A number of reports have surfaced in recent weeks offering predictions of a return to growth in the economy by the end of this year. No one disputes the value of positive thinking, especially in troubled times such as these. But positive predictions made prematurely, or based upon an incomplete set of facts, can create false hopes and unrealistic expectations, which can actually be counterproductive. Unfortunately, the recent predictions of an impending turn-around in the economy appear to be of this sort.
Just look at the unemployment rate. It has been steadily on the rise for months now. Last month alone, some 539,000 jobs disappeared. This sent the jobless rate up to a disturbing 8.9 percent -“ the highest it has been since 1983. These figures reflect a loss of 5.7 million jobs since December 2007, the greatest total job loss on record since the Great Depression. The Labor Department currently projects that the month of May will round out with more than 630,000 additional jobs in the tank. The total number of people collecting unemployment benefits across the country has set records for 15 weeks straight. At the moment, that number stands at more than 6.5 million people.
And the economy is just beginning to feel the effects of the current woes in the auto industry. Chrysler recently filed bankruptcy, and GM appears poised to do the same any day now. The layoffs from Chrysler alone will inevitably place a significant additional drag on the economy. On May 1st, the auto manufacturing giant stopped production at its 22 plants around the country. Together, those plants employed almost 27,000 hourly employees. Think there's a chance Chrysler's moves will have a trickle-down effect on other businesses? You betcha -“ and it will likely be a significant one at that. Production at Chrysler plants is the lifeline for scores of businesses -“ from auto parts manufacturers and suppliers to car dealers and auto service centers.
With Chrysler's production halts around the country, many of the employees at these businesses will be hung out to dry too, at least for the near term. And how about GM? Record layoffs and production halts appear to be just around the corner for this auto giant as well. And when they happen, many of the thousands of GM employees -“ as well as those who work for business that rely on GM's continuing vitality -“ will likely find themselves standing in the unemployment lines too.
Growth by the end of this year, they say? Under these circumstances? Not likely. It will probably take until the end of the year before the full effects of the fallout in the auto industry even become apparent -“ much less begin to dissipate.
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