There was much negativity today in the markets today. Non-farm Payrolls came in at -524,000 jobs. This follows November which when the economy lost 533,000 jobs. The employment rate rose to a 15-year high 7.2%. Average Weekly Hours came in at an all-time low 33.3 hours. The so-called diffusion index, which reports how far-reaching job losses are through the broad economy reported significant employment declines in nearly every sector (government and healthcare / education were the only sectors reporting gains).
Large job losses in the broad economy promise to perpetuate the negative feedback loop. As home prices decline, fewer homes are purchased, fewer building materials and appliances are purchased. The financial industry suffered from a lack of lending business, Americans lose their jobs. Fewer people are in the pool of potential home buyers. Home prices fall and the cycle repeats itself. The longer it takes for home prices to find a bottom at which potential home buyers feel confident enough to buy a home, for banks to lend (for non-conforming mortgages), for investors to purchase private-label mortgage-backed securities (necessary to provide capital for mortgages, the longer and deeper the recessions will be. The problem is that no one in Congress, on either side of the aisle, will admit that some (maybe many or most) of distressed home owners cannot and should not be saved. When one is experiencing pain from a malignant growth, taking aspirin for the pain is not the answer. At some point, painful surgery is necessary. The longer one waits to address the real problem, the worse the problem becomes and the prospects for a recovery diminishes.
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