This quarter was a balance sheet repair quarter still, and while much improved were still not positive. Real nonresidential fixed investment decreased 8.9 percent in the second quarter, compared with a decrease of 39.2 percent in the first. Nonresidential structures decreased 8.9 percent, compared with a decrease of 43.6 percent. Equipment and software decreased 9.0 percent, compared with a decrease of 36.4 percent. Real residential fixed investment decreased 29.3 percent, compared with a decrease of 38.2 percent.

I really thought this quarter would come in at zero, and a lot of the indicators were pointing in that direction. If the stimulus had been done correctly I think it would have. And that would have saved over a million jobs, and it would have avoided the continued sharp rises in unemployment. You would think that would matter to a Democrat led congress.

It is frequently described by the Fed as we do not have that feeling of freefall anymore, but note every one of these is still down. They say the stimulus money begins to really gain traction in the second half of the year, we will see. I have been getting the sense that every good idea gets too watered down in the Congressional process and comes out so compromised it does not work right. Very frustrating. House prices and house sales now are trending above the stress test baseline scenarios and that is very good.

We were all happy that Quarter 1 of last year came in at a growth rate of 0.9%. Now we learn the economy actually contracted at a rate of 0.7%

Quarter 3 was supposed to be a decline of 0.5%. It is now reported as a decline of 2.7%.

What sort of garbage is this? And if we have to have such large errors in the data being reported, why are they predominantly one way - always overestimating growth? You would think with a ridiculously inaccurate process such as this the government would at least try to make the errors balance out randomly.

LOL. Only another 585,000 thousand workers filed for new claims last week. Ain't that great? Surely, this economy, this CONSUMER economy, is on the road to recovery with more and more going without jobs. And, say, what are wages doing anyhow?

No jobs, no recovery. Where will the new good jobs come from? I hear the hedge funds executive ranks are full right now. Everyone sees the market going up = recovery. I think we have a long way to go.

"The Labor Department said Thursday that the initial claims for unemployment aid rose by 25,000 to a seasonally adjusted 584,000, above analysts' estimates. But the figure is below the 617,000 new claims filed in late June, before the numbers began to be distorted by a shift in the timing of temporary auto shutdowns.

The four-week average of claims, which smooths out fluctuations, fell to 559,000, its lowest level since late January. And the number of people remaining on the jobless benefit rolls unexpectedly fell to 6.2 million from 6.25 million, the lowest level since mid-April."

and it appears that the Stimulus Bill has contributed a significant amount of support even in the second quarter.

The consensus of macroeconomic forecasters is that the Stimulus (ARRA) contributed roughly 3% to annualized growth rates in the second quarter.

This means that without the Stimulus, economic performance would have more closely resembled that of the previous three quarters, when the economy contracted at an average annual rate of 4.9%. In short, the recovery act turned this quarter’s economic performance from disastrous to merely bad. This is no small achievement. And the future stimulus is to have an even greater affect. This is equal to about 2 to 3 million jobs on an annual basis.

The other good piece of news in this data is that personal incomes grew at a 3.2% real growth rate. This indicates that productivity in this period is coming back very strongly. Household income had stabilized in the first quarter, so having personal incomes beginning to rise, productivity increasing is the precursor to hiring.

This data would indicate that job growth could yet begin in 2009, even as early as September or October.

NYT - A few weeks ago, a woman named Judith Kipper asked Lawrence Summers a question that’s been on everyone’s mind — one that helps explain why the country is so angry at the big banks right now...

After first mentioning “the apparent unwillingness of banks to keep people in their homes,” she pointedly asked Mr. Summers: “Do you have confidence that the banks, who helped to create the problem, and the C.E.O.’s and C.F.O.’s who are still there, are assuming a little bit of responsibility or at least self-discipline to do what is right for the country and not only for their bottom line?”

Mr. Summers was just as pointed in his reply. “No one should be confused about the extent to which the public sector has provided a foundation for financial recovery,” he said sternly, ticking off such measures as the Troubled Asset Relief Program and the trillions of dollars in various government guarantees to the financial sector. He concluded, “It is very important that those in the financial system consider carefully their obligations to their fellow citizens.”

But what are those obligations? Here we are 10 months past the frightful events of last September, when it appeared that the financial system was headed off a cliff. A number of the banks, including JPMorgan Chase and Goldman Sachs, have returned their TARP loans to the government. The second quarter was hugely profitable for not only JPMorgan and Goldman, but for Bank of America and Citigroup, as well. Executive compensation is likely to soar again ...

And yet, even as the banks’ prospects have improved, the government had to call a big meeting just this week of the nation’s largest mortgage servicers — which include the big banks — because it is so unhappy with the sluggish pace of loan modifications.

Foreclosures continue to rise. According to an analysis by The Wall Street Journal, overall loan volume continues to decline; small businesses, especially, are gasping for credit. For many Americans, credit card rates have skyrocketed.
more at the link

_{I feel the American worker has been sacrificed to the capitalist idols in the ancient Mayan fashion. - Sue Lamb, NYT reader}

NYT - The dozens of insurance companies that make up the American International Group show signs of considerable weakness even after their corporate parent got the biggest bailout in history, a review of state regulatory filings shows.

Over time, the weaknesses could mean trouble for A.I.G.’s policyholders, and they raise difficult questions for regulators, who normally step in when an insurer gets into trouble.

State commissioners are supposed to keep insurers from writing new policies if there is any doubt that they can cover their claims. But in A.I.G.’s case, regulators are eager for the insurers to keep writing new business, because they see it as the best hope of paying back taxpayers.

In the months since A.I.G. received its $182 billion rescue from the Treasury and the Federal Reserve, state insurance regulators have said repeatedly that its core insurance operations were sound — that the financial disaster was caused primarily by a small unit that dealt in exotic derivatives.

But state regulatory filings offer a different picture. They show that A.I.G.’s individual insurance companies have been doing an unusual volume of business with each other for many years — investing in each other’s stocks; borrowing from each other’s investment portfolios; and guaranteeing each other’s insurance policies, even when they have lacked the means to make good. Insurance examiners working for the states have occasionally flagged these activities, to little effect.
more at the link

_{I feel the American worker has been sacrificed to the capitalist idols in the ancient Mayan fashion. - Sue Lamb, NYT reader}

and why taxes must rise