All Hail The Economic Recovery!

Er...uh...wait a second...

Seven months after passing a whopping $787 billion stimulus package, unemployment and mass layoffs both jumped in August.  What didn't go up?  Orders of durable goods, which took a significant plunge instead:

New orders for long-lasting U.S. manufactured goods fell unexpectedly in August, dropping by their biggest margin in seven months, following a plunge in commercial aircraft orders, the government reported Friday.

The Commerce Department said durable goods orders tumbled 2.4 percent, the largest decline since January, after rising by a revised 4.8 percent in July. New orders for July were previously reported to have increased 5.1 percent.

Analysts polled by Reuters forecast orders rising 0.5 percent in August. Compared with the same period last year, new orders were down 24.9 percent.

Durable goods orders are a leading indicator of manufacturing activity, which in turn provides a good measure for overall business health.

This follows on the heels of a new decline in housing sales of 2.7% in August as well:

Resales of U.S. homes dropped 2.7% in August to a seasonally adjusted annual rate of 5.1 million, the first decline in five months, prompting the National Association of Realtors to again plead for more taxpayer subsidies for their business. …

"It is perfectly clear that realtors are scared to death of the tax credit's expiration," wrote Dan Greeenhaus, chief economic strategist for Miller Tabak & Co., noting the phrase "tax credit" appears six times in the group's press release.

First-time buyers accounted for about 30% of sales in July and August, Yun said.

Without an extension of the taxpayer subsidy, the housing market could fall into a "double-dip" downturn, Yun said, which would stall the overall economic recovery.

The housing market is also being propped up by the Federal Reserve's purchases of nearly $1.5 trillion in mortgage-related securities, accounting for about 80% of the market. The Fed said Wednesday it would slow its purchases and end them by next March.

Also:

The unemployment rate for young Americans has exploded to [25.5] percent — a post-World War II high, according to the Labor Dept. — meaning millions of Americans are staring at the likelihood that their lifetime earning potential will be diminished and, combined with the predicted slow economic recovery, their transition into productive members of society could be put on hold for an extended period of time. ...

During previous recessions, in the early '80s, early '90s and after Sept. 11, 2001, unemployment among 16-to-24 year olds never went above 50 percent. Except after 9/11, jobs growth followed within two years.

A much slower recovery is forecast today.

Looks like hope-n-change is as valid for the young as it is for the old!  Here's why:

First, the recession.  During recessions, it is typical for the teen jobless rate to rise even more than the overall jobless rate.  Second, we just had a minimum wage hike, so a big jump in teen unemployment in the first month of a higher minimum wage is not surprising.  Third, structurally, immigration has probably crowded out some teens from the workforce.  

Overall, here's what we're facing, and why:

...the $787 billion stimulus and other government-subsidy programs don't address the real problems of the recession.  Cash for Clunkers is a perfect demonstration of this, where massive government intervention gives the appearance of improvement for a very short period of time, but really only results in a transfer of sales from the future to the present, which creates a recessionary period later.

The problem with the economy now is the drain of capital from the private markets, both now and especially in the future.  The Obama administration has expansive dreams of big-government control of health care and energy production which will suck capital out of the private markets, where it gets used efficiently, into government bureaucracies that waste it.  These massive programs are running up massive deficits, and it doesn't take a rocket scientist to know that taxes will get hiked in huge proportions to pay for it eventually.  The result: investors put their money into savings rather than risk, jobs don't get created, and recessions continue.

Obama's domestic agenda will only continue the malaise, and the illusion of recovery has already begun to peel away.  Get ready for the downward curve of this economic roller coaster again, which even an extension of federal subsidies won't cover for long — but which will guarantee an even further drop down the line.

Let's recall a quote from the Stimulus Czar:

"In my wildest dreams, I never thought it would work this well..."

Let's also recall this quote from the Stimulus Czar:

"If it fails, I'm dead."

I wonder if he wants to take that back yet...?

There's my two cents.