All About The Onion: 63,000 Jobs & An Economy Without A Core

It’s difficult to find anything to smile about in the latest jobs report. Despite the assurances from the Bush administration that the economy remains strong, each new report brings evidence that we’re in a recession. It looks like the administration is either in denial or simply employing the same “head in the sand” mindset that spent the last five years telling Americans that the situation in Iraq is improving. Despite the president’s rosy rhetoric, I choose to believe that the data doesn’t lie.

The current economic uncertainty reminds me of a metaphor shared by a friend many years ago. While discussing borderline personality disorder, a psychological condition prone to sociopathic behaviors, she described it as being akin to comparing an apple to an onion. The normal personality is like an apple, in that it has a core; whereas with the onion, you peel away layer after layer to find that no core exists.

It’s not a perfect analogy, but it underscores my belief that this latest period of economic expansion has lacked the essential fundamentals to insure economic stability. When one strips away the facade of inflated home values…driven by artificially low interest rates…all that remains is a tenuous economy in the throes of adjusting to the instability and uncertainty of globalization.

The economy shed 63,000 jobs in February, the government said on Friday, the fastest falloff in five years and the strongest evidence yet that the nation is headed toward — or may already be in — a recession.

“I haven’t seen a job report this recessionary since the last recession,” said Jared Bernstein, an economist at the Economic Policy Institute in Washington. “This is a picture of a labor market becoming clearly infected by the contagion from the rest of the economy.”

The loss in February was the second consecutive monthly decline in the labor market; economists had predicted a slight increase. The government also revised down its estimate for January to a loss of 22,000 jobs — the first decline in four years — and cut in half its estimate for job growth in December.

Wages stayed stagnant in February, further depressing the outlook for consumer spending over the next few months. Among rank-and-file workers — more than 80 percent of the work force — average pay grew just 0.3 percent to $17.20 an hour. Wages are effectively running flat when adjusted for inflation.

These job losses are only one segment of the current economic downturn. Truth be told, the housing crisis and its impact on financial markets looks to be an unprecedented debacle that has yet to fully unfold. The efforts of the Federal Reserve to reduce interest rates and make huge amounts of capital available to struggling financial institutions is a testament to the severity and complexity of this crisis.

I suspect the powers that be are hesitant to offer a candid assessment for fear it will trigger even more caution on the part of consumers. To a degree, that is prudent. Unfortunately, this snowball is already rolling and I see little reason to offer false assurances that it won’t continue to expand. I look for the government to make added admissions in much the same manner found in a criminal investigation…as more evidence is unearthed, the administration will find itself unable to continue with the denials.

Look no further than a comparison to the Saving & Loan scandal of the late 80’s to understand how the government will attempt to downplay the gravity of the situation. Sadly, I’m concerned this fiasco may be far more pervasive. While the S&L scandal was primarily isolated to commercial real estate, the current crisis involves residential real estate and millions of homeowners. That alone suggests a greater magnitude; one that will strike a blow to a core source of economic growth…consumer confidence and spending.

I don’t want to be an alarmist, but I see a unique and troubling confluence of conditions that have the potential to challenge our existing economic constructs. The growth of multi-national corporations with GDP’s that rival those of many nations serves to undermine the assumption that all Americans share similar economic objectives with consistent measures of success. It simply isn’t true in this day and age of global investments and the outsourcing it facilitates in order to increase the bottom line. When the goals of a huge corporation no longer comport with the goals of their nation of origin, the established economic models have become outdated and virtually irrelevant.

I realize I’m painting a gloomy picture. At the same time, I’m convinced that the American public must demand an honest assessment and an open dialogue with regard to these dramatic developments. If we allow our politicians to plot the course…in conjunction with their corporate benefactors…we may find ourselves in a conflict with the United Empire of ExxonMobil…a conflict that we can neither overcome or endure.

On that dark note, I think the following video from The Onion captures much of the essence of this shifting economic construct. It made me laugh…but as with all comedy…it also underscores an undeniable truth that requires our consideration.

