What's happening to the real economy?

While Wall Street goes for a roller-coaster ride, unemployment claims jump and household net worth declines


Andrew Leonard
September 19, 2008 6:21PM (UTC)

If the first half of hour of trading on the New York Stock Exchange is any indicator, September 19th 2008 will be one of the most explosive days for stocks in history. Barely half an hour after trading began, the Dow Jones Industrial Average had jumped over 400 points. Thursday witnessed record volumes of trading on the NYSE, and Friday looks likely to break that record with ease.

The explanation for this enthusiasm is the conviction that the federal government is going to proceed with its plans for the most radical remaking of the American financial system since the Great Depression. The plan to take bad debt off the ledgers of U.S. financial institutions is likely to rank up with the disastrous Iraq war as one of the two greatest legacies bequeathed by the Bush administration to the American people.

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The ideological warfare breaking out among economists of the left, right, and libertarian persuasions over what this means for the endless tug-of-war between the camps of regulators and deregulators is something to see. But no matter whether you think the repeal of Glass-Steagall was a boon to humanity or the match that set off the bonfire of Wall Street, it's hard not to look at this spectacle, and think, hmm -- financial markets, not as smart as we thought.

But more on all that, later. Even as investors rush to buy, let's pay a little attention to what we used to enjoy calling the "real economy."

The Wall Street Journal reports this morning that the "net worth" of American households declined 0.8 percent in the second quarter.

That marked the third straight quarter of declines, bringing consumers' net worth -- total assets such as homes and checking accounts minus liabilities such as mortgages and credit-card debt -- to 2006 levels. Total household net worth hit a record $58.7 trillion a year ago.

This is certainly true for me. How about for you?

And on Thursday, Calculated Risk reminded us that all is not well in the labor market. Weekly unemployment claims jumped 10,000, from 445,000 to 455,000, and the rolling four week average also increased 5000, putting us squarely in territory we haven't reached since the last recession.

No matter what happens in the market today, those trends don't seem quite as liable to a quick turnaround.

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Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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Related Topics ------------------------------------------

Globalization How The World Works Unemployment U.s. Economy




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