavirus Infections Trend Trajectory Worse than Italy - Government PANICs! Sterling Crashes! - 20th Mar 20
UK Critical Care Nurse Cries at Empty SuperMarket Shelves, Coronavirus Panic Buying Stockpiling - 20th Mar 20
Coronavirus Is Not an Emergency. It’s a War - 20th Mar 20
Why You Should Invest in the $5 Gold Coin - 20th Mar 20
Four Key Stock Market Questions To This Coronavirus Crisis Everyone is Asking - 20th Mar 20
Gold to Silver Ratio’s Breakout – Like a Hot Knife Through Butter - 20th Mar 20
The Coronavirus Contraction - Only Cooperation Can Defeat Impending Global Crisis - 20th Mar 20
Is This What Peak Market Fear Looks Like? - 20th Mar 20
Alessandro De Dorides - Business Consultant - 20th Mar 20
Why a Second Depression is Possible but Not Likely - 20th Mar 20
UK Coronavirus Infections Trend Trajectory Worse than Italy Government PANICs! Sterling Collapses! - 19th Mar 20
Coronavirus Market Crisis - Nowhere to Hide! - 19th Mar 20
Coronavirus Most Likely GDP Economic Outcome for Q1 and Q2 2020 - 19th Mar 20
How COVID-19 Leads to 2008-Style Bank Crisis - 19th Mar 20
Coronavirus Impact on Global Economic GDP Numbers - 19th Mar 20
Bticoin Crash Big Channel Review - 19th Mar 20
Gold is Doing Its Job…Silver Will Come Back as a Safe-Haven Asset - 19th Mar 20
The Chartology of Coronavirus Deflationary Event - 18th Mar 20
Fed Slashes Rates to Zero and Introduces QE in Response to COVID-19. Will Gold Rally Now? - 18th Mar 20
Coronavirus - Nothing to Fear but Fear Itself - 18th Mar 20
The Stocks Bear Market Is Upon Us... Or Not - 18th Mar 20
US and UK Coronavirus Containment Incompetence Resulting Catastrophic Trend Trajectories - 17th Mar 20

Market Oracle FREE Newsletter


The Flip Side of a Jobless Economic Recovery

Economics / Employment Oct 16, 2009 - 12:21 PM GMT

By: Andy_Sutton


Best Financial Markets Analysis ArticlePerhaps one of the most preposterous statements made during the ongoing financial crisis was by Ben Bernanke when he stated that we would have a ‘jobless recovery’. Certainly this is not a new term, but that doesn’t change the fact that in concept, the idea that a real recovery can occur with rising unemployment seems pretty ludicrous. Again, the devil is in the details and it all comes back to how you define your terminology and ask “A recovery for whom?”

A number of months ago, I pointed out the somewhat flawed rationale of using GDP itself as a gauge of economic growth since government spending is a portion of that measurement. Normally, this wouldn’t be a huge problem, but when the government tries to in essence become the economy by spending exorbitant amounts of borrowed money, then GDP loses its usefulness as a measure of genuine economic growth. I willingly admit that it is exceedingly difficult to argue against government spending to a construction worker who is able to remain employed because of a road project paid for with stimulus borrowing. However, we all need to be concerned with the undeniable fact that more and more of our national well-being is becoming dependent on the hazardous practice of reckless borrowing and debt monetization.

Unfortunately, in Bernanke’s jobless recovery, there are few winners and many losers.

Foreclosures Continue to Increase

Home foreclosures in the third quarter of 2009 hit an all-time record high according to RealtyTRAC. Nearly one million homeowners received a foreclosure notice during the past three months. Nevada continues to lead the pace nationally with 1 foreclosure notice for every 23 homes. Nevada is no surprise, but Vermont, on the other hand, is. Vermont, which had barely been impacted by the housing crisis until recently has seen foreclosure rates jump 170% from the same quarter a year ago. Keep in mind that foreclosures continue to run rampant despite numerous fixit attempts at the Federal, GSE, and state levels. The system is still clearly reaping what it has sown over the past decade. These numbers would be far worse if lenders were foreclosing on all the properties that met the criteria. In many low-income areas, lenders aren’t foreclosing at all, opting instead to leave the properties in abeyance and allowing the residents to remain.

