April Fools' Day is always full of practical jokes, but the real practical joke happened two days after April 1 when the unemployment report came out, along with the subsequent talk about the end of the recession. It was easy for people to see the unemployment rate as bottoming out since we went from losing approximately 740,000 jobs in January to this March data that has job losses at 663,000 jobs lost.
There are some major problems with the way that people are perceiving this data. The main problems stem from the idea many have: that we have passed all the bad things that are going to happen to this economy. This is only further fueled by the recent stock market rally and the Dow Jones hitting 8,000.
While you turn on the TV and hear all of the talk about when the recovery is going to happen, there are some lesser-known people who are talking about the second coming of this recession. The second part of this recession wouldn't manifest itself in the same way as the first part of this recession, which was spearheaded by the bank and housing market crisis. Instead, this second recession would be led by the commercial real estate market and the consumer credit market having major problems.
The commercial real estate market having problems is really just a result of the bankrupting of the companies because of all that has happened in the past year and a half. Bankruptcy of companies like Circuit City and other big players have led to an abundance of supply in the commercial real estate market and not much of a demand, which, when mixed with tightening credit, could prove to be the next troubled market. These problems could also mean more ugly write-downs for the banks that have already been beaten down by this recession.
The consumer credit market is another market that people should be paying more attention to as possibly the next troubled market. Prior to this recession, people were spending well beyond their means, as was evidenced by some of the houses that people thought they could afford. That being said, the overused credit cards owned by the people who are now losing their homes, and these same people getting laid off, are at some point going to affect the economy. The consumer credit market has remained relatively unscathed by the whole recession so far, or at least compared to the banks, but there's evidence to believe that they may be the next industry to become a victim of this recession.
Then there is also the simple fact that we might not be looking at the right kind of unemployment data. The Bureau of Labor Statistics defines the unemployment rate that we normally look at as "total unemployed, as a percent of the civilian labor force." That's the number that just changed to showing our country as having an 8.5 percent inflation rate. The problem with this is that it's not the only unemployment number available. The biggest unemployment figure the Bureau of Labor Statistics calculated is the U-6, which at the moment stands at a massive 15.6 percent. The recession may actually be a lot worse than we think, and worse than the statistics we know tell us.
It just seems that at the moment people shouldn't be as optimistic as they are currently being. Sure, the market was tremendously devalued and the past couple weeks have been strong stock market weeks, but that doesn't mean we are out of the woods just yet. We need to remember just how quickly the bank and mortgage crises hit the market, as well as remember that there are a number of industries that it could still happen to. We also need to remember that we don't know just how much more bailout money might be needed for the likes of the American auto companies and AIG.
We could be looking at more uncertainty on Wall Street and in this economy in general, and as we've learned lately, uncertainty can sometimes be worse than actual bad news. Don't let April fool you into completely buying this talk of market and economic recovery; there could still be more bad news ahead.
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