Global economic data signal
trouble. Headlines reflect worsening conditions.
The Financial Times said America's dismal jobs report and world economic
weakness raise "fears of a sharp global slowdown" or worse.
According to the London Guardian, Britain and Euroland face a "deeper
recession after figures showed manufacturing output slumped at its fastest"
rate in three years.
The Daily Telegraph said oil hit a 16th month low below $100 a barrel.
At Friday's close, WTI crude stood at $83.26. Brent slumped to $98.63.
Declining prices signal weakness.
The London Independent worried about "worldwide panic" as Dow prices
plunged 275 points. It was the worst single day's performance since
The Daily Mail commented on the "appalling state" of the world economy.
The Wall Street Journal groaned about the "grim jobs data." It wasn't
the only sign of weakness. Separate Friday reports showed other troublesome
signs. Expect economic conditions to keep heading south.
New York Times columnist Floyd Norris said Friday's jobs report "was
worse than almost anyone expected."
"There is absolutely no prospect" for positive change soon. With Europe's
recession deepening, America won't escape the fallout. When either area
sneezes, the other catches cold, and it spreads.
Europe faces serious economic trouble. Plunging euro valuations reflect
it. A crisis of confidence exists.
Bankia's insolvency was Spain's largest ever bank collapse. Other Spanish
banks are troubled. So are Italian ones. Intesa Sanpaolo shares slumped
to a 15-year low. UniCredit fell to almost generation ago valuations.
Europe's entire banking system risks collapse. Greek and Spanish banks
face panic withdrawals. In April, Spanish retail sales plunged 9.8%.
It was the sharpest monthly drop on record.
Chinese manufacturing declined for the tenth time in eleven months.
Bank lending missed government targets by about $200 billion.
Brazil shows increasing weakness. Q I figures barely eked out a +0.2
print. India's doing no better. Its year-over-year Q I GDP growth
hit a nine-year low. Q I, in fact, contracted.
South Korea's heading south. So is Australia. A front page Wall Street
Journal article headlined "Asia Strains under Euro Crisis." Another
back page one discussed African nations feeling the pinch.
UK manufacturing hit its lowest level since May 2009. In May, its PMI
slumped 4.3 points to 45.9. It showed contraction. It was the sharpest
single month decline since November 2008.
In May, commodity prices had their worst decline in four years. Their
five consecutive week slump was the worst performance in five yeas.
US and Europe face rising unemployment. Official Greek and Spanish rates
approach 25%. For youths, it's about 50%. Across Euroland it's 11% and
Shadowstats has US unemployment at nearly 23%, inflation at 6%, GDP
at minus 2%, and money supply growth declining.
The IMF is considering bailing out Spain. At issue is how given its
deepening trouble. Its impossible math shows a 9% fiscal deficit, no
nominal growth, and 6.67% 10-year rates at Friday's closing prices.
A June 1 AP report asked how Spain's "government can pay for a bailout...?"
Conditions across Europe are so troubled that the Wall Street Journal
said "multinational companies are rehearsing for any number of contingencies,"
and they all look bad.
Independent economists call the euro a failed experiment. Some admitted
it years ago. Eventual dissolution looks certain. The longer the can's
kicked down the road, the harder breaking up will be.
America's May jobs report was awful. Headline U-3 numbers reported +69K.
Shadowstats reported 20K. Consensus predicted +150K. March and April
downward revisions totaled 49K. Expect future reports to drop them further.
Full-time jobs are evaporating like water in summer heat.
The sensitive goods-producing sector dropped 15K. It was the first decline
in nine months. More ahead looks certain. Long-term unemployment reached
5.4 million. It rose 300,000 over April. Duration approaches 40 weeks.
These numbers and others reflect Depression conditions. Policies aren't
addressing them. Obama talks but doesn't act. In an election year, it's
unprecedented. If conditions worsen as looks likely, he may be another
one-term president. Current polls show him either even with Romney or
His so-called growth package includes corporate handouts, more benefits
for rich elites, and deregulation when opposite measures are needed.
