Friday, August 8, 2008

Neighborly Recession

Everyone knows when your neighbor is out of work it's a recession, when you are, it's a depression. The Bloomberg chart of continuing jobless claims looks rather depressing I'd say.
The economy will turn around before the unemployment figures and we have to stay ahead of the curve, not behind it. That being said, it looks like we have further to go and more pain ahead.

What makes this picture so troubling from a public policy position is that consumers, the primary engine of the US economy, are not in good shape to weather a recession other than their neighbors'. Individual balance sheets are in tatters for many. The principal asset, their home, is losing equity value and in many cases already gone. With the largest number of mortgages in trouble ever, extremely low savings and high consumer debt, the loss of a job can mean disaster. Without a savings reserve in place, the home equity loan atm machine closed the prospect of foreclosure for many will only get worse.

This economy has some tough work ahead