Lots of good news in today's unemployment and jobs data released by the Bureau of Labor Statistics. Essentially, they show that the economy stabilized in June and July:
1. The unemployment rate went down slightly. It went down from 9.5% in June to 9.4% in July as shown in the graph below:
2. The fall in manufacturing jobs losses seems to be slowing. Here's the chart:
The United States economy is no longer rapidly declining. The direction of the economy now depends upon the dollar. In October the dollar rose dramatically against other currencies. In recent months the dollar has returned to its pre-October levels. If the dollar continues to fall, compared to other currencies, exports would increase, business investment would pick up, and manufacturing employment would increase. However, I expect that US Government borrowing and mercantilist government currency manipulations will prevent the dollar from falling.
Think of the economy as a tire. Bush and Obama have been pumping up the economy by borrowing money and spending it. So far the pressure in the economic tire has been collapsing so fast, due to the consumer debt problem, that the trade deficit leak has been diminishing, despite their pumping.
Now Obama is pumping fast enough to keep the tire from deflating. This is where the trade deficit leak foils his plans. The more the pressure grows in the tire, the higher the trade deficit leak will grow. The trade deficit will foil the recovery, unless his administration does something to address it. The expected result: economic stagnation.
Disclosure: No Positions
