I didn’t get around to pointing to this post by Dean Baker on Wednesday. Just as well, since there’s a companion story on the AP wire (or I suppose these days its the AP tube) today.
Read it and weep. The NYT tells us that the baseline scenario for the stress tests is that the unemployment rates rises to 8.4 percent and home prices fall 14 percent. The worst case scenario is that unemployment rises to 8.9 percent and house prices fall 22 percent.
Okay, unemployment will almost certainly reach 8.0 percent and possibly 8.1 percent in February. It might cross 8.5 percent in March. The worst case scenario is that it hits 8.9 percent by the rest of the year?
Remember, this is the same crew that told us that there was no housing bubble. When it became clear that there were serious problems, they assured us that they would be contained in the subprime market. After Bears Stearn collapsed they told us that they didn’t see another Bear Stearns out there.
These stress tests indicate that our economic policy makers are still in a serious state of denial. Why isn’t the media ridiculing them and telling the public that the folks making economic policy still don’t understand the economy.
Cue the AP:
California’s unemployment rate jumped to 10.1 percent in January, the state’s first double-digit jobless reading in a quarter-century.
The jobless rate announced Friday by the state Employment Development Department represents an increase from the revised figure of 8.7 percent in December.
A year ago, California’s unemployment rate was 6.1 percent. Since then, steep declines in the construction, finance and retail industries have put thousands out of work.
The number of people without jobs in California soared to more than 1.8 million, up 754,000 over January 2008.
Got that? Worst case scenario, 8.9% by next December. California, 10.1% last month. Sure is lucky the banks don’t have any mortgages in California…