Fated

Peter Morici assesses the significance of the latest BLS unemployment report. His conclusion:

Simply, investors and employers lack confidence in the overall likely effects of Treasury Secretary Geither's plans to stabilize banks and President Obama's stimulus package and budgets proposals.

Lacking confidence that the demand for what Americans make and sell will recover significantly, anytime soon, businesses are girding for a long siege — slashing employment and dividends and other hunkering down. They are preparing for a depression and the eclipse of American leadership.

And:

Increasingly, the economic slowdown looks more like a depression than a recession. Recessions are like stock market corrections — after a time, equity prices rebound without government intervention.

Federal Reserve interest rate cuts and stimulus spending and tax rebates shorten recessions and ease their impact. However, those policies will not end the current slump, because it is grounded in fundamental structural dysfunctions in U.S. banking, energy and trade policies.

A depression is not self-correcting. The economy shifts down to permanently lower levels of production and sales, high unemployment rates become chronic, and federal deficits become narcotic — federal deficits dull the senses but don't cure the disease.