Economic Snapshot for June 2007

Dr. Christian Weller, Senior Fellow of the Center for American Progress and the Economic Policy Institute, certainly doesn't pull any punches when laying down the economic outlook from June 2007.

Jesus, are things really this bad? Here are some of Dr. Weller's sobering observations:

Wage growth is weak . Factoring in inflation, hourly wages were 2.3% higher and weekly wages were 1.5% higher in April 2007 than in March 2001.

Benefits are disappearing. The share of private sector workers with a pension dropped from 50.3% in 2000 to 45.0% in 2005, the last year for which data are available, and the share of people with employer-provided health insurance dropped from 63.6% to 59.5%.

Family debt is on the rise. In the first quarter of 2007, household
debt fell relative to disposable income for the first time in five years, but
still stayed at a comparatively high 130.7%, the third highest on record. In the fourth quarter of 2006, families spent 14.5% of their disposable income to service their debt—the largest share since 1980.

Families feel the pressure. The share of new mortgages entering
foreclosure was 0.5% in the fourth quarter of 2006, the highest level on record since 1979. The default rate on credit cards grew to 3.9% in the first quarter, an increase of 29.5% over the first quarter of 2006. And the personal bankruptcy rate, measured as bankruptcy cases relative to the U.S. population, grew by 51.5% from the first to the fourth quarter of 2006.

Housing market slows. New home sales increased in April 2007, spurred by an unprecedented decline in prices. The median price of new homes sold dropped by 11.1%, the largest one-month drop since the Census first recorded these data in 1963.

Gas prices rise sharply. In the first week of June, gasoline prices
averaged $3.15 per gallon. In inflation-adjusted terms, gasoline was at its highest level since June 1981 and it was 91.9% more expensive than in March 2001.

Savings plummet. The personal savings rate of -0.8% in the first
quarter of 2007 marked the eight quarter in a row with a negative personal savings rate.

Already weak job growth slows. Monthly job growth since March 2001 has averaged an annualized 0.6%. Over the past 12 months, the average monthly job growth was 160,400 jobs, compared to 213,400 in the preceding 12 months.

Poverty climbs. The poverty rate increased to 12.6% in 2005, the last year for which data are available, from 11.3% in 2000.

The government’s finances deteriorated. In 2001, the CBO anticipated that the government balance between 2002 and 2011 would be in the black to the tune of $5.6 trillion. Today, the CBO projects deficits between 2002 and 2011 of $2.9 trillion. This constitutes a deterioration for the period 2002 to 2011 of $8.5 trillion.

These deficits won’t shrink: Between 2007 and 2016, the CBO predicts cumulative deficits of $1.8 trillion. If AMT reform and permanent tax cuts for the wealthy are included, the total deficit for the next decade would come to $3.5 trillion—even if the costs for the wars in Iraq and Afghanistan drop below current projections in a few years.

This endangers our economic independence. Foreign investors bought 82% of new Treasury debt and the share of U.S. foreign-held debt grew to 46% from 32% from March 2001 to March 2007. The quarterly interest payments from the federal government to foreigners rose to $38 billion in the fourth quarter of 2006 from $21 billion in the first quarter of 2001.

Trade deficit remains high despite strong export growth. In the first quarter of 2006, the trade deficit rose slightly to 5.3% of gross domestic product from 5.2% in the fourth quarter of 2006. Yet these last trade deficits are still larger than any trade deficit since the Great Depression recorded before the third quarter of 2004.

Following last week's approval ratings for President George W. Bush (Only 19% of Americans consider the country to be "on the right track"? Are we sure he's taking pointers on economic policy from the Almighty?), these economic findings just add more fuel to the fire.

Read the full report here.

Good Wages, Low Unemployment Preventing Full Blown Recession

By now it should be clear to everyone "with a pulse" that the U.S. housing market is in the shitter - and it is getting progressively worse.

The Economist this week objectively points out two key factors keeping the U.S. economy from going into a kamikaze nose-dive altogether: Low unemployment at around 4.4% nationally, and for the most part, good wage earnings across the American nation.

We Americans continue to spend like there's no tomorrow, saving as little as f***ing possible, and running up massive debts that can be easily repayed by an anemic and declining U.S. Dollar.

Meanwhile fuel prices are rising and inflation remains uncontrolled.

For now people living in the United States must hold out hope that there will not be a substantial drop in employment in the coming months, despite serious job hits in the real estate, building, construction, raw materials, finance sectors. Substantial jobs losses might be more than enough to send the current teetering-on-the-brink economy over the edge and into full blown economic recession.

But alas, summer is coming, so bring on the bounce of summer employment figures! But it won't necessarily mean a rise in wage earnings - and that is what fuels the insatiable spending that keeps the titanic-sized American economy afloat.