Bears, Bulls, Chickens and Pigs: wOw’s Wall Street Weekly with Liz Peek (Week of 6/29) 

Editor’s Note: Liz Peek is a financial columnist and the author of wOw’s SHEconomics.

Happy Independence Day! Between the cookouts and bike parades, I always try to sneak in a few minutes over this holiday to contemplate the Declaration of Independence, and to think about the birth of this great nation. Although my imaginings of those gatherings in Philadelphia have undoubtedly been colored by one too many viewings of the musical "1776," reading about the key players of the time leaves no doubt that they were indeed extraordinary men.

Thomas Jefferson and John Adams probably did not frequently break into song. They did, however, possess great learning, idealism and courage. They were also, for the most part, selfless. I wish they walked among us now.

Today, our country is again under siege. We have overcome huge obstacles in the past – the British, World Wars, Depressions and massive shifts in the economy – because we found the leaders and the skills to succeed. What about this time?

As this week’s employment report confirms, we still face major challenges. In June, the country shed another 467,000 jobs – much worse than expected, bringing the unemployment level to 9.5%.

Since the beginning of the recession last year, the U.S. has lost 6.5 million jobs – truly a disaster for so many families, and also for the prospects of a near-term rebound. It continues to be the highest-paying jobs – those in manufacturing – that are hardest hit. Some 136,000 in that field lost work last month, along with 79,000 in construction.

Employment is a lagging indicator, as we all know. Still, the persistent bad news on this front makes the hoped-for second-half recovery less likely. It also casts doubt on the effectiveness of the stimulus program undertaken by President Obama. Though opinion has been split on the potential of that $787 billion initiative, it probably boosted the nation’s confidence at a critical time. That alone was worth something. Ironically, since the administration has attempted recently to ram through a slew of other massive programs such as health-care reform and cap-and-trade, the country’s enthusiasm for deficit spending has vanished. The surprising downturn in consumer sentiment in June, to 49.3 from 54.8 in May, attests to this. Americans are not stupid. They see spending and deficits soaring, and understand the consequences.

As I wrote several weeks ago, the stock market is now weighing the shape of the bounce-back. In the second quarter we enjoyed a nice surge in the market averages, as investors decided that clocks would keep ticking, but for further gains, we need confidence that we will find an engine of growth.

The head of the Council of Economic Advisors, Christina Romer, surprised me this past week by reiterating her forecast of a V-shaped recovery. I really cannot see where that will come from. There are some short-term factors, such as inventory restocking, that will boost the numbers going forward, but it is hard to see a surge in spending by either consumers or by businesses anytime soon. The consumer is simply tapped out. The slow growth in jobs and wages over the past decade meant that consumers funded spending through borrowing. That is over, and instead many people now face debt problems and rising taxes. Businesses are in better shape, but extremely low utilization rates suggest that any surge there is unlikely.

I hope I’m wrong, and that an upturn in China and other emerging markets will fuel exports from the U.S., and that the early-stage (and potentially very damaging) protectionism that we’ve seen from the union-obliged Obama team is abandoned. It’s also possible that businesses find investment opportunities in the tech sector. The bad news is that most of the breakthroughs taking place there seem to do with providing consumers with an ever-greater range of entertainment on their cell phones. That doesn’t seem very productivity-enhancing to me. In fact, I imagine it’s quite the opposite.