No jobs and lots of debt does not equal recovery

The U.S. economy, as predicted, did not collapse while HTWW took a two-week break, but the ever-popular weekly jobless claims numbers are not encouraging. For the second straight week, seasonally adjusted initial claims for unemployment benefits rose. So did the four-week moving average, and so did the total number for Americans receiving unemployment benefits.

The new numbers come in the wake of a slew of reports that American consumers are continuing to keep a tight hold on their wallets. A tough employment picture and a rising consumer savings rate: These facts do not add up to a swift economic recovery.

But nothing better explains the "paradox of thrift" -- in which consumer reluctance to spend holds back overall economic growth, thus leading to additional job losses and an even bigger economic sinkhole -- than some data on the U.S. household debt to net worth ratio compiled at the EconomicPicData blog. (Found via Felix Salmon.)

Bottom line: Even as consumers have started to save, the crash in home values has sent the debt/net-worth ratio screaming in the wrong direction.

What we've seen is a large decline in household net worth, but unfortunately we haven't seen a corresponding decline in household debt.

As a result, the debt to net worth ratio has risen from about 17 percent in 2006 to 25 percent by the end of 2008.

And for 2009 that ratio, for those not heavily invested in the stock market, has likely continued to get worse.

So where does this currently stand? While the richest were impacted the most in $$ terms, the lower to middle class tend to have more of their net worth stashed in real estate (i.e. their home). Thus, while the financial markets rebounded in 2009, it is likely that the lower to middle class didn't reap the reward (housing has continued to fall). Thus, when data is updated for 2008 and 2009 (though too early to judge where we'll end up this year), expect the discrepancy to be even wider.

Again: Not particularly encouraging news for those looking for a return to the binge-spending go-go days of yesteryear.