The country moved into its second year of uninterrupted job losses last month, with companies shedding another 598,000 jobs and the unemployment rate moving up to 7.6 percent, the Labor Department reported on Friday.... For the last several months, analysts said, the United States has increasingly been trapped in a vicious circle of slumping consumer demand, falling business investment, mounting losses in the banking system, and rising unemployment, which was 7.2 percent in December....On Thursday, the nation's retailers reported that sales fell 1.6 percent in January, the fourth consecutive month of steep sales declines.... For comparison, the unemployment rate was 4.9 percent in January 2008. But some analysts contend that the current unemployment rate understates the labor market's problems because the percentage of adults participating in the labor force has slumped in recent years, and those people are not listed as "unemployed." Peter Morici, an economist at the University of Maryland, estimated that if the labor force participation rate today was as high as it was when President Bush took office, the unemployment rate would be 9.4 percent.
Peter Morici, an economist at the University of Maryland, estimated that if the labor force participation rate today was as high as it was when President Bush took office, the unemployment rate would be 9.4 percent.
The Federal Reserve continues to pump money into the financial system at a furious pace. Since September, the central bank has more than doubled its reserves, from $900 billion to more than $2 trillion, by literally creating new money. The Fed has used some of that money to help bail out financial institutions, from Citigroup and Bank of America to the American International Group. But analysts say that the big problem is not a shortage of money, but a shortage of demand for products by businesses and consumers. As a result, banks are overloaded with excess reserves, made available by the Fed, which they are often simply parking at the Fed.
The Fed has used some of that money to help bail out financial institutions, from Citigroup and Bank of America to the American International Group.
But analysts say that the big problem is not a shortage of money, but a shortage of demand for products by businesses and consumers. As a result, banks are overloaded with excess reserves, made available by the Fed, which they are often simply parking at the Fed.
