Recession peers over the horizon posted by Richard Seymour

The mortgage market collapses, as US housing enters its worst recession in sixteen years. Two-thirds of Americans believe a recession has already begun. Investors are persuaded that a recession is on the way. This year has seen repeated fluctuations on the stock market, sharp falls followed by a temporary recovery, indicating how nervous the planet's owners are. As last year's post about The Great 2007 Recession pointed out, it was the housing market's strength that bailed out the American economy during the 2001-2 recession, so its current weakness exacerbates the already existing structural imbalances in the economy. US workers experienced the first (very slight) real-terms wage growth for six years over a few months until February this year, but these have since contracted. As the New York Times points out:

Wage growth in the current economic recovery has been unusually weak. The real average wage for rank-and-file workers actually fell from the start of 2002 to late 2006, despite solid economic growth. As job growth picked up, wages surged in the second half of last year before falling back this year.

The recent moves to increase the minimum wage have predictably made little impact on this, since the raise is gradual and small, and affects only 1.25m workers. What's more, for a full time worker on the new rate of $5.85 an hour, as this report points out, there will still be huge problems meeting bills. American capital is obviously anxious to see how far it can go, since at some point there's the prospect of a massive wage-free work-force, as in Mexico, but the reports in the business press do indicate some concern that it aggravates the economy's weakness to have a population that can't pay for the stuff they sell, especially since the record debt levels are no longer sustainable due to the collapse of the housing market. So, what are they going to do about it? Oh, probably demand another tax cut, hope for rising unemployment to further discipline the workforce, hire retainers and repo men, and ride out the storm.

Labels: america, capitalism, global economy, recession