Some economy news (pretty much all of it is scary)

A couple reasons not to be lulled into a false sense of security by the relatively stable stock market:

  -  The December jobs report issued today notes 524,000 jobs were lost during the month, raising the unemployment rate up to 7.2%.   Brad DeLong writes the U-6 rate (unemployed plus discouraged plus unable to find a full time job) is now at 13.5%.

The toll of job losses cut across every sector. Nearly 800,000 manufacturing jobs were lost in 2008, and 630,000 construction jobs disappeared as home-building slowed. Jobs dried up in the financial sector, in publishing houses and trucking companies, department stores and hotels.

“This is unprecedented,” said Mark Zandi, chief economist of Moody’s Economy.com. “It’s coast to coast. It’s everywhere. There’s really no refuge in this job market. There’s no safe place.” (Link)

  -  A number of analysts are predicting some major movement in stock indices as December retail numbers become more available.

  -  Incoming Treasury Secretary Geithner is furiously working on overhauling the second part of the the $700B TARP initiative to broaden it's scope well beyond Wall Street.

... a new approach that would expand the program's aid to municipalities, small businesses, homeowners and other consumers. With lawmakers stewing over how Bush administration officials spent the first $350 billion, Geithner has little chance of winning congressional approval for the second half without retooling the program, the sources added.  (Link)

  -  Paul Krugman weighed in today on the "output gap" of Mr. Obama's proposed stimulus plan:

But Mr. Obama’s prescription doesn’t live up to his diagnosis. The economic plan he’s offering isn’t as strong as his language about the economic threat. In fact, it falls well short of what’s needed.

Bear in mind just how big the U.S. economy is. Given sufficient demand for its output, America would produce more than $30 trillion worth of goods and services over the next two years. But with both consumer spending and business investment plunging, a huge gap is opening up between what the American economy can produce and what it’s able to sell.

And the Obama plan is nowhere near big enough to fill this “output gap.” (Link)

Now is not the time to be meek.  Nor is it the time to try to appease the Republican contingent that still believes supply side economics and giving tax cuts to the wealthy are the answers to any economic problem.  The risks are too high.  Like it or not, 70% of the economy is driven by consumer spending.  And consumers aren't spending because they are either unemployed or nervous about their employment status or terrified the whole economy is going to tank.  The answer, it seems to me, lies with addressing that consumer confidence - extending unemployment insurance benefits, small business loans to keep those employers afloat, addressing the high cost of health care, and funding large scale employment programs like infrastructure and large scale green retrofitting projects.