More Unemployment and Bank Failures Expected

Though most mainstream news is citing a decline in unemployment as proof that the economy is stabilizing, the New York Times suggests that if you:

Include [those who have given up looking for a job and those part-time workers who want to be working full time] …then the rate is:

23.5 percent in Oregon

21.5 percent in both Michigan and Rhode Island and

20.3 percent in California.

The Times wrote a second article on August 7th pointing out that the unemployment rate had only declined because 400,000 people gave up their search for work and left the labor force. PhD economist John Williams wrote that accurate unemployment figures rose from 17.5% in December to 20.6% in July. Indeed, former Secretary of Labor Robert Reich wrote in April that the unemployment figures show that we are already in a depression.

[In the first Great Depression] there was a huge rally after the initial 1929 crash, before the bigger second wave down of the Great Depression hit. People forget that unemployment did not hit 25% until the fourth year of the Great Depression.

Former International Monetary Fund Chief Economist and Harvard University Economics Professor Kenneth Rogoff and University of Maryland Economics Professor Carmen Reinhart forecast in February that unemployment could reach 22% within 4 years.

Additionally, the Congressional Oversight Panel on the bailouts issued a report saying that small and medium sized banks are especially vulnerable, in part they hold greater numbers of commercial real estate loans, "which pose a potential threat of high defaults." Indeed, largely because of the commercial real estate crash, the FDIC expects 500 banks to fail in coming months.

[Excerpted from Washington’s Blog]