Dear United States, Welcome to the Third World!

It's not every day that a superpower makes a bid to transform itself into a Third World nation, and we here at the World Bank and the International Monetary Fund want to be among the first to welcome you to the community of states in desperate need of international economic assistance. As you spiral into a catastrophic financial meltdown, we are delighted to respond to your Treasury Department's request that we undertake a joint stability assessment of your financial sector. In these turbulent times, we can provide services ranging from subsidized loans to expert advisors willing to perform an emergency overhaul of your entire government.

As you know, some outside intervention in your economy is overdue. Last week -- even before Wall Street's latest collapse -- 13 former finance ministers convened at the University of Virginia and agreed that you must fix your "broken financial system." Australia's Peter Costello noted that lately you've been "exporting instability" in world markets, and Yashwant Sinha, former finance minister of India, concluded, "The time has come. The U.S. should accept some monitoring by the IMF."

We hope you won't feel embarrassed as we assess the stability of your economy and suggest needed changes. Remember, many other countries have been in your shoes. We've bailed out the economies of Argentina, Brazil, Indonesia and South Korea. But whether our work is in Sudan, Bangladesh or now the United States, our experts are committed to intervening in national economies with care and sensitivity.

We thus want to acknowledge the progress you have made in your evolution from economic superpower to economic basket case. Normally, such a process might take 100 years or more. With your oscillation between free-market extremism and nationalization of private companies, however, you have successfully achieved, in a few short years, many of the key hallmarks of Third World economies.

Your policies of irresponsible government deregulation in critical sectors allowed you to rapidly develop an energy crisis, a housing crisis, a credit crisis and a financial market crisis, all at once, and accompanied (and partly caused) by impressive levels of corruption and speculation. Meanwhile, those of your political leaders charged with oversight were either napping or in bed with corporate lobbyists.

Take John McCain, your Republican presidential nominee, whose senior staff includes half a dozen prominent former lobbyists. As he recently put it, "I was chairman of the [Senate] Commerce Committee that oversights every part of the economy." No question about it: Your leaders' failure to notice the damage done by irresponsible deregulation was indeed an oversight of epic proportions.

Now you are facing the consequences. Income inequality has increased, as the rich have gotten windfalls while the middle class has seen incomes stagnate. Fewer and fewer of your citizens have access to affordable housing, healthcare or security in retirement. Even life expectancy has dropped. And when your economic woes went from chronic to acute, you responded -- like so many Third World states have -- with an extensive program of nationalizing private companies and assets. Your mortgage giants Fannie Mae and Freddie Mac are now state owned and controlled, and this week your reinsurance giant AIG was effectively nationalized, with the Federal Reserve Board seizing an 80% equity stake in the flailing company.

Some might deride this as socialism. But desperate times call for desperate measures.

Admittedly, your transition to Third World status is far from over, and it won't be painless. At first, for instance, you may find it hard to get used to the shantytowns that will replace the exurban sprawl of McMansions that helped fuel the real estate speculation bubble. But in time, such shantytowns will simply become part of the landscape. Similarly, as unemployment rates continue to rise, you will initially struggle to find a use for the expanding pool of angry, jobless young men. But you will gradually realize that you can recruit them to fight in a ceaseless round of armed conflicts, a solution that has been utilized by many other Third World states before you. Indeed, with your wars in Iraq and Afghanistan, you are off to an excellent start.

Perhaps this letter comes as a surprise to you, and you feel you're not fully ready to join the Third World. Don't let this feeling concern you. Though you may never have realized it, you've been preparing for this moment for years.

rbrooks@latimescolumnists.com
Source L.A. Times

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Why the 'Recovery' Is Taking So Long



Reuters – Obama: Economy "turning corner".

Play VideoVideo:Jobs March Back ABC News

By Rick Newman – Fri Apr 2, 1:45 pm ET

If the economic recovery seems like a mirage, you're not imagining things.
The data show that the economy has stopped shrinking and started growing, which is good news no matter what. Economists broadly agree that the recession probably ended last summer, which means things ought to be getting better. Yet jobs are still scarce, the housing bust continues, consumers and businesses remain skittish, and many families are barely muddling through. "It's a recovery, yes," says Nariman Behravesh, chief economist for forecasting firm IHS Global Insight. "But it sure doesn't feel like it."

[See how to tell if you're keeping up with the middle class.]
Part of the reason for the slow-motion recovery is the depth and nature of the recession that preceded it. A Federal Reserve study of the past three recessions found that employment, income, spending, stock prices, home values, and wealth all fell much more sharply during the 2007-2009 recession than after the downturns of 2001 or 1991. Loan delinquencies and bankruptcies, correspondingly, rose much faster. That leaves a lot of damage to repair.
The economy also takes longer to recover from recessions these days, like an aging patient who requires more time to bounce back from an injury in his 50s than he did in his 20s. It's not entirely clear why, but technology and globalization probably allow companies to wait longer before they start hiring American workers after a spate of downsizing, which in turns dampens confidence and spending. Here's how long it took for the unemployment rate to peak and start declining after the recessions that ended in the following years:

--1982: 1 month
--1992: 15 months
--2001: 19 months
--2009: ???

