THE BAD NEWS
Help not wanted
The jobless rate in the U.S. is as ugly as ever, with unemployment up to 9.7 per cent as of August. According to the U.S. Bureau of Labor Statistics, there are now 14.9 million unemployed Americans, more than double the 7.4 million who were jobless when the recession began. For every job opening, there are now more than six job seekers. Still, the rate of decline has moderated somewhat in recent months.
Our deflating hopes
The Canadian consumer price index for August is widely expected to show negative annual inflation for the third straight month. TD Economics predicts that inflation will remain negative for a while longer due to “weak domestic fundamentals and soft labour-market conditions.” Core inflation, which strips out fuel, food and other volatile items, was at 1.8 per cent in July. It’s expected to decline in August and continue declining into next year.
Under capacity
Canadian industries are now operating at their lowest level of capacity on record. The rate of capacity utilization fell 2.8 per cent in the second quarter—the eighth straight quarterly drop—and is now below 70 per cent, according to Statistics Canada. Twenty of the 21 major manufacturing groups experienced declines. The capacity rate is the ratio of an industry’s actual output to its potential output.
SIGNS OF THE TIMES
- The Cayman Islands, one of the world’s leading tax havens, is broke. It once had one of the world’s richest populations, but is now in such dire straits it may not be able to pay is own civil servants. The island nation has appealed to the British Foreign Office for a loan, which was refused, but Britain may still be forced to bail it out, even though it has a long history of helping British citizens evade taxes.
- The amount that students are borrowing to go to college shot up by 25 per cent last year in the U.S. as students struggled to find work to pay for school. In Canada, the unemployment rate for students was more than 16 per cent last month. Financial hardship among students could be one of the downturn’s biggest hangovers, as young graduates are forced to delay major purchases, like cars and homes, and put off major decisions, like marriage and having children.
LATEST INTELLIGENCE
It has been one year since the global economy fell to pieces, and U.S. Federal Reserve Chairman Ben Bernanke is now officially calling the American recession over. But has Wall Street really learned its lesson? American President Barack Obama—and many others in the financial world—aren’t so sure.
“From a technical perspective, the recession is very likely over.” —Ben Bernanke, chairman, U.S. Federal Reserve
“Unfortunately, there are some in the financial industry who are misreading this moment. Instead of learning the lessons of Lehman and the crisis from which we are still recovering, they are choosing to ignore them. They do so not just at their own peril, but at our nation’s.”—U.S. President Barack Obama
“It’s very easy to fall back into old habits very quickly, and some firms are making profits and adding risk to their portfolios.”—Robert Kapito, president, BlackRock Inc.
“We should know now that greed is not good.” —Roger Bootle, managing director, Capital Economics
“People will accept change at a time of crisis, but we haven’t managed to do much, and maybe complacency is coming back. We seem to be losing momentum.”—Robert J. Shiller, economics professor, Yale University
“We have to change the rules and correct the fundamental flaws in the financial system.”—Kenneth C. Griffin, founder, Citadel Investment Group
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