The Soft Underbelly of the American Economic Recovery

There are always two sides to every story, dear readers, and today we're going to take a (much shorter) look at American and European economic data. First, Europe. Italy has delayed the payment of €40 billion the Italian government owes to private companies. This could indicate that Italy has a cash flow problem, that its tax receipts plus borrowing in the form of selling bonds, is currently insufficient for current debt payments. In any case, Italy's payment delay will certainly weigh heavily on Europe's already weak economic situation. It will also raise the spectre of another bailout, and the possibility of a second bank deposit seizure, this time in the heart of Europe, as the price of the bailout. In addition, today the French government asked Germany for an extension in the time required to meet its deficit target of 3% of GDP. This is no surprise since France's weak economy has made analysts begin to talk about it as the bailout bull in Europe's china shop. But it should alert the fibancial world to the general European economic and fiscal fragility. It should also remind us that the EU's 3% of GDP national budget deficit targets are not going to be met - not for the foreseeable future and for many EU countries, probably never. Now, for the soft underbelly of fiscal and econonic news in the US. In March, America added only 88,000 jobs, down from 283,000 added in February. This is the biggest drop in 4 months. And labor force participation in March was down to 63.3% from 63.5% in February - the lowest participation rate since 1979, which shows shrinkage in the number of people working or looking for jobs and is an indication of the structural shock the US received in 2007-2009. As President Obama began the first year of his second term, the US poverty rate rose to a level not seen since the 1960s, reflecting a fundamental failure of government policy. The Census Bureau says that 50 million Americans, roughly one in six, or almost 17%, are living below the poverty line, which is defined as earnings of less than $23,021 a year for a family of four. An estimated 20% of the nation's children are living in poverty. Of course, this is not headline news at the New York Times or Washington Post or on any of the networks that have become cheerleaders for President Obama. The mainstream press is so busy praising Obama that it misses or omits the disastrous economic details that Obama's policies have created. And the 50 million Americans living below the poverty line aren't the only marks of Obama's failure. Since the economy began its tentative recovery just a few months into his first term, the unemployment rate has been disastrous. It sits now at 7.7%, down from its peak of 10% in October 2009. But while that might seem an improvement, it's not. If the labor force participation rate were the same as it was when Obama took office, the unemployment rate would be higher than 12%. Another negative statistic is annual American GDP growth. Obama's average GDP growth has been less than 2% per quarter. In the last quarter of 2012, it was an almost non-existent 0.4%. For all of 2011, GDP growth was 1.8%, in 2012 it was 2.2%, below the 2.5% to 3% pace that most economists believe is the norm. The Obama White House had forecast 4% growth in each of these years. And, remember that the recession ended in June 2009, before Obama's policies could have had a positive impact on the economy. The economic weakness and joblessness of the American recovery occurred after the implementation of his policies - the nearly $1 trillion stimulus, tax hikes, ObamaCare, and greatly increased regulation and reporting burdens. All totalled, under Obama, the poverty rate grew from 14.3% in 2009 to 15.1% in 2010, then fell to 15% in 2011 before jumping to today's rate. A man who has promoted himself as a defender of the poor and middle class should have a better record. But as long as he refuses to give up on often-tested and always failed leftist-socialist policies, he never will. ~~~~~ So, dear readers, after two days of economic numbers and statistics, it is diffucult to say positively that the US has turned the corner definitively and put the Great Recession behind it. But, the US economy is moving forward in many important areas and is ready to turn that corner as soon as the President gets out of the way.