Obama was asked if, given the economic crisis, he will still raise taxes on the wealthiest Americans, maybe as soon as next year. He responded by saying his tax plan was clearly stated during the campaign, and the provisions remain his goal. Then Obama said he and his team will spend the next weeks and months studying the data to see what should be done. To my knowledge, that's as close as Obama has come to leaving open the possibility that his tax plan may have to be altered or postponed because of the economic turmoil in the country.
When you read reports about the economy, adjectives are usually pretty dry. Not today. The Labor Department has released its jobless report for October. Various writers and reporters are calling it "horrible", "dreadful", "brutal", and "staggering". And here's why the report is so bad. Analysts expected a loss of 200,000 jobs in October. That would have been bad enough, right? But today's report said that employers slashed 240,000 jobs last month. Then to add insult to injury, the Labor department revised last month's report for September from payroll losses of 159,000 jobs to 284,000. When bad news is worse than expected, that's when the alarms drown out all the other noise. Here's more bad news. The unemployment rate now stands at 6.5%. It was 5% in April. That's a stunningly fast rise. As Katy Marquardt explains in U.S. News and World Report, the share of working adults is now only 61.8%, the lowest level in 15 years. But she points out that women are a much larger share of the workforce today than 15 years ago. The share of adult men who are employed is at its lowest level since the government began keeping track of such things in 1948.
So with all this terrible news coming out today, wouldn't you know the stock market was up? If you're pulling out your hair in frustration, here are two things to keep in mind: Rogaine and bargain-hunting. After two days of huge losses, bargain hunters dipped their toes today, and sent the market higher almost from the start. Good bargains almost always trump lousy news. Actually, Barack Obama was something of a party pooper. The Dow fell 100 points during his news conference as he reminded investors of how much difficult work lies ahead to get the economy back into decent shape.
Now to the crisis in the automotive industry. General Motors should have distributed a different kind of shock absorber before it released this shocking news today. The company is almost out of cash. The country's largest car maker lost $4.2 billion dollars in the 3rd quarter. That's much worse than analysts predicted. But much more troublesome than that, GM went thru $6.9 billion dollars in cash. The company said this morning that it "will approach the minimum amount necessary to operate its business" during the current quarter. So what about after that? "Estimated liquidity will fall significantly short" of what is needed to continue operating. What does this mean exactly? Will one of America's biggest and best known companies go bankrupt? G-M insists that it is not considering that, but the experts aren't so sure. What G-M is saying is that it needs better economic conditions so it can sell more cars, and it needs the help of Uncle Sam. David Cole, the chairman of the Center for Automotive Research, is quoted in CNNMoney.com today as saying the chances of G-M going bankrupt are high unless Congress takes almost immediate action to bailout the automotive industry. Said Cole, "this is not something that can be dealt with in the next year, it needs to be dealt with in the next few weeks. When your cash is gone, you're gone." And by the way, it's not like Ford has a better idea, or at least not much better. It reported a 3rd quarter loss today of $2.98 billion, and said it used up $7.7 billion dollars in cash. Word is that merger talks between G-M and Ford are off while G-M focuses on its cash crisis. The price of Ford stock is down 71% for the year.
Expectations are that the Fed will lower interest rates again, maybe next month or sooner. But its benchmark Fed Funds Rate is already at 1%. So people are beginning to ask the question, can the Fed get down to 0%. Can borrowed money actually be free? New York Times economics writer Edmund Andrews took up just that topic recently, and tried to make sure that consumers understand the real truth: no free lunch and no free money. CLICK HERE for his report.
Have a great weekend.