The Onion: Outsourcing Child Care Overseas

Cross-posted at Thought Theater

3 Responses to “All About The Onion: 63,000 Jobs & An Economy Without A Core”

  1. Lisa Says:

    Cheer up Daniel, you are going to have a democrat controlled governement soon and they are going to create temporary jobs to boost the economy.

  2. Liberal Jarhead Says:

    The President’s assurances that we aren’t in a recession are like the guy who fell off the roof of a skyscraper shouting “So far so good!” as he falls past the third floor.

  3. manapp99 Says:

    Daniel, if you could roll back the clock and be the economy God, what would you change. Would you change the global economy to having all the chips held by a few rich countries? A protectionist economy? Where as US companies have shipped jobs overseas, the countries that got the jobs are better able to provide food and medicine for their citizens. Would it not be selfish on the part of rich nations to not allow the poor countries into the economic pool just to continue the rich life style we have always enjoyed? Would you have favored a socialistic economy to a capitalist? Trusting that big government would do better than big business?

    You do not want to allow politicians to “plot our course” Here is an area in which I agree completely. The degree that government gets involved is typically a detriment to a good economy.

    Here is an interesting take on the current sub prime issue and the governments involvment going back to the Carter years:

    It is entitled “How the government makes things worse”

    An excerpt:

    “The subprime mortgage collapse is another tale of unintended consequences.

    The crisis has its roots in the Community Reinvestment Act of 1977, a Carter-era law that purported to prevent “redlining” - denying mortgages to black borrowers - by pressuring banks to make home loans in “low- and moderate-income neighborhoods.” Under the act, banks were to be graded on their attentiveness to the “credit needs” of “predominantly minority neighborhoods.” The higher a bank’s rating, the more likely that regulators would yes when the bank sought to open a new branch or undertake a merger or acquisition.

    But to earn high ratings, banks were forced to make increasingly risky loans to borrowers who would qualify for a mortgage under normal standards of creditworthiness. The reinvestment act, made even more stringent during the Clinton administration, trapped lenders in a Catch-22.

    “If they comply,” wrote Loyola College economist Thomas DiLorenze, “they know they will have to suffer from more loan defaults. If they don’t comply, they face financial penalties . . . which can cost a large corporation like Bank of America billions of dollars.”

    Banks nationwide thus ended up making more and more subprime loans and agreeing to dangerously lax underwriting standards - no down payment, no verification of income, interest-only payment plans, weak credit history. If they tried to compensate for the higher risks they were taking by charging higher interest rates, they were accused of unfairly steering borrowers into “predatory” loans they couldn’t afford.

    Trapped in a no-win situation entirely of the government’s making, lenders could only hope that home prices would continue to rise, staving off the inevitable collapse. But once the housing bubble burst, there was no escape. Mortgage lenders have been bankrupted, thousands of subprime homeowners have been foreclosed on, and countless would-be borrowers can no longer get credit. The financial fallout has hurt investors around the world. And all of it thanks to the government, which was sure it understood the credit industry better than the free market did, and confidently created the conditions that made disaster unavoidable.

    “No man’s life, liberty, or property is safe,” warned Mark Twain, “while Congress is in session.” Mark Twain was a humorist, but that was no joke.”

    Further, I disagree that we have not seen crises that rise to the level of the current one. The S & L that you mentioned WAS a major crises that caused the collapse of more than 1000 banks. World war II almost bankrupted the country as we spent more than 1/2 of GDP fighting it. Compared with Iraq being approx 1% and total defense being about 4% today.
    The Tech bubble burst in the 90’s led to the great disapearing act of many 401Ks then there was 9/11 on the heels of the 2001 recession. Of course we cannot forget the great depression that lasted from 1929 to WWII.

    Of course we will not be truly able to judge the depth of the current crises until further down the road but I feel you are being especially pesimistic given the data currently available.

    Lastly, I think you are wrong about our economy having no core. Clearly the core is capitalism. Our economy is built on allowing individuals to build wealth by marketing the skills or wares they possess. It rewards risk taking with wealth if successful and the chance to try again if not. It allows everyone from all stations the ability to rise above their current enviroment instead of just a few born into power.

    I am curious as to what a President Daniel DiRito would do?

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