A Snapshot of the American Economy, Unemployment Rates, and Stock Market

uncle_sam_bruised_economyMortgage Foreclosure Report has been created with the intent to help Americans preserve the American dream.  We at Mortgagefloreclosurereport.com believe that America is the greatest country in the world and want to help Americans preserve that American dream.  It is undeniable that America has had a decline in prosperity over the past couple of years.  The weakening of our country has been caused by a combination of reasons such as:

  • Legislation passed by the Executive and Judicial branches of government
  •  Corruption and greed on Wall Street
  •  Americans living beyond our means
  • Banks providing substantial home loans to Americans who were never in a position to afford that home

According to the United State Department of Labor, when comparing January 2008 to January 2009, the unemployment rate and the percent of the force that is unemployed rose from 7.6M to 11.6M and 4.9% to 7.6%, respectively.  That is an increase of 4.0M unemployed Americans and an increase of 2.3% in the *percent of the labor force that has become unemployed over the past year.  (Note as of August 2009 unemployment has increased to ~11.00.)

Please note these numbers do not depict an accurate picture of the unemployment crisis in America.  The statistics do not take into account the following.

  • Americans working part-time who are unable to find full time work (~8.0M)
  • Citizens who desire a job, however they are not actively seeking employment (~5.6 million)

Therefore, ~25 million Americans are unemployed.  Per our research there only an estimated 3 million job openings in America as of December 2008.

In addition to the unemployment pandemic in America, the stock market (in reference to the Dow) has dropped below 7,000 points.  This is the lowest it has been 11 years.   (Please note we have seen a great recovery in the market since this article was originally written.  The Dow is now over 9,500 points).

Side Note: The events that led to the downturn in our market and the events that are currently happening after our market started to decline are vary comparable to the events that led to the stock market crash of 1929 and the Great Depression. 

  • After the stock market crash in 1929 the Dow did not hit its lowest point until October 1932 (~3 years).  The market declined 89% in a three year period.  Mortgageforeclosurereport.com compared the highest point in the Dow over the past three years and noted it occurred in October 2007.  Since this peak the market has decreased ~50% over the past year and a half.
  • Real estate values peaked in the mid 1920s and as the real estate values started to decrease the stock market then crashed.  The correlation between peaking real estate values followed by a sharp decline in the Dow during the 1920s is similar to the real estate bubble that peaked in the 2000s followed by the rapid descent of the Dow.
  • Economists debate whether political legislation that was passed by the government may have provided an avenue for the market to decrease significantly in both time periods.  In the 1920s economists argued whether the Smoot-Hawley Act contributed to the stock market crash.  In our current times economists are debating whether the Community Reinvestment Act revisions in 2002 made by the Clinton administration contributed to our current situation.
  • Banks over extended themselves in both time periods
  • When the media reported the stock market crash in the 1920s to the American public there was national spread panic.  This panic led to a decline in market confidence, which led to the crash of the Dow, which led to the Great Depression.  This same panic the American Media created in the 1920s is tenfold in the present.  This media is able to reach out to the American public and the rest of the world 24/7.

By looking at history we can learn some valuable lessons.  First, the past is the past and we have to move on and work towards improving the future.  Second, the worst may have yet to come.  Therefore, we need to take precautions and seek help from professionals.  Finally, there has to be a personal responsibility by each individual American to take care of him/herself and their families. 

Our website is not designed to debate who or what created the financial crisis in America, but rather give the reader a background of what is going on in our country.  Additionally, we want to help the public gain a basic understanding of loan modification, foreclosure, debt consolidation, and a short sale.   

*The percent of the labor force that is unemployed is calculated by the following calculation:

                                Number of Civilian ** Noninstitutional Population in the labor force   

                                Number of Unemployed Civilian ** Noninstitutional Population in the labor force

** Civilian Noninstitutional Population – All persons who are equal to or greater than 16 years of age (aka “working-age population”) and are not members of the armed forces or persons who reside in institutions such as a nursing home, jail, prison, mental hospital, and juvenile correctional facilities.

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Comments

By Tony Orlando on August 26th, 2009 at 7:00 pm

Well said

 

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