Despite the rash of "excellent" economic news suggesting that the weak recovery is gaining steam, the underlying fundamentals continue to spell trouble. As we've repeatedly pointed out, the jobs picture is MUCH weaker than the administration would like us to believe.
Robert Reich, former Secretary of Labor under the Clinton adminstration, and no friend of Republicans, has weighed in with his own "take" on the employment situation.
According to an editorial in the Wall Street Journal, Reich wrote "Since the start of the Great Recession in December 2007, the economy has shed 8.4 million jobs and failed to create another 2.7 million required by an ever-larger pool of potential workers. That leaves us more than 11 million jobs behind. (The number is worse if you include everyone working part-time who'd rather it be full-time, those working full-time at fewer hours, and people who are overqualified for the jobs they're in.) This means even if we enjoy a vigorous recovery that produces, say, 300,000 net new jobs a month, we could be looking at five to eight years before catching up to where we were before the recession began."
Reich points out that consumer demand is insufficient to facilitate a decent recovery, especially in light of the fact that the stimulus bill has now passed its peak. Even with consumer demand on the upswing, it has a long way to go to reach pre-depression levels.
Since many, if not most, households rely on two wage earners, the unemployment and under-employment situation is affecting virtually every family. Compounding that is the wealth effect of substantially lower home values and investments.
Consumers' debt burden is still very heavy, despite the fact that the wave of personal bankruptcies and defaults have reduced debt levels. According to Reich "At the end of last year, debt averaged $43,874 per American, or about 122% of annual disposable income. Most analysts believe a sustainable debt load is around 100% of disposable income, assuming a normal level of employment and normal access to credit — neither of which we are likely to have for some time."
Dr. Williams of ShadowStats (http://www.shadowstats.com/) confirms Reich's views in his latest piece. Williams notes that real consumer credit in the first-quarter is down at a seasonally-adjusted annualized pace of 3.0% from the fourth-quarter. Williams also concludes that the sluggishness in consumer income, combined with contracting debt are not indicative of a sustainable economic recovery.
On the corporate side, both Commercial Paper outstanding as well as Commercial and Industrial Loans are in virtual free fall. As a result, money supply aggregates, such as real M-3, is now down a mind-numbing 6% year-over-year. This level of contraction is indicative of imminent and severe economic weakness.
So, while the Obama Administration runs around trumpeting their "success" in turning the economy around, the foundation for economic strength is simply non-existent.
Our new YouTube video on the Legality of The Personal Income Tax is now posted. You can access it here (http://www.youtube.com/watch?v=1TInKnCIikg&feature=youtube_gdata).