Economic Crisis in 2010 and Beyond Job losses will continue to rise

By Jack Rasmus

At the end of 2009, investors, business press pundits, and government policymakers alike reluctantly began to question whether the economic recovery in GDP terms would continue into 2010. Growing almost daily was talk of declining housing prices, rising home foreclosures and mortgage delinquencies, falling tax revenues, growing deficits for state and local governments, and chronic jobs losses occurring at a 200,000 to 400,000 monthly rate—depending on which of the government’s two surveys is chosen. Even government policymakers at the highest levels, Fed Chair Ben Bernanke, for example, admit that job losses may continue for months, possibly several years, and that it will take another five years minimum—until 2016—to get back to a level of jobs that existed in 2007.

In my critique of Obama’s 2009 recovery programs, I argued that there could be no sustained recovery so long as jobs continue to disappear at historic rates and home foreclosures continue to rise by the millions. My further prediction last March that jobless numbers would exceed 20 million by December 2009 was actually exceeded by October. By December more than 24 million of the private non-farm labor force was out of work, according to the U.S. Labor Department’s U-6 unemployment rate.

A second prediction—that foreclosures would continue to rise sharply—also proved accurate, as foreclosures by year end totaled more than six million with some estimates as high as another seven million forthcoming over the next two years. That’s 13 million, more than one in four homes, now estimated will foreclose. No longer a subprime mortgage issue, one-third of the foreclosures in the third quarter of 2009 were prime loans, which make up 78 percent of all U.S. mortgages. These aren’t buyers who got into homes they couldn’t afford; these are owners who have been in them for years and are now losing their homes due to extended unemployment.

From February 2009, the Obama program declared its primary goal was to get credit flowing again, which meant a focus on first bailing out the banks. We were told the bank bailouts were key to getting them to lend once again. Meanwhile, bank lending to U.S.-based businesses that might create jobs has continued to decline every month throughout 2009. A grandiose three-part plan was developed in March to stimulate bank lending (that never happened) by pumping initially $2 trillion into the banks, with a commitment of another $9 trillion if necessary from the Federal Reserve.

My prediction in March was that this bank bailout program—with proposals called the PPIP (Public-Private Investment Program) and TALF (Term Asset-Backed Lending Facility)—would inevitably fail. And so they have. PPIP has all but been dismantled, proving no more successful in getting banks to disgorge their bad loans and assets than did PPIP’s predecessor, TARP (Troubled Asset Relief Program). TALF—designed to resurrect what was in 2007 a $2 trillion market for securitized assets encompassing consumer auto loans, student loans, credit cards, and mortgage loans—has thus far resulted in less than $90 billion in new issues or less than 5 percent of its previous volume.

for the remainder of this article, go to
http://www.zmag.org/zmag/viewArticle/23523

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