The Great Recession Lessons

 Financial FAQs

“Irrational Exuberance. Economists who adhere to rational-expectations models of the world will never admit it, but a lot of what happens in markets is driven by pure stupidity - or, rather, inattention, misinformation about fundamentals, and an exaggerated focus on currently circulating stories. Robert J. Shiller

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Nobel Laureate Robert Shiller is best known for his book, Irrational Exuberance, that he wrote in 2000 predicting the Dot-com recession. But it applied as well to the Great Recession of 2007-09, the worst world-wide recession since the Great Depression, which was precipitated by the busted housing bubble that in turn was based on the irrational belief housing prices would never fall.

And former Fed Chair Alan Greenspan’s Fed cooperated by pushing its Fed Funds rate to 1% in 2004 per the FRED graph, after which inflation took off. CPI (consumer) inflation ultimately reached 5 percent and Greenspan’s Fed then had to sharply raise its Fed Funds rates to combat it, busting the housing bubble.

The Great Recession that lost more than eight million jobs was ultimately based on President GW Bush pursuing the time-honored Republican agenda of multiple tax cuts and borrowed money while advocating ultra-low interest rates that created the first $1 trillion federal budget deficit.

Sound familiar? Trump is pushing for lower interest rates once again when Chairman Powell’s term at the Fed ends in the spring and his own Fed Chairman takes over with a majority of more inflation-friendly Trump-appointed Governors.

The Great Recession was caused by pure greed, in other words. Republican tax cuts mainly benefited their wealthiest supporters and were paid for by taxpayers. The Trump administration is running up another $4 trillion to the federal debt from its Big Beautiful Tax Bill renewing the tax cuts enacted during his first term that had already added $5 trillion to the debt.

There were also other reasons for the 2007-09 Great Recession. Bush had championed cutting regulations that ‘freed’ more market speculation and appointed regulators who were in reality foxes in the hen house. They refused to enforce existing regulations, allowing banks to buy and sell junk bonds that were falsely rated as investment grade, causing several investment banks to fail (e.g., Bear Stearns, Lehman Bros).

How close are we to another recession of any kind? The November unemployment report comes out on December 16, as I’ve said, (skipping October’s report) after the Fed’s FOMC meet that decides whether another rate cut is appropriate, so we have only the ‘unofficial’ ADP private payrolls report on employment that showed -32,000 private payrolls were lost in November.

We do have the just out October JOLTS report on monthly hirings and layoffs that said job openings jumped to 7.7 million in October from a 7.2 million reading in August that had been close to a pandemic low. The increase in job openings was likely tied to the holiday shopping season, says MarketWatch’s Jeffry Bartash.

“Yet the number of people hired in October was basically the same as the number who found jobs in August: 5.1 million. That was the second-lowest number since the pandemic and the lowest since 2015 if the COVID-19 era is omitted,” said Bartash.

That’s hardly a reason for optimism on future job growth. The fear of higher inflation from the tariffs is causing higher long-term bond and mortgage rates, stopping the housing market from growing at all.

A recession is basically a vote by consumers that they will save more and spend less and fewer can afford the higher prices. It’s possible that Republican priorities will fool some of their poorer, MAGA supporters some of the time, but not all Americans.

It’s also a vote on who to blame for too high inflation. Powell’s Fed Governors will lower their rate another -0.25% but will be reluctant to predict more rate cuts because of the tariff uncertainties. Yet Donald Trump will continue to pursue more rate cuts when his Fed Governor takes control, telling everyone it won’t cause higher inflation.

This could be the Great Recession scenario all over again, with a deflated AI asset bubble instead of the busted housing bubble. Or, maybe inflation isn’t so bad. Consumers will know first, even though Trump likes to fire those that don’t agree with him and hire incompetents in their place.

We’ve already seen the results in the Bureau of Labor Statistics because he didn’t like revisions to its last unemployment report that showed big hiring drops. A lack of reliable economic monitors could be another reason for a recession, so that irrational exuberance takes off again.

There are even more lessons to learn, such as history has a habit of repeating itself when “markets are driven by pure stupidity”.

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Still Flying Blind--Part II

 Financial FAQs

“Hiring has been choppy of late as employers weather cautious consumers and an uncertain macroeconomic environment. And while November's slowdown was broad-based, it was led by a pullback among small businesses.” ADP

wallpaperaccess.com

We know why consumer confidence has plunged to a new post-pandemic low. We have no news of current economic conditions to guide consumers and investors, much less what may happen next, so the U.S. economy is still flying blind.

