Robert Reich, the economist and Clinton-era Labor secretary, says a stock market “correction” is now certain. Essentially, there are now two economies — the economy of the rich Wall Street and Washington types who are enjoying the Dow’s surge past 12,000 and a corporation cash pile in excess of $1 trillion, and the rest of America.
The other Americans, he writes, are suffering and waiting for the cash hoard to turn into jobs.
With all that cash in hand, “you'd expect jobs be coming back. But you'd be wrong,” Reich writes on his blog.
The most recent jobs report showed just 36,000 new jobs in January. The headline number dropped to 9 percent from 9.4 percent, but the actual jobs number is very bad news, Reich contends.
“Remember, 125,000 are needed just to keep up with the increase in the population of Americans wanting and needing work. And 300,000 a month are needed — continuously, for five years — if we're to get back to anything like the employment we had before the Great Recession,” he writes.
The reason the top line number fell, Reich says, is because more people just gave up looking.
He singled out corporate for outsourcing jobs and Wall Street for profiting off the practice while millions of unemployed Americans sit and wait.
It will get worse for them, Reich warned. On top of personal debt, falling home prices, and lack of work, inflation is coming.
“In coming months most Americans will also be contending with sharply rising prices of food and fuel,” Reich points out.
When that hits, expect even high-flying stocks to crash and for the power brokers in D.C. and New York to wake up to reality, just in time for the 2012 election cycle.
“Without a strong and broadly-based middle-class recovery, America's big money economy will fall in on itself,” Reich says. “A major stock market ‘correction’ is a certainty.”
Have patience, counsels former chief economic adviser to President Barack Obama, Larry Summers.
“The dynamics of renewal are under way,” Summers said at an event in Israel.
“For the first time in five years I am more optimistic than the consensus forecasts, and expect growth to exceed 3.5 percent this year.”
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