Even as the stock market grinds on through its bear market rally, the real economy continues to slide off its narrow shelf like a boneless chicken seeking someplace lower.
First, factory activity plunged to its lowest reading since 1982. How significant is this? Well, in 1982 we were in the depths of a very severe recession. (This one hasn’t even officially started, according to the NBER, who are squirming desperately to avoid proclaiming one right before an election). For factory activity to plunge like this at the outset of a recession speaks to a very deep economic hit in our near future.
Factory sector weakens sharply in October
WASHINGTON (MarketWatch) — The nation’s manufacturing firms reported the worst level of output in 26 years, further evidence that the economy is slumping sharply, according to a closely followed survey of top executives released Monday.The Institute for Supply Management index fell to 38.9% from 43.5% in September, below the 41.5% expected by economists surveyed by MarketWatch. See Economic Calendar.
The result is the lowest reading since September 1982. The indexes for production and new orders fell to their lowest level in 28 years.
What do factories make? You know, cars and things. Perhaps these two news items belong together, then:
Ford posts big drop in October U.S. sales
Toyota also posts decline along with top German automakers
SAN FRANCISCO (MarketWatch) — Ford Motor Co. on Monday reported a 30% drop in U.S. sales for October, touting the launch of its new F-Series pickup as a silver lining in "an economic gauntlet the likes of which haven’t been seen in more than two decades."Toyota Motor Corp. fared slightly better, but its sales still fell 23% to 152,101 units with truck sales taking the brunt of the damage.
To which we can add GM sales being down 45%.The chance of the big three automakers to survive this is very, very low. They will need a lot of public assistance to even limp along for a while longer.
Next, bankruptcies are up strongly, topping 100,000 for the month of October, for the first time since the new restrictive bankruptcy laws went into effect.
Bankruptcies Top 100,000 for First Month Since 2005
Nov. 3 (Bloomberg) — More Americans threw in the towel in October as monthly bankruptcy filings topped 100,000 for the first time since bankruptcy laws were tightened three years ago.Businesses and individuals in the U.S. filed 108,595 bankruptcy petitions of all types, up 13 percent from the prior month, according to data provided by Automated Access to Court Electronic Records, a service of Jupiter eSources LLC in Oklahoma City.
Filings dropped precipitously after more restrictive bankruptcy laws came into effect in October 2005. Elizabeth Warren, a professor of bankruptcy law at Harvard Law School, said the changes "drove up the cost of filing for bankruptcy, but it did not end the need for bankruptcy.”
Back in 2005 when this very, very banker-friendly law was passed, I was telling audiences that it smelled wrong that this particular law was being passed right at the outset of a Fed rate hiking campaign, following the most profligate and unwise bout of credit expansion that we’d ever lived through. It was a dead certainty that lots of personal bankruptcies were in our future, and Congress voted overwhelmingly to assure that the brunt of the pain was going to be felt by the borrowers, not the lenders.
So I kind of took exception to the manner in which the financial industry both lobbied for less oversight in their lending practices (and got it) and more restrictive bankruptcy laws and got that too.
Couple that with the fact that Congress did not heed the wishes of the electorate that overwhelmingly did not want war with Iraq (in 2002), did not want this bankruptcy law (2005), voted for a change in direction that they did not get (2006) and did not want to bail out Wall Street (2008), and you’ve got a pretty clear set of dots to connect. Congress is not listening to "the people."
This is not a partisan statement of any kind. Please do not send me any supporting evidence that either the Democrats or Republicans are better or worse in any particular regard. When it comes to looking out for our financial future, and listening to the people, I’ve truly lost the ability to detect any distinction between the parties.
That’s why this site and the Crash Course exist. Every single significant social movement, from women’s rights to civil rights, has been brought kicking and screaming to the marble halls of power. That’s just the way it works.
Is it time to bring an economic movement to the center stage?
I think so.
by former_user