The mainstream media definitely got this headline correct. Greece does not need a third bailout, because it has already had one. The next bailout will be the fourth, but Venizelos, the Finance Minister, is claiming that it won’t be necessary. Venizelos believes that changing the terms of the debt coupled with a return to the bond market will alleviate the need of another bailout program.
Lowering the interest rates on Greek debt held by the rest of the EU would constitute another adverse credit event and also be considered another bailout. Moreover, Greece will never return to the bond market as a full-fledged euro member, but Venizelos need not worry. Greece will continue to receive enough table scraps from its troika overlords to remain within the euro maintain Germany’s and his ow living standards.
The various pieces of economic data are not conflicting. They all tend to confirm the picture of an economy that is still struggling with politically connected entities doing well while the rest of the country endures a five year labor market slump. In our chart above, we have marked this “recovery’s” best growth with a red line making it easy to see how poorly the economy has performed in the wake of the Great Recession. Peak economic growth during the last two recoveries was double and quadruple the highest rate today
The only thing the economic data conflicts with is the economic recovery narrative. At this point, economic growth should be stronger, and economists and commentators must adjust to the new normal rather than seeking and expecting the old normal.
Low jobless claims indicate that companies are not laying off as many workers, which is to be expected in an environment of stable, if not robust, consumer spending. Firms are maintaining current employment levels but not expanding. There is no firing, but no hiring either.
The true state of the labor market is not revealed by decreasing unemployment claims but by the total number of people working:
Employment levels remain well-off the peak. During the last recovery, it took two years to regain the pre-recession peak. Nearly four years after the trough, over two million less people have jobs.
Rising mortgage rates have stopped the housing “recovery” in its tracks, which should come as no surprise for astute readers of Dareconomics. Houses have become more unaffordable since May crimping sales. In my opinion, we have witnessed a peak. Downward pressure on sales volumes will be a major headwind against more price increases going forward.