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Economic Woes: Maybe We Ain’t Seen Nothin’ Yet

Today’s bad news comes from Catherine Rampell of the New York Times:

In the latest sign that the economic recovery may have lost whatever modest oomph it had, more small businesses say that they are planning to shrink their payrolls than say they want to expand them….While big companies are buoyed by record profits, many small businesses, which employ half of the country’s private sector workers, are still struggling to break even. And if the nation’s small companies plan to further delay hiring — or, worse, return to laying off workers, as they now hint they might — there is little hope that the nation’s 14 million idle workers will find gainful employment soon.

The six-week slump in the Dow (likely to be a seventh when Friday’s trading is done) indicates something equally worrisome. Since the middle of last year, the markets have been “pricing in” an economic recovery generally. If, instead, what we are seeing is that we are mired in the doldrums or at the outset of a substantial reversal, then the priced-in recovery will be priced out and the stock market will decine even more substantially.

So along with the decline in housing value we’ll have a decline in stock-market value. The economic woes, therefore, don’t just have a prolonged impact on the unemployed, though they are certainly in the worst and most awful position of everyone. They affect everyone. And the question for President Obama will be this: How on earth do you sell yourself for a second term when the people you need to vote for you outside your base feel poorer and (in many cases) actually are poorer than they were when you took office?


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