Truths and half-truths about the economy

Two weeks ago, on October 29, the US officially became the fourth G-7 nation, after Germany, Japan and France, to come out of recession. After shrinking for a year, the US economy grew at an annual rate of 3.5 percent during the third quarter of 2009. That was great news.

The Guardian described Britain's envy at what was partly the result of "the Obama administration's financial support for the housing market and 'cash for clunkers'".

The following day, the Obama administration said its stimulus package had "created or saved" 640,000 jobs over eight months.

General Motors, now 60 percent government-owned thanks to a federal bailout, is back in business, and says it's healthy enough to keep its subsidiary Opel instead of selling it.

Other bailed-out companies, heedless of the criticism leveled at them only months ago, are again preparing to pay outrageous bonuses to their executives.

The stock market, measured by the Dow Jones Industrial Average, is back in the healthy zone above 10,000 points. Most investors don't seem to have lost much. Some are even buying stock early in anticipation of a big win.

Sounds good, doesn't it? So what's wrong with this picture? Well, it's only half the story. Banks still aren't lending. No one is hiring. And no one is spending money.

No matter how bad the economy, every US president claims to be creating jobs. But such claims are, by nature, deceptive. America's population grows, through births and immigration, by one percent a year. So 100,000 jobs need to be created each month just to break even. The new talk of "jobs saved" is a way of saying that more jobs would have been lost if the government had done nothing.

In fact, not enough jobs were saved. In early November, the unemployment figure was revealed to have risen to 10.2 per cent — the highest it's been in 26 years. Much higher than that, and you'd have to go back to the Great Depression.

People who can afford them are buying houses and cars, but most aren't buying anything. On November 8, the Gallup organization reported that "consumer spending last week trails that of the same week a year ago by 34 percent". In other words, people are spending one third less money in stores, restaurants, gas stations and online than they were a year ago.

This information isn't exact — it comes from the survey respondents themselves — but it will soon be followed by measurable numbers. The day after the Thanksgiving holiday, known as Black Friday, is the official start of the Christmas shopping season. Stores typically offer big discounts to entice people who'd rather not spend the whole four-day weekend with their relatives in front of the TV. This year, it'll be November 27.

Black Friday usually attracts big crowds to the shopping malls; but last year, hardly anyone showed up. It was, for many businesses, the worst such day on record. If this year's sales are 34 percent worse, it will be a Black Friday for the administration as well.