"Put the jam on the bottom shelf so the little man can reach it," Sen. Ralph Yarborough used to say in the 1950s and 60s, when Texas still elected populist democrats to the Senate.

Well, it's time for Obama and the Congress to put some jam, in the form of stimulus and jobs (like a new WPA) in the reach of the little people, because if they aren't careful, the little people are about to get dragged back over the precipice into a chasm of wage deflation.

This morning the BLS reported that consumer inflation remained unchanged (seasonally adjusted) in June, declining -0.2% NSA. Year-over-year prices have fallen - 2.1% into deflation. YoY consumer deflation is only surpassed by 1949's -2.9% in the post-Depression era.

The 2009 first half inflation data unfolded in accord with the optimistic scenario I laid out in January:

In the Optimistic scenario, the fiscal and monetary stimuli, together with intelligent new political leadership in Washington, halt the meltdown perhaps by mid-year, and wage reductions remain the exception. In the Pessimistic scenario, the stimuli fail, and wage reductions spread, leading to a wage-price deflationary spiral.

In both the academic and political blogospheres, there are parallel but different discussions going on about the same point: this recession is far more severe in terms of unemployment than the 2.8% loss of GDP from peak would predict. At 9.5% and increasing the unemployment rate is approaching rates only seen once since the 1930s, as almost 8 million jobs have been lost in the last year and 7 months.

A graph illustrating the uniquely bad job losses during this recession has appeared frequently in the blogosphere, and is not a stranger to this blog:

It is almost universally received wisdom that when the turn comes, we will have a "jobless recovery" where GDP turns up anemically, but unemployment stubbornly rises. Indeed the most controversial notion in some parts of the econoblogosphere is that of the "jobless recovery." as in, can it truly be a "recovery" if the number of jobless Americans continues to increase? Much moreso than dry GDP figures, wages and employment are what matter to the average American. I too have generally accepted the idea that any GDP recovery would be jobless, such that in April I made a graph showing what an unemployment spike will look like if the recession bottoms this summer, but a "jobless recovery" similar to 1991 and 2001 ensues:

This morning the Census Bureau reported that Housing Starts increased to 582,000 in June from May's upwardly revised 562,000. Year-over-Year starts are still down (-46.2%).

I'm unable to post graphs at the moment, but Calculated Risk has an excellent one, showing that housing starts are a leading indicator, always borttoming before the end of recessions. Note the recent strong turn-up in our current recession looks like the harbingers of recovery from past recessions.

This is a continuation of a monthly series that up until now has been called The Deflationary Bust Deepens. Each month I have been tracking the progress of this first full-fledged deflationary bust in over 50 years, comparing the progress of deflationary consumer and producer prices now with the pattern of the 5 deflationary busts between 1920-1950, including the Great Depression.

Yesterday morning the BLS reported that consumer inflation increased +0.7% (seasonally adjusted) in June, (rising 0.9% non-seasonally adjusted). Year-over-year prices have fallen - 1.4% (NSA) into deflation. YoY consumer deflation is only surpassed by 1949's -2.9% in the post-Depression era.

Back in April, I crunched retail and oil price numbers and concluded that the price of oil was responsible for over half of the changes in real retail spending in the last two years. As the price of oil continued to shoot higher, on June 2, after examining the role of China's hoarding in its burgeoning strategic oil reserve, and the hoarding going on at sea by oil companies and speculators, I wrote that

Part I of this series can be found here.

Parts II and III of this series can be read at The Bonddad Blog.

IV. The Federal Government must intervene to Rescue the States, in a morally responsible way

By far, the biggest threat to a bottom being put in to this Recession, is the continuing drumbeat of new layoffs. Thursday's June employment figures over - 450,000 and new jobless claims that have stubbornly, week after week, remained above 600,000, put the kibosh on any idea that the bottom is already here. We simply cannot stand 600,000 people putting in for jobless benefits, week after week after week. And the source of the continuing drumbeat of jobs lost appears to be coming more from anywhere else from the location of what Paul Krugman has called the "50 little Hoovers", i.e., the state (and municipal) governments, which are obliged to balance their budgets and so must throw employees out of work and cut back on spending projects, exactly when they are needed most.