Recession Talk Resurgent on Latest Unemployment Reports

Misery Index

The combined effect of unemployment and inflation is reflected in the aptly named misery index, at 11.7 percent it is at the highest levels in 17 years.

This number also reflects the challenge of the Fed in assessing their rate guidance. At 2 percent it is unlikely to be decreased. However, with credit tightening and new record unemployment numbers it makes it highly unlikely for the Fed to give it the rate hike inflationary hawks want.

This leaves the current consensus on the Fed rate staying put at 2 percent.

Recession?

One thing is for certain, we are likely to get an official call on "recession" soon. A term no economist is comfortable in declaring, yet seems all but upon us.

Recession, classically defined as three quarters of declining GDP, is also challenging to declare because of unique GDP data. Whereas all of the classic economic indicators are pointing to recession a weakened dollar has surged exports--potentially artificially lifting GDP.

The only sure conclusion is that we are living in unique economic times.

Political Impact

The first effects of the new unemployment numbers might be on the political front. As Senator John McCain wraps up the Republican National Convention and Senator Barak Obama fights the traditional bounce of post-convention polls--the economy is likely to get increasing attention on the center stage of the campaigns.

President George Bush, potentially headed towards overseeing two recessions may drag on Republican hopes to convince voters they should lead them out of this one.

More Mortgage Disaster

Outside of Washington DC and back on main street the fear is that this will be another downward force in the mortgage vortex. Unemployment numbers are climbing faster than recovery measures can take effect.

The recent housing bill, passed in July and set to take effect in October may be too late to help these thousands of new unemployment applicants.

Unemployment is now coming in every industry. This continues to complicate the mortgage recovery process--sure to increase payment defaults. Challenging even the sharpest economist to come up with solutions to right a swamping economic boat.