Vanished Jobs & New Economic Stimulus Program
Today’s economic numbers are telling us a lot about where we have been and what could be occurring to us in the future. First, the unemployment numbers came in and they were much worse than most expected. In October we lost 240,000 jobs and had an unemployment rate of 6.5% from 6.1% in September. This is the highest unemployment rate we have had in 14 YEARS! To put 6.5% in perspective the highest that it has gone up recently is in 1982, during a bad recession, the unemployment rate went up to 10.8% before it went down! Most economist including Nobel Prize winning economist Paul Krugman believes that we are going to at least to go up to 8% if we do not go to a double digit number!
So what does this mean?
The increase in unemployement is a very bad sign that we are in a recession. Even though we have seen a positive GDP in the past few months the unemployement number being so high negates the GDP number. It essentially means that the flow of money has stopped and that is why more individuals do not have jobs!
Second, the most shocking number was that from the American automobile industry. General Motors came out with a loss of 6.9 billion dollars in the last quarter! Ford motors came out with a loss of 7.7 billion dollars! Both companies came out and basically said that they want a bailout as well! The question really is - do they deserve to get a bailout? The financial industry was instrumental to the economy so to let them go down would have cost us all a tremendous deal. But is the American automobile industry as important?
New Economic Stimulus Program
So the first economic stimulus plan was not so hot. Remember that stimulus plan that put $ into people’s pockets? Just to let you know - most of that money did not get spent and went into individuals bank accounts. So it was not that great of a plan! So what can be done - that is your question? What would a “New Economic Stimulus Plan” look like?
Some very insightful individuals such as Marc Morial who is the CEO of the National Urban League envision the following:
1) The federal government giving money to states to be used directly for infrastructure such as roads, bridges, community centers. By giving money for these purposes, this creates jobs instantly as well as helping with a large infrastructure issue around the United States.
2) The federal government giving money to the state to create a public service employment job program. This program would give jobs to disadvantaged workers who otherwise would not get a job.
3) Creating longer and more comprehensive unemployment benefits so that those who are unable to get jobs will have a way to take care of themselves.
4) Creating a moratorium on home foreclosures. We have helped the individuals on Wall Street but it is time to create a program to help those on Main Street. This means giving homeowners a pause of possibly 90 days before they go into foreclosure so that they can create a workout with their lender.
5) Incentivizing lenders to create workout plans for their borrowers so that there are fewer foreclosures.
So what do I think?
I strongly agree with incentivizing the lenders and creating a moratorium on home foreclosures. Short sales have not worked. The economic stabilization act is a band aid but the wound is still bleeding, and the only way to stop the bleeding is to stop the foreclosures! The only way to do that I believe is to stop the foreclosures and have the banks create workout plans with the borrowers. The issue has been that the lenders have been very difficult to work with. I support any program that will create jobs and stops foreclosures.
So what are your thoughts on ANOTHER Economic Stimulus Program? Do you believe it would work?
Email me at psingh@rempower.com or leave a comment hear - I am excited every time you all respond.
I will look forward to seeing you in a future workshop!
Prabhjit Singh