August Economic Recovery Reality Index creeps up less than 5 points

Unemployment dipped slightly, the increase in the number of “discouraged” workers slowed, the health care sector continues to add jobs according to the U.S. Bureau of Labor Statistics, and recent investor confidence led the monthly Economic Recovery Reality Index (ERRI) up a modest 4.76 points over July numbers to 16.03 for August. But, as with prior economic recessions and depressions, changes in hiring and earnings are once again trailing the other economic indicators.

Cash for clunkers isn’t enough…

Average weekly earnings, which had fallen in June, did rebound during July  to the level they had been at in May of this year. The small ERRI gain shows Wall Street’s optimism hasn’t yet reached most other streets; it will take some time for average Americans to feel – or believe – that the no-longer subtle fallout that started with obscure financial “devices” has eased — that the nightmare of rampant foreclosures has abated and real recovery has begun. The problem, we know now, was not just credit default swaps, let alone sub-prime lending which can and does help people who need credit, but rather aggressive and deliberately predatory sub-prime lending from companies and CEOs who operated as though they were immune to the risks due to an essentially unregulated environment.

The ERRI uses a hypothetical, indexed fund (similar in some ways to a mutual fund) to measure investor confidence across nearly a dozen sectors of the economy, but until jobs and wages show sustained improvements you won’t see it move back closer to (or above) the 100 mark no matter how fast stock prices drive the stock/investment component higher.

“Equity investments are volatile, particularly when not carefully diversified and monitored; the ERRI would have shown even less improvement had closing prices from even a day sooner been utilized in the calculations…”

What’s trickled down? Pain & uncertainy.

The modest gain in the August ERRI figures reflect both equity prices as of the close of the NYSE on Friday, August 7th and data released in the monthly update/estimate from the Department of Labor earlier the same day combined using a new calculation. Without the on-going hiring in health care and the slight turn-around in unemployment rate even the robust gains in  stock prices will not offset the impact of falling wages, losses in non-farm employment, and the sense that the elite and ultra-wealthy living in luxury benefit from bailouts and tax loopholes while the hard working people in America’s middle class pick up the tab.

Those green jobs can’t come too soon.

The President got the big 3 U.S. automakers back on relatively stable footing, the bankers and Wall Street gamblers got huge bailouts last year, but every day more Americans lose their COBRA benefits if not their jobs. Sure, it takes time to reverse such profound financial turmoil, and the “perfect economic storm” that built up over years – but unemployment support isn’t indefinite. Cash for clunkers isn’t enough, even though it visibly stimulates a distressed sector of the economy. We need the stability and security that comes from putting Americans back to work with decent wages and fair benefits.

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