Economy rolls along dragged down by unemployment, real-estate and inflation

Recent evidence suggests the economy is still growing since the 2nd quarter GDP was released as a 3.3% gain. But real estate continues to deteriorate, the unemployment rate hit a 5-year high and inflation has been soaring.

Yesterday, the Commerce Department released its wholesale inventories report. They said that inventories climbed 1.4% after increasing by a downwardly revised 0.9% in June. The overall ratio of inventories to sales edged up but sales of non-durables (e.g., crude oil and gasoline) declined by 0.7% while durable goods orders increased by 0.2% in July after rising 1.6% in June. But the durable goods component would have been even better if not for autos: Car inventories rose 2.3% while auto sales declined 1.4%. Petroleum sales have crashed 5.9% since January 2007.

Pending home sales (i.e., sale contracts signed) resumed falling, dropping 3.2% in July after rising 5.8% in June.

The Labor Department said on September 5th that 84,000 payroll jobs were lost in August representing the eighth straight monthly reduction in jobs. Job losses in June and July were revised downwards. July's job losses were severely revised downwards to 100,000 from an original estimate of only 51,000. Separately, their household survey reported a 6.1% unemployment rate.

Inflation is a world-wide problem due, at least in part, because of U.S. economic strength and a wide array of important products (e.g., crude oil) priced in U.S. Dollars. Today, Japanese wholesale prices were said to have risen 7.2% in August - remaining near a 27-year high. Back in the U.S., inflation that is caused by the weak dollar has ameliorated somewhat as the dollar has strengthened since mid July. But nothing is being done to stop rampant food cost inflation due to the mandated use of corn-based ethanol in gasoline.