The Eek Conomy

You're right, it's getting harder and harder to "eek" out a living, and with inflation headed our way it's not going to get a whole lot easier any time soon. However, there are signs that the meltdown is getting ready to bottom out and level off. It hasn't done so yet, and things are still getting worse. But according to Barry Ritholtz, one of the economists who has a track record of accurate prediction, they're getting worse more slowly.

His opinion contrasts with those of significant interested parties, most notably Ben Bernanke, who saw "green shoots" in the recent market uptick, and says we've bottomed out. Big Ben takes the Hooverish view that prosperity is just around the corner.

Ritholtz explains why Bernanke's optimism is unjustified: "In recent weeks, I have keyed in on 4 data points that the mainstream has spun positively, despite the actual data being horrific. These four factors include ISM data, New Home Sales, Existing Home Sales, and Non Farm Payroll."

ISM stands for Institute of Supply Management, an independent, non-governmental agency which surveys levels of manufacturing activity in the U.S. and reports on the amount of industrial capacity the country is utilizing. Its most recent report shows that U.S. manufacturing activity is continuing to shrink, but not as rapidly as it has for the past year and a half.

New house sales took the biggest one-month jump in 13 years in March, almost 14 percent. But they did so because builders dramatically lowered prices. In some places, like parts of Southern California, house prices are down as much as 40 percent from a year ago. Also, that number, favored by the Wall Street Journal, CNBC, and other corporate media is deceptive because it's a month-over-month figure (March new house sales were up from February's). This category of sales was, we can be sure, way below what it was a year ago, as it was in February: there were over 40 percent fewer sales in 2/09 than in 2/08.

Existing house sales were down in March, but not very much. That market has been considerably less volatile than the one for new houses, but has experienced continuous shrinkage for the past year and a half.

Unemployment statistics are the worst news, as each week hundreds of thousands continue to lose their jobs or have their hours cut back. The government Bureau of Labor Statistics reports 663,000 workers thrown out of work in March. This is fewer than January's and February's frightening numbers of over 700,000 each month, but still intolerable. There are now about 13 and a half million of us out of work, and as long as unemployment remains that high, spending will be depressed and money will be tight, even if the currency inflates and we get "stagflation," like we did back in the seventies.

I suppose we should be glad the economy is not still in free-fall. But don't look for things to get better any time soon. The best we can hope for is that at some point before too long the situation will start to stabilize.

Graph schnorred from the Wall Street Journal.