His jobs program is smoke and mirrors duplicity combined with more for
corporate giants at the expense of troubled households. Trickle down
failed years ago.
Nonetheless, Obamanomics feature it. Since taking office, he's done
virtually nothing to create jobs and improve living standards for millions
of Americans needing help.
He waged ruthless class war from day one. Wealth extremes are unprecedented.
Corporate profits come at the expense of public pain. Expect much worse
Voter sentiment mostly reflects pocket book issues. Given current dire
conditions, it's certainly true now. Declining consumer confidence reflects
it. So do unemployment and poverty levels.
Economic activity is clearly heading south. In May, incomes dropped
0.2%. They've fallen for two of the past three months. Chicago's PMI
plunged from April's 56.2 to 52.7. Consensus expected 56.8. It was the
worse read since September 2009. It matched December 2007 when recession
PMI components were also abysmal. Order backlogs fell from 56.8 to 46.3.
In the past 30 years, only three declines matched May. Other regional
manufacturing indexes also showed softness.
Unprecedented low Treasury yields signal trouble. TIPs sunk below 0%.
So did German 2-year notes. Its 10-year bunds yield 1.1641%. Inflation
adjusted shows negative returns. Ten-year US Treasuries stand at 1.46%.
They're also negative when inflation adjusted.
Five months remain until America's election. Hope springs eternal every
time. After Obama won in November 2008, Chicago erupted like New Year's
eve. Hangover conditions followed. Despair deepened them.
Nothing ahead shows promise. Wrongheaded policies assure it. As 2013
approaches, grim conditions are worsening. Relief is nowhere in sight.
Whichever party wins in November, things won't change. It's hard imagining
how much longer suffering millions will tolerate it. Sooner or later
they're bound to erupt. It's their only chance.
A Final Comment
Economist Jack Rasmus provides incisive economic analysis. He appears
regularly on the Progressive Radio News Hour (PRNH).
He called last winter's jobs numbers "grossly overestimated." Statistical
adjustments were manipulated and questionable. Eventually truths come
out. Today's reality shows "stagnant jobs growth" and "economic relapse."
Housing remains in Depression. So is overall construction. Obama's efforts
to stimulate exports "produced a mere dribble of new jobs." Most are
part-time/low pay/low benefit ones.
State and local governments keep laying off thousands of employees monthly.
Hundreds of thousands of workers exit the labor force monthly for want
of job opportunities.
Bank lending to small businesses is moribund. Median household incomes
are declining while food, healthcare, energy, education, and other costs
Personal consumption is "stumbling along" at best. Rasmus comments often
on air how mainstream economists virtually always get it wrong.
They're behind the curve. They're sanguine when caution and concerns
are warranted. They promote illusory economic growth and prosperity.
They ignore reality independent analysts stress.
Last fall, Rasmus predicted a sharply slowing global economy in 2012,
a troubled Eurozone, and hard landing prospects for China, Brazil and
elsewhere. America will feel the fallout, he said.
Expect worse conditions ahead. Before yearend, Democrat and Republican
leaders will implement $2 - 4 trillion spending cuts plus another $2.2
trillion scheduled to begin in January.
They'll call it deficit reduction, not austerity. It'll hit America's
economy like a hammer when conditions can least tolerate it. The effect
on GDP will be dramatic.
If all agreed on cuts kick in, it will have up to a 4% negative impact
on national output. Imagine how much more intense today's crisis will
Stephen Lendman lives in Chicago and can be reached at firstname.lastname@example.org.
His new book is titled "How Wall Street Fleeces America: Privatized
Banking, Government Collusion and Class War"
Visit his blog site at sjlendman.blogspot.com and listen to cutting-edge
discussions with distinguished guests on the Progressive Radio News
Hour on the Progressive Radio Network Thursdays at 10AM US Central time
and Saturdays and Sundays at noon. All programs are archived for easy