As predicted, unemployment has indeed increased. The latest number from the Bureau of Labor Statistics is 8.9%, bringing the total number of people unemployed to 13.7 million.
The ranks of the marginally attached (those who want work and have looked in the recent past, but have given up and haven't been looking in the last 4 weeks) has been sharply increasing during the recession, and now stands at 2.1 million.
This is pretty bad news, but Wall Street seems to be giving it a positive spin; as the Wall Street Journal reports, job losses are "decelerating". Unfortunately, the slowing growth of job losses doesn't really count as good news, as much of the reason for the
lessening slack is new hiring by the government. Given the fiscal realities that the various levels of government are facing, it seems unlikely that government can pick up the slack for long.
The second piece of bad news is that the stress tests results are in: the Federal Reserve reckons that bank losses may be as high as $599 billion. It almost sounds like a sale, doesn't it? Act now, bank losses only $599, that's right, $599 billion!
The WSJ also has a poll, asking readers: Do the stress tests results paint an accurate picture of the financial services industry? When I checked the results, 88% had said no.
The table is from the Fed's report; it gives some of the assumptions that led to their results about the extent of bank losses.
The interesting thing about these numbers is how big they are. Under the baseline view, loss rates in subprime mortgages of 15-20%! That's the optimistic scenario! And 12-17% for credit cards - unreal. So given these huge loss rates, why didn't banks see it coming? Why did they make these loans? And why should they now rush in to lend more, with these kind of loss rates?
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