Sunday, December 07, 2008

America Might Be About to Lose a Million Jobs a Month

Now that Parliament has been let out early for Christmas recess or, to be accurate, "locked out," we have to wonder why, with a full-blown crisis beating down our door, they're taking any break at all? Oh, that's right. To save Steve Harper's job. Once again it's Steve-1, Canada-0.

Counting on the Government of Harper to deal with the fiscal freight train it never saw coming requires a pretty huge leap of faith. (I call it the Government of Harper, incidentally, because to me the Government of Canada speaks through the duly elected Parliament of Canada which Steve has subverted to save his own skin.)

And just what is coming? Well, ever since Mr. Mulroney locked Canada's economy into the death grip of the American economy (something Harper dreams of even more firmly cementing with deep integration), we have to look south to get a good idea of what's in store for us.

A report today in The Guardian warns that, by spring, the US economy could be shedding a million jobs a month.

Graham Turner, of consultancy GFC Economics, says the rising cost of corporate debt is now flashing a red warning signal that far worse is to come over the next few months and job losses are heading for levels last seen in the 1930s Great Depression.
Corporate bond yields have rocketed since the credit crisis began as investors flee risky assets in search of safe havens such as US Treasuries. That effectively means many firms are being forced to pay eye-watering interest rates to borrow funds.

Turner says when the gap between the yield on high-risk company bonds and US Treasuries widens sharply, unemployment tends to shoot up - and current credit conditions are pointing to a doubling in the pace of layoffs, to more than a million workers a month, by spring.

'The correlation is holding up all too well,' he said. 'It's very disconcerting.' He added that the pace of layoffs already happening in the US 'is indicative of panic'. During the 1970s oil crisis the panic was relatively short-lived, he says. 'But the worry now is that this will just roll on and on.'

If you're still bewildered about how this meltdown happened, John Cassidy wrote an excellent piece in the December 1 edition of The New Yorker entitled Anatomy of a Meltdown, Ben Bernanke and the financial crisis. It's a fascinating, blow by blow, account of how this disaster unfolded and how the key players never caught up to events:

This Is No Time for a Leisurely Christmas Break

So we have no legitimate government for two months while Steve figures out how to save his skin. Some, such as Chuck Strahl, send out e-mails claiming it's no biggie, Parliament takes a long Christmas break anyway. Memo to Chuck, and all the rest of you knuckleheads, this is no time to be without a government. Give your head a shake, there's an economic crisis happening, right now.

This from David Olive, business columnist for the Toronto Star:

Somehow the urgency of the present hour has eluded the Prime Minister, who needlessly provoked a constitutional crisis in the midst of global economic peril unmatched since the Great Depression, and a governor general who last week abetted the PM's recklessness by overturning precedent in granting him the parliamentary adjournment he sought in order to save his skin.

The upshot is that Canada effectively has no federal government as the nation slides into a recession that some forecasters expect will claim 600,000 jobs, in addition to the hundreds of thousands of Canadians thrown out of work in the manufacturing, auto, forestry and other sectors in the last two years.

Relief will have to wait at least the better part of two months, until late January, when Stephen Harper's government finally tables a stimulus budget, which must then be debated and might well be defeated.

That's seven lost weeks, at a minimum, when Stephen Harper's political career will assume primacy over the economy.

A lot can happen, we've learned this year, in seven weeks. Entire national banking systems have been exposed as insolvent and in need of a state-financed bailout lest the global system collapse. Oil, wheat and other commodities have rapidly plunged in value, taking oil patch and farm incomes down with them. Everyday Canadians have endured huge losses on their retirement nest eggs invested in the stock market. The North American auto industry teeters on the brink of extinction. Iceland has declared bankruptcy. Hungary and Pakistan are hooked up to fiscal IVs provided by the International Monetary Fund (IMF).

That's seven weeks of neglected measures to curb further job loss. To soften the blow for those who have been put on the street. And to create new jobs by investing in a sustainably prosperous 21st century economy.

Steve-2, Canada-0

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