Economic reports for July showing unemployment rising, retail sales falling and mortgage foreclosures at an all time high, touched off warnings from economists: only stronger action by the federal government to create jobs, extend unemployment benefits and stop foreclosures can turn the economy around.
“There is really no positive spin to put on these numbers,” Jennifer Lee, an economist with BMO Capital Markets, told the Associated Press. “The U.S. consumer remains very weak. The jobs situation, while slowly improving, is still dismal.”
Paul Dales, an economist with Capital Economics, wrote, “Households are in no position to drive a decent economic recovery.”
Heidi Shierholz, an analyst at the Economic Policy Institute, said the Labor Department unemployment report is grim proof that “while the pace of decline is easing, the labor market is continuing to deteriorate.”
Unemployment will likely pass 10 percent by the end of the year, she said.
President Obama’s $786 billion economic stimulus package, Shierholz said, “is creating hundreds of thousands of jobs, but additional policy interventions are desperately needed to provide relief and generate jobs. These should include an immediate extension of federal unemployment benefits for the estimated half a million workers who will exhaust their benefits by the end of September.”
Retail sales fell 0.6 percent, excluding auto sales that were boosted by the “clunker” federal rebate program.
Most stunning was the 32 percent rise in mortgage foreclosures last month. More than 360,000 households received a foreclosure-related notice, the highest level since lenders started publishing the data more than four years ago.
The foreclosure crisis is worsening despite billions of dollars in taxpayer bailouts. The Treasury Department reports that 37 banks holding an estimated 2.7 million delinquent loans have renegotiated less than 1 percent of the troubled mortgages. These banks find it more profitable to foreclose on struggling homeowners.
The congressional leadership negotiated with JPMorgan Chase, Wells Fargo,and Bank of America, urging them to increase the numbers of loans converted to lower, fixed-rate mortgages.
Sen. Dick Durbin, D-Ill., said the banks “will not even participate in a renegotiation,” even though they are “surviving today because of taxpayer dollars.” The three giants that hold enormous mortgage portfolios received a combined $95 billion in federal bailouts but prefer to use the money for CEO bonuses and lavish taxpayer-funded conferences at posh resorts.
The Labor Department jobless report said applications for unemployment insurance rose unexpectedly last week to 558,000 from 554,000 the week before. Analysts had expected it to drop to 545,000.
The number of people receiving jobless benefits fell to 6.2 million from 6.34 million and the jobless rate fell slightly to 9.4 percent. But 247,000 workers lost their jobs in July and the number of workers unemployed six months or longer increased by 584,000 to 5 million. Over one-third of the 14.5 million officially unemployed have been out of work for half a year or more.
And the official jobless rate does not include “marginally” employed part-time workers who want full-time jobs. If they were counted, the total number of unemployed would be 25.6 million.
The jobless rate for African American workers was 14.5 percent and for Latino workers 12.3 percent in July.
Manufacturing employment declined by 52,000 jobs in July. Since December 2007, over 2 million manufacturing jobs have disappeared. Another 76,000 jobs were lost in construction, bringing to 1.4 million the number of jobs lost in the building and construction trades since the recession began.
There were also big job losses in the professional and business services sector. Retail trade shed a whopping 44,100 jobs. State governments pink-slipped 5,000 workers as state and local deficits deepened.
“The pain in the real economy is continuing to deepen but much more slowly than it had been,” the Economic Policy Institute said in a statement. President Obama’s economic stimulus “likely added 3 percentage points to GDP growth in the second quarter, creating or saving around 720,000 jobs,” the statement added.
The American Recovery and Reinvestment Act signed by Obama in February “is the primary reason why job losses in the last three months have averaged 331,000, down from the 645,000 average loss in the prior six months,” the EPI said. Total jobs losses of 6.7 million since the recession began in December 2007 “would have been much higher — around 7.5 million — without the Recovery Act.”