Many borrowers are unable to refinance even with historically low interest rates thanks to Bernanke’s MBS buying program because their credit is destroyed. Unemployment certainly isn’t helping. The lack of accumulated savings has left many folks with little or no wiggle room to deal with financial hardships.

The fact of the matter is that as bad as foreclosures are right now they’d be several orders of magnitude worse if it weren’t for government intervention. Unfortunately, this rationale will be used moving forward to justify even more intervention. Obviously the reason things aren’t getting better is because government hasn’t done enough or done it long enough… right? I fully expect to see the $8000 tax credit for first time buyers eventually extended to any buyers, and then somehow fit into refinancing deals as well. Maybe a government-sponsored mortgage holiday is in the works. You laugh? I know people howled when I mentioned the idea of government stimulus by handing out store gift cards, but several politicians have already mentioned doing exactly that.

It is also clear that the Fed has made the decision to work the demand side of the equation by monetizing the mortgage-backed securities market. The Fed has purchased nearly a half trillion dollars worth of MBS in the last 2 quarters in an attempt to artificially suppress rates. During this period, they made one concerted attempt to back off on the purchases and rates immediately shot up as was documented in my 6/5/2009 missive. This action, coupled with the first-time homebuyer tax credit has been a shameless effort to lure renters and younger people into sopping up the excess inventory from foreclosures. This while new home construction continues, albeit at a lower pace. Does all this sound like a recipe for a genuine recovery?


It continues to be my opinion that the headline unemployment rate will never reach 10%. I realize this is a considerable stretch simply because it is already on the precipice, but I’m sticking with it. Frankly, the headline number, while heralded by the telescreen, is largely irrelevant in the real world. A closer approximation lies in the BLS’ broadest measure U6 (shown below) and even that understates unemployment due to the use of the arbitrary and capricious birth-death model. For decades now, BLS has engaged in the highly questionable and political practice of changing methodologies when the numbers become unfavorable.

Shadowstats does a fine job of keeping up the tradition of the older, more accurate methodology and states employment to be nearly 22%. This is a level of depression proportions, but you wouldn’t know it watching the telescreen. Perhaps again the devil is in the details and when you coalesce the consumer confidence numbers, and the massive and ongoing retrenchment in consumer credit, which I have been screaming about as a signpost for over 3 years, it is easy to see that things on Main Street are not what many would like us to think they are. The retrenchment is certainly good news for the consumer, but bad for growth in our twisted world. Given the proclivities of the American consumestocracy to blow money over the past decade, it is probably a reasonable assumption that the retrenchment is not voluntary. 22% unemployment and a shattered consumer hardly seem like firm foundations from which to build a recovery - even a jobless one.

Credit Card Resets?

And now we move on to our ‘salt in the wound’ section of this week’s journey. We all know very well about the $23.7 trillion (courtesy lavished on the financial system to ‘rescue’ it. We know about the tens of billions in bonuses handed out by financial firms and the nonsensical battles over the AIG handouts Congress occupied itself with while Rome burned. We know full well about the federal reserve’s efforts to artificially manipulate interest rates lower and essentially give away money to the banks, then pay them 15 basis points to store their reserves at cartel headquarters. So after receiving all these perks of the well-connected, the banks are doing the logical thing: they’re sticking it to the consumer.

How, you say? In the form of higher interest rates on credit cards, additional fees, higher minimum payments, and ironclad rules on repayment terms with substantial penalties for non-compliance. So all of those folks who dodged a bullet on mortgage resets just might get one after all when they open their next credit card statement. After all, if we can’t get consumers to take on debt, we can do the next best thing – charge them more for the debt they do have, right? You can’t make this stuff up.

The above are just a sampling of the stresses that exist on the backbone of our real economy: Main Street. So the next time you hear a government or quasi-government official discussing economic optimism or a jobless recovery, all you need to do is ask yourself, “For Whom?”

By Andy Sutton

Andy Sutton holds a MBA with Honors in Economics from Moravian College and is a member of Omicron Delta Epsilon International Honor Society in Economics. His firm, Sutton & Associates, LLC currently provides financial planning services to a growing book of clients using a conservative approach aimed at accumulating high quality, income producing assets while providing protection against a falling dollar. For more information visit

Andy Sutton Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules