If anyone had any doubt that the subprime mortgage/credit crisis is taking its grim toll on other aspects of the U.S. and world economy, here’s a sobering figure:The unemployment rate skyrocketed to 5 percent (and,yes, that is considered high for the U.S. and a sign of a faltering economy) while employers added only about 18 thousand jobs last month.
Many economists are now saying this could be a critical warning sign that the nation’s economy is slipping into a recession—defined as an extended period of a shrinking economy and growing unemployment at the same time. Sound familiar?
There are predictions that the Fed, yet again, will lower key interest rates for banks in an effort to inject some energy into the economy.
The stock market, of course, took its own nose dive the day the negative numbers were revealed and there is little reason to believe that the market won’t continue its wild roller coaster ride.
Sure, there are other factors impacting our economy–oil prices hitting $100 dollars a gallon,political instability in many parts of the world (hint: Pakistan!) not to mention the steady decline of the U.S. dollar against the Euro.
But, even these can be linked back to the sub mortgage crisis in the U.S. which,afterall, really became a credit crisis long ago. Banks, governments,businesses and people do not like the notion that credit, in a credit driven world, is now hard to come by, even for relatively good customers.
True, the glut of unsold houses is bringing the price down, but people thrown out of work, or unable to find jobs, or credit or both, are not likely to be buying up all those hulking shells.
Yes, there are small parts of the country where we do see some light–but don’t count on it being at the end of the tunnel.
2008 is likely, think many economists, to be a year of still more foreclosures, ever tightening credit markets, fewer jobs and maybe even an honest to goodness recession.
See why when it comes to the real estate market here the knee bone is very much connected to the leg bone—and that bone appears to be fractured.