Economy Continues To Free Fall
Despite the passage of the stimulus package, the proposed Homeowner Affordability And Stability Plan, and the feverish bank bailout negotiations, the economy continues to free fall. The tentative unemployment numbers for February are dire. According to preliminary reports, another 650,000 individuals were laid off last month. The unemployment rate is expected to rise to 7.9%.
In addition, consumer spending contracted for another quarter and economists anticipate that it will continue to shrink in the months ahead. While a four quarter decrease in consumer spending is unprecedented, there is nothing in the immediate economic forecast that would alter this trending.
Tim Geithner and Mr. Obama’s economic team are frantically trying to implement the TARP 2 program in order to get credit flowing again. However, frozen credit markets have effectively paralyzed the economy with no immediate end in sight. Overall GDP has dropped by 6.2%. Government estimates initially stated that the drop would be around 3.8%. Even the top economists estimated the drop at approximately 5.8%. The serious, unexpected decline in GDP presupposes that the economy is in a severe contraction and the worst may be yet to come.
Despite the (arguably) best efforts of the Obama administration, the economy has not hit bottom yet. Teetering precariously, Federal Reserve Chairman Ben Bernanke stated that the economy can expect a modest recovery in 2010 if everything goes right. His speculations were more optimistic than most.
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