Economists aren't sure yet what month the latest recession ended, but August 2009 is a good guess. If the recovery matches the pace from the early 2000s, the unemployment rate, now 9.7 percent, would continue to drift higher for another year, and not start to come down until early or mid 2011. And it could take longer.

[See how to rebuild after losing your fortune.]
A few things are going right. Corporate profits are strong--thanks to all the layoffs and cost-cutting of the last two years--which means companies are in a good position to hire once they're confident that the economy is getting stronger. Interest rates are low, energy prices are manageable, inflation isn't a problem, and the stock market rally has restored some wealth for people lucky enough to have an investment portfolio. But that's not enough. Here are six of the most stubborn problems preventing a more robust recovery:

Weak credit. Banks are working through trillions in bad loans and slowly getting healthy again. But virtually every kind of lending--for homes, cars, credit card purchases, small businesses, and even big corporations--remains depressed. And tight credit slows many other kinds of economic activity, since consumers and business typically can't make big purchases with cash. Behravesh says lending could pick up by late this year or early next year--although that would probably be the point at which the Federal Reserve starts to raise interest rates, to subdue inflation.

Stagnant income. After falling during the recession, incomes are inching up, but few are feeling flush these days. A glut of unemployed workers is likely to depress wage growth for years, which will keep companies' costs low but consumers' wallets thin. And of course many households with a laid-off or underemployed family member are getting by on far less income. The only real boost to incomes has come from government subsidies, and many of those were temporary stimulants that are set to expire.
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Tepid spending. Consumers have surprised economists recently by spending more and saving less than expected. But the splurge probably won't last. Temporary incentives like unusually aggressive deals on cars in March and the soon-to-expire tax credit for home purchases could be pulling forward sales that might otherwise have happened later in the year. And with many households still paying down debt and trying to rebuild wealth lost in the housing bust, savings seem certain to rise well above the 3.1 percent rate they're at now. That means demand for cars, homes, appliances, and nonessential products--which constitute a huge chunk of the economy--will stay weak for a long time.
Dismal confidence. Americans remain gloomy, which most consumer-confidence surveys showing only modest improvements from the low points hit during the recession. The most obvious reason is the weak job market and a sense that the end of the recession will be followed by a prolonged period of malaise rather than a crisp rebound. Businesses aren't much cheerier, since many are struggling to get loans and increase revenue, instead of just cutting costs. Deep doubts about the recovery mean that businesses are likely to hire very slowly, and consumers, when in doubt, will save rather than spend.
[See how to live happily on 75 percent less.]

Reeling real estate. The epic housing bust that triggered the whole recession is moderating, but it still isn't over. Moody's Economy.com predicts that house prices, which have fallen more than 30 percent from their 2006 peaks, could still fall another 5 to 10 percent through the end of this year. A housing rebound isn't likely until 2011 at least. Foreclosures are likely to keep rising this year, and the end of several government programs meant to boost housing could worsen the situation. The continued fall of home prices will further gnaw at Americans' net worth and depress a sector that accounts for about 15 percent of economic activity. The commercial real-estate market is also in lousy shape, with thousands of overbuilt properties and rising loan defaults stressing many regional banks.
Scarce jobs. It all comes down to jobs, and a pickup in hiring is likely to be painfully slow. The latest data show that layoffs have largely abated--but the damage from the recession is profound. About 8 million jobs have disappeared since the end of 2007. More than 15 million Americans are out of work, with many others working less than they want. "An extraordinarily high share of unemployed workers have been idle for long periods of time," according to Moody's Economy.com. "It will take years for the millions of displaced workers to find their way back into the labor market." Others who are so discouraged that they've stopped looking for work will re-enter the labor force as the economy improves, which could push the unemployment rate back up over 10 percent, even with a net gain in jobs. Still, workers who have managed to stay employed until now will eventually start to worry less about losing their jobs, which will boost confidence and everything else that stems from that. Gotta start somewhere.

Economy adds jobs at fastest pace in three years

Economy adds 162,000 jobs for March, strong sign that recovery is finally taking hold

Buzz up! 123
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In this photo taken Tuesday, March 30, 2010, job seekers wait in line to attend a career fair put on by National CareerFairs in San Jose, Calif. Hundreds turned out for the three-hour event in search of a job. The nation's economy created the largest number of jobs last month since the recession began, while the unemployment rate remained at 9.7 percent for the third straight month.(AP Photo/Eric Risberg)

Jeannine Aversa and Christopher S. Rugaber, AP Economic Writers, On Friday April 2, 2010, 6:22 pm EDT
WASHINGTON (AP) -- The nation added jobs at the fastest pace in three years last month as factories, stores, hospitals and the census all brought workers on board -- the surest sign yet that the worst employment market in a generation has finally snapped back.