The November unemployment report comes out on December 16, for instance, (skipping October’s report) after the Fed’s FOMC meet that decides whether another rate cut is appropriate, so we have only the ‘unofficial’ ADP private payrolls report on employment that showed -32,000 private payrolls were lost in November.

The goods sector of the U.S. economy, including Construction and Manufacturing, lost -19,000 jobs. The service sector lost -12,000 overall, though Education, Health and Leisure activities added +46,000 jobs in the sector.

September’s last ‘official’ unemployment report with 119,000 payroll jobs was ok, but that was before the government lock down. And the U.S. economy had averaged just 38,600 new jobs since April and the tariff announcements.

Dr. Nela Richardson Chief Economist, ADP said it best in the survey. Small businesses aren’t hiring because of the uncertain tariffs, since some 90 percent of small businesses import their products that are sold in the U.S.

September retail sales also reported before the shutdown. Retail sales are growing more dependent on a smaller group of consumers. The top 10% of earners in the U.S. accounted for nearly 50% of spending in the second quarter, the highest level it’s been since this data first started being collected in 1989, according to Moody’s Analytics.

And the poor ISM manufacturing index numbers show the manufacturing sector has been contracting for the past nine months.

“A closely followed manufacturing index fell to a four-month low of 48.2% in November from 48.7% in the prior month, the Institute for Supply Management said Monday. Any number below 50% signals contraction,.” MarketWatch

The Federal Reserve will probably lower interest rates another -0.25%, but next year is a rate tossup because of the inflation worries, as almost no tariff agreements have been ratified by congress and signed.

We still have a lot of postponed economic data from the government shutdown, in other words, such as personal consumption and spending data (PCE) that the Fed prefers to measure inflation. We know that annual consumer CPI inflation had jumped to 3% in September, also before the shutdown, and will probably go higher as the tariff costs are passed on to consumers and businesses.

It’s obvious that we are living in uncertain times, and the old Republican playbook of tax cuts combined with DOGE and Project 25 slashing of government benefits are hurting the 90 percent of Americans still living paycheck to paycheck, as I’ve said.

Is that enough to cause a recession, in spite of the stock market’s boost supporting the top 10 percent of Americans that can still afford more than the basic necessities?

It won’t take much to tip US into a recession. The data we need to predict the future will eventually come out. Then we will know if not only the manufacturing sector is contracting—e.g., employment, capital expenditures, and personal income—which are the other major components that determine whether we are in a recession.

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Trump Imitates Putinism

Popular Economics Weekly

“Russian mathematician and Putin critic Andrey Piontkovsky characterized Putinism as "the highest and final stage of bandit capitalism in Russia; and also as a war, 'consolidation' of the nation on the ground of hatred against some ethnic group, attack on freedom of speech and information brainwashing, isolation from the outside world and further economic degradation". Wikipedia

Medium.com

The latest Ukrainian peace proposal was negotiated between President Trump and Vladimir Putin without Ukraine’s involvement. This is another example of Donald Trump’s attempt to curry favor with Vladimir Putin by literally allowing Putin to dictate the terms of the peace proposal.

Why has Trump turned into Putin’s messenger, whose policies mirror Putinism? Why has the oldest liberal democracy in the world, a nation of immigrants founded on the principle of every member’s inalienable right to be free become the “bandit capitalism” of Vladimir Putin, a dictator who allows no freedoms and kills his own people?

Late-stage capitalism doesn’t fully explain why Donald Trump, a real estate developer with no political experience, could convert a weakened American Democracy into a version of capitalism that concentrates power and wealth in the hands of his oligarchic supporters blatantly ignoring America’s founding principles and laws of the land.

But epidemiologic disease models studied by medical researchers can explain how capitalism could morph into Putinism and bandit capitalism. Such models have shown that there are predictable paths that all epidemics, pandemics, or other contagious disease outbreaks follow from beginning to end.

The body politic of countries and regions (i.e., “the people of a nation, state, or society considered collectively as an organized group of citizens) have endured political outbreaks with similar characteristics. Even civil wars fit this infectious disease model, because they originate internally—brother or sister against each other—and may last longer than years, and suddenly end in unexpected ways.

How do diseases infect? The Black Plague epidemics usually infected people that had been weakened by famines or dysfunctional governments, and the more recent Spanish Flu and COVID-19 pandemics as well that infected and killed millions.

