Since the recession began in December 2007, Congress has passed two stimulus packages ($168 billion in February 2008 and $787 billion in February 2009), and last month the House passed a $154 billion jobs bill. The economy has been growing for more than six months. Yet job creation is sluggish.
Today's unemployment rate is 10 percent; the underemployment rate—the unemployed, plus those employed part time, plus those discouraged persons who have stopped looking for jobs—is 17.3 percent. Almost 40 percent of the unemployed have been so for seven months or more—which is not surprising: Congress continues to extend eligibility for unemployment benefits, apparently oblivious to the truth that when you subsidize something you get more of it.
There is no precedent for what the nation might be beginning to experience—a torpid recovery from a steep recession. Since World War II, the average growth rate in the first four quarters after a recession ended has been 6.6 percent, and then 4.3 percent for the subsequent five years. In 1982, the unemployment rate reached 10.8 percent; in 1983, the average quarterly growth was a sizzling 7.6 percent.
Today, Americans are still paying down their debts that fueled consumption between 2001 and 2007. Nevertheless, household debt is still 30 percent above what it was a decade ago, so deleveraging has a long way to go. And 23 percent of homeowners with mortgages are still underwater—the value of their houses is less than the amount owed on the mortgages.
The residential-real-estate sector triggered the recession, which now may bring a convulsion in commercial real estate. A quarter of a trillion dollars of loans must be rolled over in each of the next few years. Megan McArdle, business editor of The Atlantic, explains why many of these loans will go bad:
"Take a property that was worth $100 million in 2007, when it was financed with a four-year, $70 million mortgage. That's a reasonably conservative 70 percent loan-to-value (LTV) ratio. But if the building is worth only $70 million when it's time to roll the loan over, keeping the LTV at 70 percent means that the owners can now borrow only $49 million, and have to come up with tens of millions to pay off the original loan. Worse, as the markets tighten, lenders tend to want to see a lower LTV in the deals they finance."
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6 comments:
if my memory is correct the unemployment rate during the great depression was 12%. so where are we now. thanks sjd
Thank you Obama, Reid, Pelosi. You are insuring your own demise.
As we all know it was Bush's fault. Not the dumbo congress. And nothing can be charged to obamination. If anyone believes this they are idiots.
10:09, you illustrate the depth of the current recession. Unemployment is a lagging indicator so why would you expect a record plummet in jobs to recover in 12 months. Take a fair look at the numbers by 2011 before you start bashing the administration.
The Obama administration is hostile toward corporations, small businesses, banks, wallstreet and individual freedoms.
Every sector of the economy is cowering in fear of what this idiot Obama is going to do next.
The $787 billion stimulis bill that was rushed though congress in the middle of the night doesn't do anything to reduce unemployment. What the bill does do is pay off big unions, pay off blue states, and create a big slush fund for Democrats. In the process the bill devalues the dollar and squeezes out credit for private investors thus prolonging the misery for everyone.
If Obama would have just stayed playing golf for 12 months instead of signing these bills, this country would be much better off.
Just like FDR, Obama has taken a recession and made it into a depression.
We did it to ourselves.
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