The unemployment rate stayed at 9.7 percent for the third month in a row, the Labor Department said Friday. Economists actually consider that a hopeful sign because it means more people are encouraged and starting to look for work.

"This recovery is for real," said Chris Rupkey, economist at the Bank of Tokyo-Mitsubishi.

Overall, the economy added 162,000 jobs for the month. About a third of the gains came from the census, with much more to come: About 700,000 head-counters will be hired to tally the nation's population this spring.

Economists took heart that even aside from the population count, the private sector added 123,000 jobs for the month, the most since May 2007.

Hiring is not expected to be robust enough anytime soon to significantly bring down the unemployment rate. Economists think unemployment will probably still be above 9 percent by the November midterm elections, making Democratic and Republican incumbents in Congress vulnerable, particularly in hard-hit states such as Michigan, Nevada and Rhode Island.

President Barack Obama seized on the positive numbers in the jobs report and took partial credit for them. But with 15 million people still out of work, he also acknowledged that the economy will be recuperating for a long time to come.

"We are beginning to turn the corner," he told workers at a battery plant in Charlotte, N.C., that received government stimulus money. But he added: "We shouldn't underestimate the difficulties we face."

House Republican leader John Boehner of Ohio said a jobless rate near 10 percent is "no cause for celebration." The unemployment rate peaked at 10.1 percent in October, a 26-year high.

No one disputes that the job market is still bleak. Counting people who have given up looking for work and part-timers who would prefer to be working full-time, the so-called underemployment rate rose to 16.9 percent in March.

But Friday's report from the Labor Department at least provides firm evidence that the job market is on the right track, even if it will be a long journey for the millions of Americans who want work but cannot yet find any.

"The economy is moving in the right direction, albeit at a torturously slow pace," said Paul Ashworth of Capital Economics.

Economists do not expect the jobless rate to drop to something more normal -- like 5.5 percent to 6 percent -- until the middle of this decade.

In the meantime, economists are concerned that hiring now appears to be concentrated among large companies -- a sign that small businesses, which typically lead job creation in the early stages of a recovery, are having difficulty getting financing from banks.

In March, the education industry led job creation, followed by health services and government. Those sectors, plus others like the hospitality industry, manufacturing and retail, will continue hiring as the recovery picks up, economists say.

For example, Sodexo Inc., a large food services company based in Maryland, plans to fill thousands of openings for cooks, servers, cashiers and other positions. Demand for food services is on the rise again at schools, hospitals and corporations.

"We're really very optimistic that this is not a blip," said Arie Ball, the company's vice president for human resources.

Although construction companies added jobs last month, it was seen as a temporary snapback from February, when snowstorms along the East Coast idled many construction jobs. The real estate market is still fragile in much of the country.

Other pockets of weakness include financial services, publishing and state and local governments, which are grappling with budget crises from coast to coast.

In Fairfax, Va., Merrifield Garden Center is looking to hire 100 people -- more than it added last spring.

"With the attitude of the economy swinging around, we will continue to add positions here," said Peter Hogarth, the store's manager.

More of the applicants this year are people who were laid off from higher-paying white-collar jobs, Hogarth said.

Nationwide, average hourly earnings fell by 2 cents in March to $22.47. Stagnant wages are a big reason people are still hesitant to spend money, a drag on the overall economy.

The number of people out of work six months or longer reached 6.5 million in March, a new high. The number of people forced to take part-time work in March rose by 263,000, to 9.1 million.

The worst recession since the 1930s has wiped out 8.2 million jobs, making the competition for any openings fierce. On average, there are five or six unemployed people competing for each opening, according to government data.

Elaine Murszewski of Aurora, Colo., who was laid off by a software company a year ago, has found only found openings for lower-paying jobs. Taking one would end her unemployment benefits, roughly $11 an hour, and force her to continue digging into savings to get by.

"I can't believe this," she said.

Paula Hartland, on the other hand, snagged a job last month in communications at Children's Healthcare of Atlanta after being laid off in January, and urged job-seekers to not give up hope.

"You kind of have to ignore all the negative news," she said. "You have to put all your time and energy into networking into those companies where you want to work."

AP Business Writers Chris Leonard in Kansas City and Anne D'Innocenzio in New York contributed to this report.

Idiot - many of these jobs are stupid jobs that don't need doing ayway. Others just take work away from other workers. A thirty five hour week like France and 6 weeks holiday a year are needed to reduce unemployment.
S.