When do such pandemics wane or disappear? They run a recognizable course from inception to a maximum infection rate, then subsided when disease-infected populations eventually found ways to cause their decline. It was quarantines in early times, and vaccines in modern times.

Trumpism, Putinism, and like autocracies or dictatorships have captured weakened political systems. In Russia it was breakup of communism and the Soviet Empire that fostered a Vladimir Putin. In Trump’s case, he took advantage of a democratizing order that had united to win World War II but no longer served many Americans.

Oligarchism, or the Gilded Age model has supported Trump’s version of bandit capitalism with his illegal tariffs that are creating the worst income inequality in the developed world. Trump is promoting a similar hatred of immigrants as Putin, also non-white ethnic and religious groups, attacks on freedom of speech in universities, and Depression-level tariffs that is isolating America from the “outer world”.

The AP just reported that President Donald Trump says he wants to “permanently pause migration” from poorer nations and is promising to seek to expel millions of immigrants from the United States by revoking their legal status. He is blaming immigrants for problems from crime to housing shortages as part of “social dysfunction” in America and demanding “REVERSE MIGRATION.”

He has also followed Putin’s strategy by weakening foreign alliances such as NATO, and breaking up long held foreign trade alliances, all to centralize his power.

But the MAGA movement itself may be in a late-stage decline, as it is slowly disintegrating from internal divisions, with the resignation of major leaders such as Marjorie Taylor Green, growing disputes over policies including tariffs and the treatment of immigrants.

And Donald Trump, its leader, is showing signs of declining health—with fewer public appearances (that also afflicted former president Biden), irrational outbursts and making sudden policy changes without explanation. The MAGA movement has blindly followed him, believing in totally irrational conspiracies until the conspiracies are debunked or and fade away (just as did the flu and COVID-19 pandemics).

The first Gilded Age was defeated by the election of President Teddy Roosevelt riding on the wave of a progressive movement that uncovered the corruption and concentrated wealth of the time.

Trump doesn’t even attempt to hide his blatant corruption nor his promotion of the disease of Putinism that is attempting to destroy American Democracy. So it will take constant vigilance to identify and combat such a widespread contagion, as we have defeated past diseases of the 'body politic', and bring Americans together once again in common purpose to preserve our democracy.

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

 

What is Worrying Consumers?

 Financial FAQs

 “Consumer confidence tumbled in November to its second lowest level since April after moving sideways for several months,” said Dana M Peterson, Chief Economist, The Conference Board. “All five components of the overall index flagged or remained weak.”

Conference Board

Why are consumers worrying so much? Maybe they don’t like government shutdowns? Or, maybe it’s because higher prices and the tariffs are hurting small businesses that depend on imported goods? Or, there are fewer available jobs. Actually, it’s all of the above per the Conference Board’s Consumer Confidence Survey.

“Consumers’ write-in responses pertaining to factors affecting the economy continued to be led by references to prices and inflation, tariffs and trade, and politics, with increased mentions of the federal government shutdown.”

It’s also becoming obvious that consumers don’t like bully behavior, such as Republicans ramming through the continuing budget resolution without Democrats’ input.

Republicans were in fact attempting to take down Obamacare (ACA) once again by not including the subsidies in the continuing resolution that made it available for middle and low-income folk, I said last week.

Retail sales data finally released for September showed consumers were still shopping and dining out, but not as much.

So what will happen now? This was all before the shutdown. My guesstimate with anecdotal evidence from the likes of Walmart, Target, et. al., is that the more affluent consumers that own homes and stocks will come storming out of the gates after the shutdown and maybe party through the holidays. Government workers will be receiving extra paydays, for instance—i.e., weeks of backpay.

Doug McMillon, Walmart’s outgoing chief executive, cited by MarketWatch, said on the chain’s earnings call that middle-and-upper-income households drove growth in the U.S. during the third quarter. He also said that “lower-income families have been under additional pressure of late.”

And the financial markets have been rallying as it looks like the Fed will cut rates once again in December. Consumers will rally as well as they race to borrow and purchase during the holidays. That’s because polls say they expect inflation to surge over the next year when things will become more expensive.

And Trump has grown wilier with his tariff pronouncements, not touting their benefits so loudly, for instance, which was alarming consumers, while finally admitting that tariffs have been raising prices. His MAGA followers are suffering the most. He must have finally looked at his poor poll numbers that are even lower than during his first term.

The other unspoken shoe to drop that affects consumers is the shrinking job market. ADP payrolls reports that just +42,000 private payrolls were added in October. Trade, Transportation, Education and Healthcare added the most jobs. But -51,000 jobs were lost in other sectors such as Information and Information and business services.

