Grab a tourniquet. Put in a central line. Get the rapid infuser. Hang a bag of O-neg.
Okay.
I watched the series finale of ER last night, and I’ve got med-speak on the brain.
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But if jobs are oxygen in the blood of the economy, then the patient is cyanotic.
Unemployment in March surged to the highest level since 1983. The economy lost 663,000 more jobs.
Despite the massive efforts by the federal government to shock the economy back into a normal sinus rhythm, these mounting job losses threaten to keep spending subdued for months and delay any recovery.
The number of Americans out of work increased from 8.1 percent in February to 8.5 in March. U.S. employers have cut nearly 5.1 million jobs from the economy since the recession began. This has resulted in the biggest economic slump in the post-World War II era.
You May Say ‘Strangling’
In TV medical terms, the job market is bradycardic with a distal pulse on Main Street that is thready and becoming more difficult to palpate.
For the first time in four days, U.S. stocks retreated. Traders and investors are obviously concerned that the deteriorating job market will thwart the government efforts to defibrillate the economy. Despite these concerns, oil prices pulled back and the dollar advanced against the yen.
The economy has had a nice run over the past four weeks with S&P 500 surging nearly 23 percent since sinking to a 12-year low of 676.53 on March 9. This rebound in the market was aided by reports from major banks such as Citigroup and JPMorgan Chase saying they made money in the first two months of 2009.
Be Wary of a Relapse
Treasury’s plan to finance as much as $1 trillion in distressed asset purchases from the banks was the medical equivalent of a gastric lavage of toxins from the gut of the economy.
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In the midst of the temporary euphoria that has engulfed the market over the past several weeks, banks have been working furiously to doctor the “marked-to-market” accounting rules that they contend accelerated the growth of cancerous loans on their books.
Under the GAAP (Generally Accepted Accounting Principles) rules in place since the early 1990s, the value assigned to an asset must be adjusted to reflect its fair market price. As the fair market value of real estate holdings in their portfolios diminished, banks were compelled to reflect these changes in calculating the value of their assets.
The changes to so-called mark-to-market accounting will allow companies to use significant judgment when gauging the price of investments on their books, including mortgage-backed securities. Although this may improve their chances of a full recovery in the future, it likely will do very little to help them overcome their hypoxic condition or the current anemia in stock values.
In short, if the economy continues to bleed jobs at the same rate it has over the past several months, the prognosis for a full recovery will continued to be mixed with an increased possibility for a relapse.
Hopefully, as we go forward, the highly anticipated infusion of federal monies into the local economies will be just what the doctor ordered.
Goodnight, Dr. Ross.
John Cohn is a senior partner in the Globe West Financial Group, based in West Los Angeles. He may be contacted at www.globewestfinancial.com
