Saturday, November 7, 2009

The Bad Econ Report That Nobody's Talking About

Yesterday, all the talk was about the unemployment rate hitting 10.2%.

As most economists will tell you, and what the White House made clear, over and over again, yesterday, unemployment is a "lagging" indicator that can take months to improve; even after the economy is roaring again.

But also yesterday, a not-hardly-lagging report was released and it showed that this economy is still in deep trouble. That number, Consumer Credit, fell by almost $15 billion last month (Click to See Full Story: "Consumer borrowing drops $14.8B in September"). Since most economists had predicted a $10 billion dollar shortfall, this latest credit number was 50% worse than expected. A completely horrible number!

As I have said before, the economy isn't going to get rolling again until the consumer starts to buy stuff. What this drop in consumer credit is really saying is that consumers bought fewer items than they did the month before; and, to the tune of $15 billion. In the month before that, they bought $10 billion less stuff than they did in the month prior to that. In fact, on average, Consumer Credit for revolving credit purchases has been accelerating to the downside almost every month this year (Click to See the Monthly Chart from Briefing.Com).

Since 70% of this nation's economy is driven by consumer buying activity, this number only reflects that they aren't willing to take on the kind of credit card debt that is needed to make the purchases that will ultimately put people back to work. Obama's so-called Stimulus Package completely ignored this simple fact and, instead, focused on everything else. His measly $13 a week tax credit was hardly enough to cover the cost of an average family's weekly newspaper and coffee expenses; let alone get them in the stores to buy the things that would really put people back to work. As long as consumer credit continues to falter, so will the unemployment rate continue to rise. It's as simple as that!

No comments: