Economy on Unsteady Grounds?

The Labor Department is expected to announce a loss in jobs for last month, with unemployment claims rising as inclement weather and a poor economy wreak havoc on our hopes that the economy is recovering.

Unfortunately, this news comes on the heels of slowing home sales and a drop in home values. Some of this can be attributed to buyers slowing down because the homeowners tax credit was set to due to expire in December, but we would expect it would pick up by now since the program has been extended. As seen with the federal homebuyers tax credit, many of the federal stimulus plans are coming to their end, so the stability they've brought by propping up sagging industries and markets with billions of tax payer dollars could be in trouble.

In an address to Congress, Federal Reserve Chairman Ben Bernake outlined plans for reigning in the billions of dollars pumped into the economy by the federal government. To allow these funds to remain in circulation for too long could result in major inflationary problems, and so they must eventually be reclaimed by the Treasury. This of course will lead to less available cash for lending, which is concerning because there isn't really a whole lot out there in the first place.

While the Senate has just approved a bill to fund public works programs and tax incentives to promote employment, clearly larger measures are needed. I found this little tidbit of information in an article written by David Leonhardt of the New York Times:

"Lawrence Katz, the Harvard labor economist, estimates that 10.6 million jobs would need to materialize immediately to return the job market to its condition when the Great Recession began. For it to get there four years from now, the economy would have to add 316,000 jobs a month."

316,000 jobs a month for the next four years straight... that's just an astounding figure. Later in the article Leonhardt gives the projected job growth rate for the next year at an estimated 110,000 a month for the next year, just barely enough to keep the unemployment rate from going up.