The market continues to bounce off its top.
BofA payed back their TARP money. How? They had some extra cash (interesting, given that the original problem was that they were out of cash. . .) and they sold some stock. Why? So that the TARP people could no longer determine executive pay at BofA. What now? BofA remains a very sick little puppy with about twice as many non-performing loans on their books as have been written down to date. They are getting away with this because the Fed is loaning them money at roughly zero percent interest, except the Fed money doesn't have strings attached like the TARP money does. We're being taken for a ride by BofA and Bernanke.
According to a CNN/Opinion Research Corp. survey released Thursday, 40 percent of people questioned say the U.S. would be better off if Democrats ran Congress while 39 percent feel things would be better if Republicans took charge on Capitol Hill. The 1-point margin is a statistical tie. Support for Democrats is down from a 10-point advantage in August and a 25-point margin in January. Nineteen percent of people questioned say that the country would be in the same condition regardless of which party controls Congress.
According to the poll, a very large majority of Americans think that the health care bill that the U.S. Senate is considering would raise the federal deficit and raise their taxes, and while they think that the bill would help many families, only one in five think they would benefit personally if the bill becomes law. "As a result, more than six in 10 say they oppose the Senate health care bill," Holland said. "Republicans obviously don't like the bill, but two-thirds of independents also say they are against it."
Federal employees making salaries of $100,000 or more jumped from 14% to 19% of civil servants during the recession's first 18 months - and that's before overtime pay and bonuses are counted. The highest-paid federal employees are doing best of all on salary increases. Defense Department civilian employees earning $150,000 or more increased from 1,868 in December 2007 to 10,100 in June 2009, the most recent figure available. When the recession started, the Transportation Department had only one person earning a salary of $170,000 or more. Eighteen months later, 1,690 employees had salaries above $170,000.
We all heard the great news - new unemployment claims were "only" 11,000 in November. Is this it? Are we on the way to recovery? Forecasting unemployment several years out is quite difficult, as there are several significant variables. The Census Bureau estimates that we will add about 200,000 workers per month on average for the next 10 years. So we need to create 200,000 jobs just to keep up with this. However, this is the decade the baby boomers start to retire. This means we will loose people from the workforce every month as they quit working forever. The jobs the boomers give up will count towards the required 200,000 per month.
In past recessions, the trend is clear: hiring doesn't start until a year or even two after the recession is over. Perhaps this recession is over now, and perhaps there won't be a double dip. However, we're still left with about 4 million workers who are working part time due to this recession, Those people will be restored to full time, and perhaps a bit of overtime, before new workers are hired. The underemployment numbers will pick up long before the unemployment numbers.
Manufacturing is a large segment of our work force. This segment has lost a lot of jobs, and many of those jobs are not coming back: it will be a long time before car sales are back from the current 11 million per year to the previous peak of 15 million per year. Retired baby boomers don't buy so many cars, and young people just entering the workforce don't buy a lot of SUVs. When the manufacturing jobs do start to come back, many of them will come back in Asia, not in the US.
Finally, construction is a huge portion of our economy. However, the commercial vacancy rate is up enormously, and three- quarters of all the home foreclosures in this recession cycle are still out there waiting to happen. Building of homes and commercial properties will not recover for at least two more years, and likely three or four.
Mike Shedlock has produced a forecast combining all these effects. You have heard on the news that various economists are saying we should be back down around 5% to 6% unemployment by 2015. Not when Mike runs the numbers through his spread sheet. He assumes the economy adds 150,000 jobs per month starting next year and continuing for the decade, no double dip recession, and no other recessions in the next 10 years. 150,000 jobs per month is better than the economy averaged over the last 10 or even 15 years, so this estimate is optimistic. No recessions in the next 10 years is, in my opinion (and in Mike's), almost hopelessly optimistic. His results: unemployment peaks two years from now at about 11.5%, and stays above 10% through 2015, then slowly declines to about 8% by the end of the decade. Unemployment is what most of us feel, telling us how the economy is doing. We're going to be coughing and sneezing from this little economic flu for the entire next decade.