“Private employers added jobs in October for the first time since July, but hiring was modest relative to what we reported earlier this year. Meanwhile, pay growth has been largely flat for more than a year, indicating that shifts in supply and demand are balanced,” said Dr. Nela Richardson, Chief Economist

It’s pretty obvious that we are living in uncertain times, and the old Republican playbook of tax cuts combined with DOGE and Project 25 slashing of government benefits isn’t yet hurting the 10 percent of consumers that have assets, but that leaves 90 percent of Americans still living paycheck to paycheck.

What will happen to them?

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Good September Unemployment Report

 

Popular Economics Weekly

“…while the economy is growing thanks to AI spending, it’s a K-shaped expansion: People who were already affluent are becoming more so, but the less well-off are under severe pressure.” Paul Krugman

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The delayed U.S. unemployment report for September was good old news. It showed 119,000 nonfarm payroll jobs were created, though the unemployment rate edged up to 4.4%. But that was before the government shutdown.

And the U.S. had already lost -13,000 nonfarm payroll jobs in June and -4,000 jobs in August. The U.S. economy has averaged just 38,600 new jobs per month through September since Trump announced the April 2 retaliatory tariffs, as employers haven’t been hiring while they wait see what the final tariff rates (and therefore costs) might be.

The October employment report has been canceled because of the government shutdown and the November report will come out late, depriving the Federal Reserve of critical information before its next meeting to decide whether to cut interest rates again. Both reports were postponed by the 43-day government shutdown that lasted from Oct. 1 to Nov. 12.

So the November employment report will be published on Dec. 16 instead of Dec. 5 as originally scheduled, per the BLS. An estimate of employment for October will be included in the November jobs report. It’s thought that up to 100,000 more government jobs may have been lost in October due to firings or attrition.

It is a K-shaped jobs report, as Nobel Laureate Krugman stated. This is why hiring has stagnated at such a low level since April. Jobs are being created in the lower-paying service sector, whereas the industrial sector and governments are losing jobs.

Employment in food services and drinking places continued to trend up in September (+37,000). In September, social assistance employment continued to trend up (+14,000), reflecting continued job growth in individual and family services (+20,000).

Employment in transportation and warehousing declined by 25,000 in September as job losses occurred in warehousing and storage (-11,000) and couriers and messengers (-7,000). Federal government employment continued to decline in September (-3,000) and is down by 97,000 since reaching a peak in January.

That means the more affluent consumers continued to dine out and could afford more health care services, which is now the fastest growing segment of the economy, as I said.

So the economy is k-shaped because just 10 percent of American consumers are keeping the economy from contracting, because they now own more than 50 percent of assets, according the latest Federal Reserve data—in housing, pensions, and financial assets. And the stock market is still booming.

But small businesses that employ the most workers aren’t hiring because more than 90 percent of them are dependent on imported goods that Trump has targeted with his higher tariffs. We won’t see its effect on economic growth until the fourth quarter and beyond.

If employers aren’t hiring, what is causing the predictions for 4 percent GDP growth in Q3? It’s a statistical fluke because imports are deducted from exports and other domestic expenditures to calculate the overall GDP growth rate. And small business importers are buying less at the moment. The Gross Domestic Product measures what is produced domestically, in other words.

This is the k-shaped economy we will have to live with. The NYTimes reports that the unemployment rate for 20-24 year-olds has risen to 9.2 percent. The hiring slowdown means they are competing with more experienced workers for fewer available jobs, at least until the tariff rates have settled.

Interest rates? The Fed is scheduled to cut rates another -0.25 percent in December but what if inflation doesn’t come down? Trump has signaled he wants to continue to lower interest rates regardless of the consequences.

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Who Won the Shutdown?

 Financial FAQs

“What if conservatives succeeded in repealing Obamacare? “Republicans' Obamacare repeal bill would leave 17 million more people uninsured next year, and 32 million more in 2026, the Congressional Budget Office said in an estimate Wednesday. It also said premiums would double by 2026. …By 2026, three quarters of the population would live in areas with no insurers participating in the non-group market, due to upward pressure on premiums and downward pressure on enrollment, the report found.” Huffington Post

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Republicans didn’t win the recent government shutdown because they don’t understand how important affordable healthcare has become to all Americans, not just the wealthy.

They were in fact attempting to take down Obamacare (ACA) once again by not including the subsidies in the continuing resolution that made it available for middle and low-income folk.

