Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
If You Don’t Understand Bonds, You Don’t Understand Investing - 25th Aug 19
Gold's Next Move - 25th Aug 19
Fresh Water Crisis Unfolding - 25th Aug 19
Newbie Guide to Currency Pairs in Forex Trading – Review - 25th Aug 19
When A 16-Year-Old Earns $3 Million, You Know It's Not A 'Silly Fad' - 24th Aug 19
The Central Bank Time Machine - 23rd Aug 19
Stock Market August Breakdown Prediction and Analysis - 23rd Aug 19
U.S. To “Drown The World” In Oil - 23rd Aug 19
Modern Monetary Theory Could Destroy America - 23rd Aug 19
Seven Key Words That Explain "Stupidly High" Bond Market Prices - 23rd Aug 19
Is the Fed Too Late Prevent A US Housing Bear Market? - 23rd Aug 19
Manchester Airport FREE Drop Off Area Service at JetParks 1 - Video - 23rd Aug 19
Gold Price Trend Validation - 22nd Aug 19
Economist Lays Out the Next Step to Wonderland for the Fed - 22nd Aug 19
GCSE Exam Results Day Shock! How to Get 9 A*'s Grade 9's in England and Maths - 22nd Aug 19
KEY WEEK FOR US MARKETS, GOLD, AND OIL - Audio Analysis - 22nd Aug 19
USD/JPY, USD/CHF, GBP/USD Currency Pairs to Watch Prior to FOMC Minutes and Jackson Hole - 22nd Aug 19
Fed Too Late To Prevent US Real Estate Market Crash? - 22nd Aug 19
Retail Sector Isn’t Dead. It’s Growing and Pays 6%+ Dividends - 22nd Aug 19
FREE Access EWI's Financial Market Forecasting Service - 22nd Aug 19
Benefits of Acrobits Softphone - 22nd Aug 19
How to Protect Your Site from Bots & Spam? - 21st Aug 19
Fed Too Late To Prevent A US Housing Market Crash? - 21st Aug 19
Gold and the Cracks in the U.S., Japan and Germany’s Economic Data - 21st Aug 19
The Gold Rush of 2019 - 21st Aug 19
How to Play Interest Rates in US Real Estate - 21st Aug 19
Stocks Likely to Breakout Instead of Gold - 21st Aug 19
Top 6 Tips to Attract Followers On SoundCloud - 21st Aug 19
WAYS TO SECURE YOUR FINANCIAL FUTURE - 21st Aug 19
Holiday Nightmares - Your Caravan is Missing! - 21st Aug 19
UK House Building and House Prices Trend Forecast - 20th Aug 19
The Next Stock Market Breakdown And The Setup - 20th Aug 19
5 Ways to Save by Using a Mortgage Broker - 20th Aug 19
Is This Time Different? Predictive Power of the Yield Curve and Gold - 19th Aug 19
New Dawn for the iGaming Industry in the United States - 19th Aug 19
Gold Set to Correct but Internals Remain Bullish - 19th Aug 19
Stock Market Correction Continues - 19th Aug 19
The Number One Gold Stock Of 2019 - 19th Aug 19
The State of the Financial Union - 18th Aug 19
The Nuts and Bolts: Yield Inversion Says Recession is Coming But it May take 24 months - 18th Aug 19
Markets August 19 Turn Date is Tomorrow – Are You Ready? - 18th Aug 19
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
GOLD BULL RUN TREND ANALYSIS - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

US Soaring Jobless Claims and the "L" Shaped Recession

Economics / US Economy Aug 07, 2008 - 04:08 PM GMT

By: Mike_Shedlock

Economics Best Financial Markets Analysis ArticleImplications Of An Overleveraged Consumer

For an economy overleveraged on consumer spending the chart could hardly look worse. Yet, it is going to get worse, lots worse. Hiring has stalled, commercial real estate is hitting the skids, vacancy rates at malls are rising, lease rates are dropping. In short, the Shopping Center Economic Model Is History .


Continuing Jobless Claims



The reported unemployment rates is 5.7% and rising rapidly. It takes somewhere between +100K and +150K jobs a month to keep up with the birthrate and immigration. Yet, Jobs Have Declined 7 Consecutive Months .

It will be interesting to see what the above chart looks like and what the economy looks like when the unemployment rate hits 6.5% or 7% sometime next year.

Some will point out that unemployment is a lagging indicator. It indeed is. That means unemployment will keep rising even after the economy has turned.

Now think of the implication of housing foreclosures and housing prices in light of that.

Short Squeeze In Reverse

The SEC triggered a short squeeze in financials by proposing to prop up the share price of the GSEs and instituting Selective Enforcement of Regulation SHO .

In addition, Treasury Secretary Paulson asked for and received permission to buy unlimited positions in Fannie Mae (FNM) and Freddie Mac (FRE) stocks and bonds. See US Blackmailed By China? for more on the story.

Fannie Mae Chief Executive Officer Daniel Mudd called Paulson's move a "confidence building measure". Mudd cannot possibly be further from the truth.

Let's take a look at how well those "confidence building measures" worked.

Fannie Mae (FNM) Daily Chart



Freddie Mac (FRE) daily chart



Market intervention and manipulation cannot change the long term trend.

The "L" Shaped Recession

In my opinion, the past 7 years have been among the most fiscally reckless ever in the entire history of the world. The hangover is going to be long and deep. I am sticking with my Case for an "L" Shaped Recession .

Ironically, clowns on CNBC are debating every day whether or not a recession has even started. The only way a recession hasn't started is by using a definition of 2 consecutive quarters of declining GDP. That definition is widely used but it simply is not how recession calls are made.

What actually happens is the National Bureau of Economic Research (NBER)decides recessions using a wide range of data, not just quarter to quarter GDP.

The Library of economics has a discussion of the above as well as data on the average length of a recession . From 1920 to 1938 the average length was 20 months. The average length of a recession from 1948-1991 was 11 months. The longest was the great depression that lasted 43 months.

Given that this was the greatest global fiscal party ever, the likelihood that this will be one of the greatest hangovers on record is very high. In other words, this recession will neither be short nor shallow.

For the sake of argument consider the recession began in December 2007. If 20 months is the target, the recession still has another year to go. Those who think a depression is coming may wish to add another year or more to that. Another possibility is the US will slip in and out of recession for a number of years just as Japan did.

With the above in mind....

It's Time To Think

  • Think foreclosures have topped? Think again.
  • Think housing has bottomed? Think again.
  • Think CEOs are being honest about forward guidance? Think again.
  • Think corporate earnings are going to improve? Think again.
  • Think the parade of bottom callers is correct? Think again.

The big irony in all of this is bottom callers are calling the end to a recession they claim has not even started. The truth of the matter is there is no reason whatsoever to think that the economy is remotely close to turning up. The teeth of this recession have barely begun to bite.

By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com .

© 2008 Mike Shedlock, All Rights Reserved

Mike Shedlock Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

James
26 Aug 08, 14:38
Jobs and stats

Despite the stats, I see thousands of high paying jobs posted on popular employment sites:

With so many 100K and 150K jobs posted, I wonder about the stats.


Post Comment

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

6 Critical Money Making Rules