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Morning Reading

Scott Jagow Aug 13, 2009

This morning, reaction to the Fed’s assessment of the economy. Plus, why in the world did President Obama say what he said about the Postal Service this week? But let’s start with consumer spending. There isn’t any.

Cash for Clunkers sure didn’t do much for the numbers overall. From AP:

The Commerce Department said Thursday that retail sales fell 0.1 percent last month. Economists had expected a gain of 0.7 percent.

While autos, helped by the start of the Cash for Clunkers program, showed a 2.4 percent jump — the biggest in six months — there was widespread weakness elsewhere. Gasoline stations, department stores, electronics outlets and furniture stores all reported declines.

The Washington Post has four economists weigh in on the Fed’s statement yesterday that the economy is “leveling out”. Here a couple of samples:

If America were populated only by economic statisticians (a frightening image) then the worst would be over. Reams of economic data support the notion that, in the words of the Federal Reserve, “the economy is leveling out.” Unfortunately, the labor market remains very weak, unemployment is more likely to rise again than to fall, and real labor income is essentially flat. That combination offers little relief to U.S. households…

At the same time, the federal budget is in disastrous shape, and the Fed’s massive liquidity injections pose a risk of a significant uptick in inflation in the years to come. Americans face the real possibility that “recovery” will consist of paring spending to rebuild wealth, paying higher taxes and facing higher inflation. A new generation may be exposed to the frustrating coincidence of chronically high unemployment and rising prices. So the numbers will be better, but the American psyche will take longer to recover.

If you have lost your job, the worst may not be over for a long time. If you have a job, you may still lose it. The main reason for optimism is that the rapid deterioration of the economy has slowed down. Production and sales may even start increasing gradually in the next few months. For many businesses, the worst may be over. But don’t expect a bounce. Scared consumers are hanging on to their cash, bemoaning the lost value of their houses and trying to reduce their debts…

Public intervention has stabilized the big financial institutions, some of which are making substantial profits. To many this seems unfair, since it was the mistakes of those institutions that caused the crash. Unfair or not, a catastrophic financial meltdown was avoided. We’ll have a long slog back to prosperity, but another Great Depression is not going to engulf us all.

At Real Clear Markets, CNBC’s Larry Kudlow expounds on a rather bizarre comment President Obama made this week:

It’s hard to know why President Obama said what he said at Tuesday’s health-care town hall in New Hampshire. He actually stated, “If you think about it, UPS and FedEx are doing just fine. It’s the Post Office that’s always having problems.”

Oops. Freudian slip? Subliminally speaking, was the president inferring that private health insurers are doing just fine?

…it’s something of a mystery why the president went down the FedEx/UPS/Post Office turnpike. Perhaps the inner Obama is a free-enterprise guy. Maybe in the heat of battle his private-sector FedEx/UPS endorsement kind of, well, slipped out unconsciously.

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