Republicans have proven time and again that they want non-senior Americans to pay for health care out of their own pockets, if not through their employer or business. Their extreme dislike of the federal government providing any public healthcare is most evident in Trump picking a very demented RFK, Jr. to lead the Department of Health & Human Services, while slashing Medicare and Medicaid benefits.

It reveals why they are the party of wealthy oligarchs. They are not at all interested in the health of their constituents. It’s why Republican administrations have attempted to repeal Obamacare more than 30 times and why many of the Republican red states haven’t enlisted in the Obamacare premium subsidies that would enable their own citizens to afford Obamacare

So I cited above a CBO estimate from my 2017 Huffington Post article of the benefits to Americans’ health from Obamacare resulting from its passage.

A 2016 Commonwealth Club study said “…evidence indicates that the ACA has likely acted as an economic stimulus, in part by freeing up private and public resources for investment in jobs and production capacity. Moreover, the law’s payment and other cost-related reforms appear to have contributed to the marked slowdown in health spending growth seen in recent years.”

Some of those benefits are:

· Health care spending growth per person—both public and private—has slowed for five years.

· A number of ACA reforms, particularly related to Medicare, have likely contributed to the slowdown in health care spending growth by tightening provider payment rates and introducing incentives to reduce excess costs.

· Faster-than-expected economic growth and slower-than-expected health care spending have led to multiple downward revisions of the federal deficit and projected deficits.

· These trends have also been a boon to state and local government budgets, as job growth has improved state tax revenues while cost growth in health care programs has slowed. At the same time, expanding insurance to millions of people who were previously uninsured has supported local health systems and enhanced families’ ability to pay for necessities, including health care.

We now must wait for the November 20 release of the delayed September unemployment report to learn just how much the shutdown hurt the American economy.

But the almost complete ignorance of Obamacare’s importance by Republicans during the shutdown enabled Democrats’ big win in the November elections.

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

U.S. Economy Is Freezing!

 Popular Economics Weekly

“…while the economy is growing thanks to AI spending, it’s a K-shaped expansion: People who were already affluent are becoming more so, but the less well-off are under severe pressure. For example, there are clear signs that middle-to-low income consumers are struggling: car loan and credit card delinquencies are rising, and grocers report that shoppers are buying cheaper varieties of food. At the same time, the affluent are spending freely: the top 10% of the income distribution now accounts for nearly half of all consumer spending.” Paul Krugman

PBS.org

This was the wrong season for President Trump’s Republicans to freeze Democrats out of the just passed continuing resolution or demolish the East Wing. We already have a record fall freeze hitting the Midwest and southern states.

Americans already feeling the freeze is also a good way to describe the Democrats landslide victories in the November elections. The record government shutdown put the U.S. economy on pause, but in fact much of the damage was already done, says Nobel Laureat Paul Krugman, just as Trump seemed oblivious to the timing of the damage being done to the White House,.

Republicans had been losing in the popularity polls this year because they chose to ignore the signs. So they believed that flying blind by keeping the federal government closed without official economic data on employment and inflation was the better option than knowing the truth.

But there are other data to fill the government void in data collecting that affect how consumers behave. The ADP, for instance, a private sector payment provider said private-sector employers shed an average of 11,250 jobs a week in the four weeks ending Oct. 25.

This hit the “middle-to-low income” consumers particularly hard that Krugman is talking about. What about inflation?

Ordinary grocery prices are climbing, forcing consumers to shop for “cheaper varieties of food.” Grocery prices have risen 18.2 percent since January 2022, making a $100 grocery bill approximately $118 today, per CBS News.

And President Trump is flailing in his attempt to mask the damage his tariff war is causing. Overall consumer inflation is stuck at 3 percent in large part because of the tariffs, so he wants to offer $2,000 rebates to consumers while the Fed is cutting interest rates. This would cost more than the import taxes he has already collected, enlarging the federal debt that has ballooned from his Big Beautiful Bill tax cuts.

And his proposed cuts to legal immigration from the longer term, historical average of one million to 7500 annually, will continue to shrink the workforce, even the number of H-1B work visas for highly qualified workers that are badly needed in the tech sector.

All of this will continue to damage economic growth at a time when worldwide economic growth is being affected by the chaos Trump has generated in tearing up existing foreign trade agreements.

No economy can tolerate such uncertain weather over the longer term. Hence investment decisions remain frozen while consumers find shelter for the coming economic winter. How severe will it be?

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen