It’s likely the US GDP will contract by 1% or more in the next nine months and the jobless rate will exceed 7%. The freeze in financial markets is getting worse and implementation of TARP is at least a few weeks away.

Global growth is now forecasted to be 2.7% in 2009, down 0.8% from a few weeks ago. Mainly because of trade and financial shocks, technical recessions have hit many industrial economies. Growth in exports is slowing and there is a risk of a downturn in capital spending.

Inflation is less of a bugbear as growth slows and inflationary heat diminishes. This slowing down varies from country to country however. a global slowdown is now forecast. But just how severe and for how long? No one knows and forecasts of interest rates curves have got steeper helping the dollar but this may not last.

 The U.S. government is planning to take over Fannie Mae and Freddie Mac on Sunday, September 7 and all shareholders of the two mortgage giants will lose out. 

This is expected to be announced later today, and is believed to be possibly the largest financial bailout in the nation’s history, in an attempt to prevent further damage to a housing market experiencing the worst downturn since the Great Depression.

The government will run the two companies suggesting that the chief executives would be removed. The two government-sponsored enterprises were sent a letter by their regulator, the Federal Housing Finance Agency, that detailed problems at the companies and said why the federal government was taking control.

The two companies own or guarantee almost half of the country’s $12 trillion in home mortgage debt and being placed in receivership would be a major blow to the administration and likely to have adverse effects on the dollar as well as confidence in the administration. A bailout would avoid the more onerous step of being placed in a receivership in the interests of debtholders.

Statistics

Average hourly earnings rose by 6 cents, or 0.3%, over the month. Both the number of unemployed persons (8.8 million) and the unemployment rate (5.7%) rose in July. Over the past 12 months, the number of unemployed persons has increased by 1.6 million, and the unemployment rate has risen by 1.0%.

Over the month, the unemployment rates for adult men (5.3%) and whites (5.1%) edged up while the rates for adult women (4.6%), blacks (9.7%), and Hispanics (7.4%) were little changed. The jobless rate for teenagers increased to 20.3% in July.

The unemployment rate for Asians was 4.0% in July. Among the unemployed, the number of reentrants to the labor force in July rose by 207,000 to 2.7 million. This number has increased by 623,000 over the past 12 months.

The number of unemployed (ex-workers) stayed steady in July at 4.4 million, but rose by 778,000 over the year. The civilian labor force, at 154.6 million, was little changed in July, and the labor force participation rate remained at 66.1%.

Total employment, at 145.8 million, was about the same as in June. The employment-population ratio, at 62.4% in July, was the same as in June 2008 but was down from its most recent high of 63.4% in December 2006.

In July, the number of persons who worked part time for economic reasons rose by 308,000 to 5.7 million and has risen by 1.4 million over the past 12 months.

Declines Across Industry

Over the month, employment continued to decline in manufacturing, construction, employment services, wholesale trade, and the information industry.

Construction shed 557,000 jobs since its September 2006 employment peak, with almost 75% of the decline occuring since October 2007.

In the same period, over 272,000 people in the US received notice of foreclosure, a rise of 55% on July 2007 according to analysts Realtytrac. The US Government has introduced new measures to try and help home owners from losing their property.

Sales of new homes have fallen to the lowest level in nearly seven years, plunging 35.5% since July 2005.

Making matters worse, the supply of unsold stock climbed to the highest in 16 years.

Former Chairman of The Federal Reserve Alan Greenspan, warned that the US faces a one in three chance of a recession this year.

There are growing concerns that the rising defaults of America's so-called 'sub-prime' mortgages could hit the economy hard.