Is the economy on an upturn?

[TotallyOz]

I hear news reports all the time that the recession (I think Depression) is ending and on an upturn. I have not seen it yet. Now this:

WASHINGTON (Reuters) — The unemployment rate hit 10.2% in October, surpassing 10% for the first time since 1983.

The Labor Department also said Friday that employers cut a deeper-than-expected 190,000 jobs in October. It revised job losses for August and September to show 91,000 fewer jobs lost than previously reported.

Analysts polled by Reuters had expected payrolls to drop 175,000 and the jobless rate to edge up to 9.9% from 9.8% in September.

The labor market is being watched for signs whether the economic recovery that started in the third quarter can be sustained without government support. The economy grew at a 3.5% annualized rate in the July-September period, probably ending the most painful U.S. recession in 70 years.

Payrolls have declined for 22 consecutive months now, throwing 7.3 million people out of work since December 2007, when the recession started.

Counting those who have settled for part-time jobs or stopped looking for work, the unemployment rate would be 17.5%, the highest on records dating from 1994.

However, the pace of layoffs has slowed sharply from early this year, when nearly three-quarters of a million jobs were lost in January. In October, job losses were across almost all sectors, with education and health services and professional and business services bucking the trend.

Manufacturing employment fell 61,000 last month, while construction industries payrolls dropped 62,000.

The service-providing sector cut 61,000 workers in October and goods-producing industries slashed 129,000 positions. Education and health services added 45,000 jobs, while government employment was flat.

[Guest EXPAT]

Technically, the recession is over. It's only defined as the GDP growth in the previous quarter which we had in Q3 of the year. Job growth is always the last thing to recover. And since that is what hits people the most, it is hard for people to get that recovery is on the way.

I also believe that companies went a bit overboard in layoffs this year. It's never a good PR move to lay people off. But when a recession hits, it provides "a good excuse to downsize" more than you might normally because you can always site economic conditions. So I think there was a bit of overkill in downsizing many companies this year. The big question is whether they will hire back as revenues get better. That will be the real test.

And of course Wall Street has always celebrated layoffs because it usually means more profits. So it is a catch-22 situation.

[Guest Conway]

I don't think that there's any way that one can realistically say that the economy is in recovery. The third quarter GDP results that the media pundits are basing these statements on are driven by a number of artificial stimulants such as cash for clunkers and other elements of the Obama stimulus program.

In my opinion, there are three elements missing that are necessary to call this a recovery.

The first is a stabilization of employment. Today's news on unemployment marks a drastic increase in that number that is reflective of the fact that companies are still reliant upon cutting costs to make profit.

Second is a lack of consumer spending and confidence in the economy. Until we see that, industry will continue to cut expenses to meet its bottom line obligations to its shareholders.

Third, the availability of credit to small and middle market businesses remains frozen forcing those who are illiquid to seek more expensive alternatives such as the factoring of receivables at deep discounts to meet cash flow needs.

The recent bankruptcy filing of CIT will only serve to tighten the credit market to manufacturing companies even more. They were a substantial provider of trade credit to the manufacturing and garment industries.

Banks will begin lending again when they are confident that the risk associated with the current residential and commercial real estate crisis has passed and they no longer have to set aside excess cash to reserve against losses. The good news is that present indications are that the commercial real estate market problems do not appear to be as deep as the problems in the residential real estate market have been.

The only recovery we have here is the one that exists in the minds of the President's PR team. Until Americans begin working (and spending) again and banks keep lending tight due to regulatory concerns, there will be no natural recovery of any substance in this country.

My expectation is that things will get worse in 2010 and 2011 with unemployment reaching the 11-12% range before all is said and done. We likely won't see this recovery extend itself beyond one or quarters until early 2012. By 2013, we should be in a scenario where growing GDP is the norm again and unemployment falls back to more acceptable levels.