Last week was “Job’s Week” for the Obama Administration, with speeches and road trips designed to highlight ‘Recovery Summer’ and how the economy is improving. Then they got blindsided by some awful jobs numbers. So this week, “Export Week”, the White House made sure they inflated their ‘expected’ unemployment claims so the results would fall below and look positive. But there are still many indicators that not only are we already in a double-dip recession, trends are all pointing to a potential depression.
First, let us look at exports, since Obama is talking up how U.S. exports have risen 17%. During the same period, U.S. imports have risen 20%. So we’re still losing ground. I’m not sure if I would be running around the country bragging about how we’ll be exporting more pork to China and chicken to Russia. Not exactly the same as exporting automobiles and TV sets.
While this week’s unemployment claims were ‘below expectations’, the reality is that we still lost some 454,000 jobs last week. Maybe some 25,000 to 50,000 hiring took place, mostly summer temporary jobs in the hotel and resort industries. The critical number to be watching is the overall employment number, which has declined in the past year from 59.4% of the U.S. population down to 58.5%. No recovery there yet!
The Dow Jones Index has been a bit of a roller coaster lately. While it has improved significantly over the past year, since January, it has lost ground, around 5%. Mind you, the DJI only represents 30 of the largest publicly traded corporations. More frightening is the Russell 2000 Index, which represents 2000 smaller corporations worth an average of about $500 Million each. The Russell 2000 Index, which is often used by mutual fund managers, has declined nearly 20% since January!
As you can guess, this is a really bad number! The Russell 2000 Index did get a bounce in the 4th Quarter of 2009, but was still off 26% since it’s record high in July 2007. That is what is known as a “dead cat bounce” on Wall Street. The implications here is that there is still a great deal of uncertainty and reluctance in small to mid-sized companies, as also indicated by last week’s ADP Payroll report. Small businesses, with 50 or less employees, went negative and mid-size companies, with 51 to 500 employees only hired 3,000 new workers nationwide.
A story out of Canada last week caused a bit of a flurry when the Financial Times leaked remarks made by GE’s CEO, Jeffrey Immelt, during a private dinner in Rome, Italy. Immelt was complaining about how China is cleaning our clocks and that the Obama Administration is anti-business. This week, we’ve seen Treasury Secretary Timothy Geithner on an apology tour trying to convince business leaders that the Obama Administration is business-friendly.
While Obama and his cronies try to talk up the economy, there is still no clear evidence of a recovery. All the indicators point to the “dead cat bounce” ending and the bears returning to the market. We’ve already entered a double-dip recession. The next event will be a short-term deflationary move on the U.S. dollar. The grim side points to a depression (some say we’re already there) followed by massive hyper-inflation as America prints it’s way out of debt.
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