Fresh off a decent GDP number, the bulls have had tough time gaining traction in the markets lately.
It may just be because the markets realize that the +3.5% gain in the third quarter was achieved primarily with assistance of smoke and mirrors.
After all, without a healthy push from Uncle Sam, the gains practically would have been non existent.
So while some cheerleaders have used the numbers to make the case that the recession is over, a closer look at the figures leaves them riddled with doubt.
That’s the opinion of Joseph Stiglitz who recently said that we have much farther to go before we can claim victory over the downturn,
Here are the details…
From Bloomberg by Bob Willis entitled: Stiglitz Says U.S. Recession ‘Nowhere Near’ End After GDP Jump
“Nobel Prize-winning economist Joseph E. Stiglitz said the U.S. recession is “nowhere near” an end and the economy’s third-quarter growth rate of 3.5 percent, the first expansion in more than a year, won’t carry into 2010.
While this week’s figures on gross domestic product are “very good,” the numbers would be “miserable” without stimulus measures enacted by the Obama administration, Stiglitz said today at a forum in Shanghai. He urged the U.S. and other countries not to pull back on efforts to shore up economies.
“When we look at if workers can get jobs, if they can work full time, if businesses are able to sell goods they produce, in those terms, we are nowhere near the end of recession” in the U.S., said Stiglitz, 66, the former chief economist at the World Bank. The U.S. job market is still “in very bad shape.”
The U.S. unemployment rate reached a 26-year high of 9.8 percent in September and economists project it will exceed 10 percent by early 2010.
“The unemployment rate is likely to go up,” Stiglitz told reporters two days earlier in Beijing. “Growth won’t be fast enough to bring down the unemployment rate.”
Stiglitz, a professor of economics at Columbia University in New York, said the growth rate of 3 percent to 3.5 percent needed to create enough jobs for new U.S. labor market entrants was unlikely to be sustained into next year.
It is too early for the U.S. and other countries to begin easing stimulus measures put in place a year ago to avert a financial market meltdown, Stiglitz said.
“For the world as a whole, it’s premature to think about exiting stimulus,” he said today in Shanghai. Stiglitz became a Nobel laureate in 2001, sharing the prize with George A. Akerlof and A. Michael Spence, both of the U.S., for their analysis of how markets function when buyers and sellers have different information about a product or service.”
It will be interesting to see how the market reacts this week if we do get a 10% unemployment figure from the BLS on Friday.
By the way, while everyone was busy yucking it up at happy hour on Friday the FDIC was busy seizing banks. In all, nine failed banks were shut down potentially costing the FDIC some $2.5 billion in the process.
The failure of the nine banks brings the nation’s total number this year to 115.
The bad news is there are about 500 more banks on the troubled list.
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