EMPLOYMENT & GROWTH DISCONNECT

GDP grows!...JOBS shrink?

ECONOMY GROWING with LESS JOBS

How can the economy grow while businesses are cutting jobs? How can fewer employees produce more goods & services? How can the government crow about 7.2% GDP growth while the unemployed stay that way for longer periods of time and have less opportunities for employment going forward? How can we be doing better when so much is doing worse? why is there such an obvious disconnect between the prosperity and the problems?

I am not sure who is going to be happy about the recent news that the economy grew at its fastest pace in 20 years when the labor market continues to cut jobs. the presidents economic dreamteam, led by the elaine choa and john snow, cheered on by the media bulls, are so full of themselves for calling the bottom and encouraging investors to believe, that they have failed to see, or acknowledge, some very obvious problems with the extraordinary surge in GDP growth just reported. how can the economy be growing so fast? how can the stimulus that created the growth continue? what will happen when the stimulus is taken away? have any of the structural problems in the economy been fixed? what will we do about continued job cuts? what is REALLY going on and how can it be continued?

lots of questions with very few GOOD answers. the FED seems to see that things are tenuous, or else rates would have been raised to reflect the robust growth. greenspan and co. have stated on numerous occasions, any occasion they can, that rates will stay where they are for a "considerable period of time" in order to support the economic recovery, with no worries about inflation. How can that be??? 7.2% growth with no inflationary pressure? best growth in 20 years with no job creation? has that ever happened before? have we ever had record home sales coming out of a recession? have we ever had record auto sales coming out of a recession? have we ever pulled forward so many sales in so many areas without a severe falloff in demand? have any of the things happening in todays economy ever happened before? so why is this all happening now? one answer is the cost of money.

the "fuel" for all the growth has been FREE money. 0% financing on all durable goods. lowest home mortgage rates ever, along with low or no down payments and easier credit approval criteria(low income borrowers can now add aunts, uncles, brothers, sisters, cousins, etc. to mortgage applications in order to get approved). creative financing for businesses to finance the purchase of new technology so they can produce and sell more...with fewer employees! easier lending guidelines so banks, brokerages and any other quasi-banking company can easily lend to sub-prime credits, in order to put more money in the hands of less qualified borrowers so they can keep consuming.

needless to say its worked. and being that the 2nd qtr saw record borrowing and 3rd qtr saw record growth, all is well in bush-land. the home of the free and the debt burdened. US government debt is at an all-time high. consumer credit is at all time highs. mortgage borrowing is at all-time highs. mortgage to assets, home equity and income is also at all-time highs. other things at all-time highs would be personal bankruptcies, mortgage defaults, credit card charge-offs, and some other credit stats. spending by consumers coming out of a recession is also at an all-time high. How can this be? what is the consequence of all this stimulation?

footnote to GDP report
10:00am 11/04/03
U.S. October layoffs surge 125%, Challenger says By Rex Nutting
WASHINGTON (CBS.MW) -- Layoff announcements from U.S. companies more than doubled in October to 171,874, the highest in a year, according to the monthly tally released Tuesday by outplacement firm Challenger Gray & Christmas. October is typically the largest month for layoff notices, as companies slash costs at the end of the fiscal year. The Challenger survey is not adjusted for seasonal factors. Layoff announcements had fallen for three months in a row before October's 125 percent increase. In October, the auto industry sacked 28,363 workers, followed by 21,169 in the retail sector. Telecommunications companies cut 21,030. So far in 2003, 1.04 million job reductions have been announced.


Can someone please explain how the economy is growing so fast while jobs continue to be cut? Oh yeah, its that great productivity.