From John Mauldin's latest newsletter, here is an excerpt:
The unemployment number from the BLS last week showed a loss of 62,000 jobs. Private sector jobs were off by 91,000, with the government showing growth of 29,000.But once again, the birth/death ratio of estimated new jobs was 177,000. As The Liscio Report noted: "... without the b/d's contribution, private employment would have been down by something like 268,000. It added 29,000 [new jobs] to construction, 22,000 to professional and business services, and 86,000 to leisure and hospitality. Given the weakness of the economy and the crunchiness of credit, we doubt that there are enough startups around to match these imputations."
Because the BLS makes adjustments to the figures each month, during economic downturns, the official figures historically underestimate the true losses in jobs. Using the BLS' own numbers, the U.S. economy in June really lost more than 1/4 million jobs for the month! Ouch!
It get's worse, too. From the same newsletter:
" 'We are facing an avalanche of bad assets. We have big doubts as to whether financial institutions will be able to obtain enough new capital to cover their losses. The credit crisis is going to get worse,' said the group in a confidential report, leaked to the Swiss newspaper Sonntags Zeitung.
"Bank losses on this scale would have far-reaching effects. Lenders would have to curtail loans by roughly 10-to-one to preserve their capital ratios. This would imply a further contraction of credit by up to $12,000bn [$12 trillion] worldwide unless banks could raise fresh capital."
Last quote:
The bottom line is that they estimate there is at least another $1.1 trillion of losses that will have to be written off by institutions all over the developed world, including very large potential write-offs from insurance companies.Banks and investment institutions worldwide may need another $400 billion in capital infusions. But where they are going to get it is the problem.
Read the entire newsletter here:
$1.6 Trillion in Losses and Counting
