"The Impending Triple Hit to the U.S. Economy"

"The Impending Triple Hit to the U.S. Economy"
By S.L. Carroll

“The U.S. economy appears to be headed for another meltdown. The unemployment rate rose to 9.2 percent in June, the highest it's been since January, prompting the Dow to take a 1.2 percent slide which translates into a loss of 151 points. Prior to today, the Dow fell from a high of 12,807 on May 2nd to a low of 11,897 on June 15. The Dow rebounded briefly from June 24 to July 7 only to fall to 12,505 on July 11; 300 points lower than the two month high.

This does not translate into good news. The Dow is falling, job growth is nonexistent, and the unemployment rate is up, but that's not the worst of the economic news. After December 2011, extended unemployment benefits expire. According to The Lookout, the loss of unemployment benefits will remove $37 billion from the economy. Almost 20 percent of personal income is "now provided by the government," reports the New York Times. The semi-good news is that the loss of unemployment income will happen slowly. It started earlier this year when the first batch of 99ers ran out of unemployment benefits, and it will continue with thousands losing their benefits each week until the complete expiration in early 2012.

What does this mean? It means that as individuals and families run out of benefits, they will apply for welfare. At the very least, they will go on food stamps and Medicaid. There will be an even larger increase in multi-family households, and more empty houses and apartments. The latter doesn't translate well to the still sagging real estate market, but that's where the U.S. is headed if we don't do something very soon.

The economists have called this a jobless recovery. I don't believe it. Without jobs there can be no recovery. Jobs provide income. Income allows people to spend money, thus creating more jobs. The Lookout states that "Sixty to 70 percent of the economic activity is consumer spending." If consumers stopped spending, the U.S. economy would drop to 40 percent of its current level.

Can we even fathom a 40 percent economy? I can only guess as to what that would do. It would reduce demand for discretionary items, and food. It will send more people to food pantries. More citizens would go hungry. It would prompt companies to lay off more people, and increase the unemployment rate even further. The economists may be screaming that there is no Double Dip, but with an outlook such as the one I've just outlined, how can we think anything else? “

- http://news.yahoo.com/

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