Santa's Last Stand

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Economists, politicians, and the media have spent a number of weeks examining the wrong holiday season. The results for this year are nearly set in stone.

For reasons that no one has explained well, the government undercounts the number of unemployed persons by excluding those who are part-time workers looking for full-time jobs and those who are too disillusioned to be looking at all. According to Webster’s, unemployed is unemployed.

Adding up all of the people without full time jobs brings the jobless rate to more than 12%. The calculus of panic would figure that another 12% of working people feel certain that they will soon be out of jobs, and 12% on top of that are worried about their fortunes. By that reckoning, nearly half of all Americans are frightened about what will become of their incomes.

Even the most spiritually inclined, who shun materialism, hope to get some kind of tangible reward for their year of goodness when the holidays arrive. This holiday season should not be entirely disappointing for many people. The fear of a recession has overcome most shoppers, but retail sales are off only modestly so far.  There are hopes that the last two weeks of shopping will bring out the inner generosity of those hermitted by concerns and that the 2008 holiday season will be short of a real disaster for retailers.

It is next year that should be the real concern. Scrooge has not been visited by The Ghost of Christmas Yet to Come. There is nothing to be seen there but a tombstone.

The 2009 shopping season will be much worse than this year’s. Nearly every expert from the president-elect to associates of the National Bureau of Economic Research sees retail sales, GDP, credit, and housing repelling down the mountain much more rapidly in the quarters ahead. The pessimists in the forecasting business predict 10% unemployment by the end of 2009. Adding in what the Labor Department refuses to count and the figure will probably be closer to 16%.

If there is any false elation during this holiday period it is because people have the vague or unconscious sense that next year will be much worse. Best to eat, drink, and be merry now. Looking toward the void is too awful.

Now that the new administration is just a few weeks from charging into Washington it is responding to reality by muting expectations. The idea of a public works program brought the nation’s governors out of their fox holes with $136 billion worth of infrastructure upgrade programs. The  governors claimed that for each $1 billion spent, the economy would add 40,000 jobs. Those figures are probably less accurate than the claims of The Big Three that $34 billion will solve their entire multitude of problems. The only thing which is clear is that massive national programs do not take root in a few weeks or a few months. There is absolutely nothing this side of the horizon that will save the economy from a vicious keelhauling and the loss of another two or three million jobs.

The truth of it is that all of those who dream of being the heroes who will save the nation’s jobs and correct the credit market are in a race against the awful ravages of joblessness which could come close to matching levels from the 1930s. Those who would like to be well thought of in the history books have until the end of next year to show that their programs will make a meaningful difference.  If not, the recession is likely to settle in for a long stay.

Douglas A. McIntyre