William M. Wright's  Instablog

China Can You Spare A Dollar?

by William Wright

If China or the oil rich nations are wondering what to do with their new found wealth and extra US dollars...they could buy gold.  And with their spare coins they should consider buying Detroit. 

Think you've seen some real-estate bargains over the last year?  Check out the Detroit real-estate market bargins. A once great domed football stadium, built as just one part of the Detroit area mid-70's  revival plan, just sold for 1% of what it cost taxpayers to build.

Silverdome Stadium Sells For 1% Of Its 1975 Cost To Build

The Pontiac Silverdome — once home to the NFL’s Detroit Lions — was just sold for $583,000, or about 1% of the $55.7 million it took to build in 1975. The land along probable sold for $3-5 million in 1975. 

Many may still be depressed over the economy for lots of good reasons.  

Still, we have had a positive string of green shoots sprouting this spring through fall. The September and October weekly unemployment reports contained positive signs too.

Yes, the bad news of 17% remains with us.

The total measure of the unemployed and underemployed is around 17%. This may be the worst since the great depression.  And while every administration harps on the need for more college degrees, our nation has never had so many unemployed and underemployed college degreed people as now. 

Yet, let's now look at a positive sign. 

The fact that new unemployment claims as a percentage of the labor force have been declining is the positive. This is always a good leading economic indicator.  

But we now face the new great American economic phenomena know as "Jobless Recovery"  

This means unemployment will continue to remain above 9% and yes, even rise to 10% over the next 6 months even as we here news the official recession probable ended this summer. One economic report I read says the economy will improve but unemployment is likely to still be around 8% in 2012 due to our economic situation.

It's not that history must repeat itself -it's that the sands of time have shifted

As a result of are outsourced and imported economy, beginning in  1991 American began experiencing what economist call "Jobless Recovers". In other words unlike the 50's, 60's, 70's and 80's were we saw big spikes in job hiring at the end of recessions, we no longer see large job creation improvements. 

Unlike like those past decades we now purchase much (maybe most) of what we buy from foreign lands. That's were the most new jobs are being created as we recover.  In fact the economic training I and every economist gets totally ignores the negative impacts of importing more than you export on jobs and employment. Instead, economist will dwell all day on elementary examples of the benefits of "Comparative Advantage" which like their theory of "The Rational Man" has value but are far to simplistic to exist in a complex world of humans and changing economic tides.

You will be hearing more of this cherry coated term, jobless recovery, in the future. 

Economist will dance around the causes of this issue, often claiming more research is needed. Their Economic training and tenured Ivy towered professor jobs limits their understanding of the real world trade issues.

The U.S. economy expanded at a 3.5% annual pace in the third quarter, as massive government stimulus helped drag the economy out of the longest and deepest recession since the 1930s. I've broken down the GDP drivers by its sub-components for you.

The 3.5 percent GDP growth rate in the July-to-September quarter represented the first positive growth, after four straight quarters of declines.

It was the largest gain in two years. But the concern is that this growth will falter given the huge problems still facing households.

Yes, much of the increase can be attributed to the governments controversial Cash-for-Clunkers and New Home Buyers refundable tax credit program.  The real test for the economy will be the upcoming Q4 2009.

In August and September the outlook for shipping and dry bulk shipping rates, was very poor even while the stock market surged up in September.  This resulted in more articles predicting Stock market doom. But in October the rate has moved up, as world trade in the Atlantic is improving.  The rate has moved up about 30% .

Dry bulk shipping's Baltic Dry Index (BDI) is back on the up, just shy of breaking the 3,000 level once again. What's striking about the rally is that Fearnleys highlights strength in the Atlantic (not pacific) as a key driver of recent strength.

Fearnleys reports: