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Context of 'January 20, 2009: Iceland Predicts Economy Will Contract by Nearly 10 Percent'

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According to a report published in February 2009 by the Japanese government, Japan’s economy—the world’s second largest—suffers the biggest monthly drop since records began more than half a century ago, with January marking the fourth successive month that factory output has fallen. Officials conclude that the country is in its worst recession in decades. The figures are published days after government reports that exports plunged nearly 46 percent in comparison to a year ago, reportedly suffering from a fall in foreign product demand. A preliminary report by the Ministry of Economy, Trade, and Industry predicts that output will further fall to 8.3 percent in February, but increase in March by 2.8 percent. The report concludes that a 17.3 percent production drop in transport equipment, including cars and trucks, had the largest negative impact on the overall output decline, and that electronic parts and devices was down 21.8 percent from December, followed next by general machinery and steel, with all 16 industrial areas cutting their output. According to the Japan Automobile Manufacturers’ Association, the country’s car production plunges a record 41 percent in January and vehicle productions decrease by nearly 50 percent to 576,539 vehicles produced in January 2009 compared with 976,975 in January 2008. “Fearful of losing their jobs in the global turndown, consumers no longer want to buy Japanese electronic gadgets and cars,” says Roland Buerk of BBC Tokyo. “The Japanese are shopping less and average household spending fell 5.9 percent in January compared with the same month a year ago.” Jobs are also being slashed, with unemployment rising by more than 200,000 in January 2009. “Japan was once seen as relatively immune to the global crisis because its banks were not as exposed to bad loans as those in the US and Europe,” Buerk will say. “Their reliance on foreign markets to drive its economy out of a long slump in the 1990s has left it painfully exposed.” “The recession is having an increasing impact on the real economy,” Finance Minister Kaoru Yosano will say. [BBC, 2/27/2009; Xinhua News Agency (Beijing), 2/27/2009]

Entity Tags: Roland Buerk, Kaoru Yosano, British Broadcasting Corporation, Japan Automobile Manufacturers’ Association

Timeline Tags: Global Economic Crises

The Icelandic finance ministry says the country’s economy is forecast to shrink by 9.6 percent in 2009. In addition, it predicts no growth in 2010. [BBC, 2/2/2009]

Timeline Tags: Global Economic Crises

In their new report, “The State of Working America 2008-2009,” two economists at leading US think tank Economic Policy Institute (EPI) issue warnings that US workers will face harsh challenges as what they term “the Great Recession of 2007” draws to a close.
Unemployment - Heidi Shierholz and Lawrence Mishel, co-authors of the report, say that the extent of the huge global crash would have been much worse without President Obama’s American Recovery and Reinvestment Act of 2009. “The disaster would have been even worse without the stimulus law President Obama pushed through earlier this year,” Shierholz says. “Job losses would have been so high that the July unemployment figures would have been 9.6 percent or 9.7 percent, not 9.4 percent. We expect a steady climb in the unemployment rate up and over 10 percent by the end of the year. And it’ll rise slightly above 10 percent for a few months in 2010 before turning downwards. Until the economy is adding 122,000 jobs per month to take care of the people coming into the job market, unemployment will stay high. We still have a long way to go.”
Human Cost - Both economists speak of the human penalty. “This is more than a bunch of dry numbers,” Mishel declares. “One-third of the jobless—a record—have been out of work at least six months. Many have exhausted their unemployment benefits, which translate into bankruptcies, lost homes, no medical care, and more ills afflicting workers—even employed workers. This recession is much more than just the numbers of unemployed and underemployed, which is also setting a record,” he says. “Employed workers are seeing their hours cut, there’s an implosion in wage growth, and about 17 percent of large private employers have resorted to unpaid furloughs to save money.” Mishel explains that a one-week furlough is the equivalent of a 2 percent pay cut for a worker and his or her family.
Media Coverage Poor - In their report, the economists also criticize major media’s coverage of the crisis, urging workers not to fall for the usual chatter that things will automatically improve once productivity rises. “In the popular media, economic experts endlessly debate dynamics and causes of the downturn but most of these debates have very little to do with the real economic challenges facing working families today. The men and women of the workforce have worked harder and smarter to make the US a world-class economy and the mantra among economists and policy makers is that ‘as grows productivity, so shall living standards improve.’ Would that it was so.”
'YOYO Economics' - Prior to the crash, the report says, workers faced “rising inequality and lower real incomes for all but the richest 5 percent, diminished bargaining power, less health coverage, riskier pensions if any at all, income constraints that prevent workers’ kids from getting college educations to better themselves, and fewer high-paying jobs for those college grads, due to off-shoring and outsourcing.” The report nicknames it “YOYO (‘You’re on your own’) economics.” “We are in a unique position to judge the results of this experiment in reduced worker bargaining power and YOYO economics,” write the two economists. “The macro-economy is in serious disrepair and policymakers must move beyond temporary patches to fundamentally remake the economy so that it works for workers.”
Effect of Stimulus - The two offer praise for the Obama administration’s move to correct economic imbalances with the $787 billion stimulus package, the “cash for clunkers” program, initiatives to help the Detroit auto industry, and the $500 million “green jobs” initiative that have “partially staunched the bleeding.” Mishel predicts that, in conjunction with these programs, Congress will pass a second federal extension of unemployment benefits. They also argue that there should be fundamental restructuring away from “free market” policies that give corporations and financiers free sovereignty while the masses are forced to tighten their belts. [People's Weekly World Newspaper, 9/4/2009]

Entity Tags: Lawrence Mishel, Economic Policy Institute, Heidi Shierholz

Timeline Tags: Global Economic Crises

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