Press Bias Talks Up Recovery as Second Housing Market Collapse Begins
At the start of the fourth year of the Great Recession, people were ready to hear good news, and the press glibly passed along any ray of sunshine they could find without ever questioning it. Here is one example.
On January 28th, 2011, I wrote the following observation to my friend Stan about the housing market collapse and what would come of it:
Today, our alarm radio went off, and the local news announcers were talking about the recovery being underway based on increased consumer spending in the last quarter. Immediately, the words popped out of my mouth, “What idiots!” It galls me how news announcers, who read the news everyday, and pundits are willing to look at one sliver of economic data and pronounce “the recovery is underway.” What fools! This very same day, the following story came out, which also includes local news (in red). How willfully blind to think a little increased spending at Christmas time is more significant economically than the following:
LOS ANGELES (AP) – The foreclosure crisis is getting worse as high unemployment and lackluster job prospects force homeowners in an increasing number of U.S. metropolitan areas into dire financial straits. In Seattle, Houston and Chicago, cities that were relatively insulated from foreclosures early on in the housing bust, a growing number of homeowners are falling behind on mortgage payments and finding themselves on the receiving end of foreclosure warnings. Others have already seen their homes repossessed by lenders. All told, foreclosure activity jumped in 149 of the country’s 206 largest metropolitan areas. (Excerpts from Money News.)
My comments to Stan about the housing market collapse continued:
And a little consumer spending at Christmas time trumps a 23 percent increase in local foreclosures???
The old economy was based on home building. That cannot recover. It is impossible for two reasons:
1) All the foreclosures from the first wave of the housing market collapse [due to time-bomb ARM mortgages] plus those from the second wave [due to rampant unemployment caused by the first wave] mean depressed housing prices for a long time, which means depressed home building for a long time. (Why build when you can buy a MacMansion at half off?)
2) Such a superheated housing market was only CREATED by the availability of time-bomb mortgages and extension of credit to people with bad ratings or who were over-leveraged, and banks are not going to be allowed to do that kind of nonsense again. Since that kind of credit was ESSENTIAL for creating the old real estate economy, that economy CANNOT recover without that kind of lending still available.
So, it is impossible for the old economy to recover. That means “recovery” will only happen by the formation of a new economy built on some other industry, and right now no one seems to even have any idea what that is. Maybe it is the green economy; but maybe we also now lack the credit and money to create a green economy. New ventures are usually better financed from wealth than from poverty.
We believe we’re going to see an abnormally high growth of foreclosure activity in the first quarter and we do expect that 2011 will be another record year for foreclosure activity and bank repossessions.
I guess news announcers should read more than one news story before they glibly proclaim the recovery is underway.
But it didn’t stop there. Later that day another article that typified so many I had seen came out. This time from the Wall Street Journal. Instead of being about the housing market collapse, it was puffery about a jobs “recovery.” This is it in the quotes, with my comments to Stan about it:
New claims for jobless benefits rose last week and orders for durable goods fell in December, according to reports Thursday indicating the struggle of an economy trying to gather steam. (WSJ)
So far, so good, but now we enter the spin zone:
The Labor Department reported the number of idled U.S. workers filing new claims for benefits rose by 51,000 to 454,000 in the week ended Jan. 22. Analysts said the data were likely distorted by winter weather and think new claims will resume a downward course.
What baloney! How does bad weather INCREASE jobless claims? People do not become laid off due to a week of bad weather. They simply cannot get to work that week. That is not the same as being jobless, laid-off, and being eligible to claim unemployment. Even the “analysts” are seeing only the baloney they create. If anything, bad weather made it hard for those who did become unemployed to get to their unemployment offices and file!
The real reason joblessness rose last week is simple: seasonal lay-offs. Christmas is over, post-Christmas sales are over. Doing end-of year inventory is over for some, so the need for those season employees that helped keep unemployment claims a little lower during the Christmas season is now over, and joblessness will rise as they are laid off. Any idiot should know this because it is an annual business cycle. Many extras are hired Nov. – Dec. Many are retained in early January for New Year’s sales and for boxing up old inventory and putting new inventory on the shelves and for taking inventory while inventory is at a low. Once that cycle ends, they are laid off again, as they were only temps. I knew that much back in high school!
The four-week moving average for claims, designed to smooth out volatility, increased 15,750 to 428,750 “This jump in the number of new filers is likely to prove temporary and should reverse next week,” RBS Economics Research said in a note to clients. “Since early October, the four-week average in initial claims has been trending firmly to the downside, and we see no reason to suspect that that trajectory has changed.”
Hello! Did they forget to read what I wrote above? Did they forget everything I learned in high school? Four-week averages always start to get better as we near November; but that trajectory also ALWAYS changes in January. It will naturally level off once the laying off of seasonal temps is complete.
Still, while the U.S. labor market is gradually improving as the 18-month-old economic recovery gains momentum, it will take a long time to make up for all the jobs lost during the 2007-09 recession.
Oh my goodness! This is as bad as George Orwell’s 1984! Only worse. It is not the government creating new truth by telling lies; it is people chiming in with the government in some kind of mass euphoria! The “2007-2009 recession?” The “gradually improving economy?” How is it improving, when more and more houses are going into foreclosure “due to joblessness” and when the number of total unemployed has increased every single month of the past eighteen months? How is this an “improving economy?”
What is not being said in any of these jobless figures is that even when NEW claims of unemployment fall, the total number of unemployed is still increasing because there are still each month more new claims than there are people going back to work. So, maybe new claims fall to 400,000 one week, but the number who went off unemployment that week was only 200,000, so that still means unemployment increased AGAIN that month by 200,000 more people. Talk about rampant spin and ignorance by design!
[You can see how this would make anyone want to write a blog to unspin the stories down to some truth during a time when a clear understanding is needed but cannot be found in the press.]