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Political science empirical research teaches us that when U.S. unemployment is rising and job losses occur over many months, the political party in charge of the White House will have a difficult presidential election. (See: The American Voter, by Campbell, Converse, Miller, and Stokes.)

Federal statisticians will release one more jobs report, the September jobs report in October, but to-date the trend is not one of U.S. economic health.

The U.S. Labor Department announced Friday that the U.S. economy lost another 84,000 jobs in August, with the unemployment rising to 6.1% - - a five-year high.

The U.S. economy has now lost 605,000 jobs in 2008 after creating just 1.1 million in 2007. Economist David H. Wang told BloggingStocks Friday the U.S. economy is not growing.

'U.S. economy headed in wrong direction'

"The U.S. economy is in recession. We don't have to wait for two-quarter date to confirm it. These are very bad numbers and the economy is headed in the wrong direction," Wang said. "Electioneering attempts aside, the U.S. economy is, objectively, in bad shape and anyone who fails to see this fails to recognize reality."

Amidst all of the talk of hockey moms, jabs at Democrat Barack Obama, and media bashing, there was not much discussion of the weak economy at this week's Republican National Convention.

In fact, the Republican gathering was notably short on talk of the main issue on the minds of voters. Sure, there was "drill baby drill," but is that really an economic policy? Can Americans drill their way out of the credit crisis? Can we drill our way out of the housing slump? Can we drill our way to prosperity?

No less of a flaming liberal than CNBC's Larry Kudlow took note.

"As we head into the closing night in St. Paul, there has so far been no reference to the weak economy," Kudlow said on the network's blog before John McCain's acceptance speech last night. "There has been no economic-recovery message and no growth message."

Interestingly, the Republican platform contained language inserted by economic conservatives rejecting the Bush administration's rescue of Bear Stearns Cos., and possible bailouts of Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE), according to Bloomberg News. The document purposely did not mention the credit crunch because delegates were afraid that any solution that they would offer might make things worse, Bloomberg says. The GOP's embrace of free trade may sell well on Wall Street, but it won't win votes on Main Street where workers are fearful of their jobs being shipped to lower-cost countries overseas.

No wonder the GOP did not say much on the economy.

Most Americans are suffering because of high gas prices, a volatile stock market and plunging home prices. Though technically the economy may be strong and may not even be in a recession, most people and businesses believe they are worse off than they were a year ago.

Another shoe is dropping in the ongoing credit collapse here in this nation of whiners. According to the New York Times, the default rate on so-called Leveraged Loans -- (a very strange name if you ask me since a loan is leverage) that refers to loans used to finance corporate takeovers -- climbed fast from 0.24% in August 2007 to 3.3% in August 2008.

The loans that have gone bad so far are not big ones -- they are more like the canary in the coal mine -- hinting at bigger problems to come. The Times says, "the loans that have gone bad have been concentrated in two industries - real estate and auto parts. S.& P. calculates that they have accounted for almost half of this year's defaults. Gambling has also had problems, as it turns out that there are too many casinos in some places."

The biggest loans have yet to default. But their collapse is inevitable. That's because banks are scrambling to raise capital and shore up their balance sheets. And the leveraged loans were structured to benefit from a lending market in which the name of the game was to keep from losing market share by making it ever easier to borrow. Thus the terms of leveraged loans were easy -- featuring, as the Times reported, a "flood of 'covenant-lite' and 'toggle-[Payment in Kind] PIK' loans."

The U.S. market is driving the world -- whose stock indices plunged after yesterday's 345 Dow rout. But what does today bring? A chance for recovery or further devastation depending on whether reported economic statistics are better or worse than economists expect. Early reports are bad.

Here are the reports to watch, and what analysts had been expecting according to CNNMoney:

• Job cuts - Economists expected 75,000 lost jobs, but the 8:30am report was 84,000 lost jobs -- worse than expected.
• Unemployment rate - They had forecast the jobless rate to stay the same at 5.7%, but economists were wrong on this one too and unemployment rose to 6.1%.
• Hours worked - Economists anticipated the hour work week wouldn't change from July at 33.7, and they were right.
• Change in hourly earnings - Economists saw a 0.3% increase in the hourly wage, the same as July, but hourly wages rose 0.4%. Some may interpret this as inflationary pressure, but the increase is likely not enough to increase consumer spending either.

In general, these statistics suggest consumers are less able to spend money. Since initial numbers suggest things are worse than had been anticipated, stocks could plunge, causing policymakers to meet this weekend to try to hatch another plan to boost investor confidence for announcement on Sunday night.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.

U.S. stock futures are pointing to further declines following a rough session where the Dow plunged 344 points and ahead of the jobs report mostly feared to show weakness in the labor market. Non-farm payroll is expected to show a job loss of 75,000 but the unemployment remain unchanged. Meanwhile, international markets sank following U.S. markets. Also affecting mood this morning is Goldman's call to sell Merrill Lynch.

Goldman Sachs downgraded Merrill Lynch & Co. (NYSE: MER) to Sell from Neutral and added the firm to its conviction sell list. MER stock is plunging 6.6% in pre-market trading. Goldman said valuation and the likelihood of further write-downs are the reasons. Goldman also lowered its third-quarter EPS forecast to a loss of $5.75 a share.

SanDisk (NASDAQ: SNDK) shares are shooting up 26% in pre-market trading after Samsung Electronics said it may buy the flash memory maker. There are no concrete announcements or details as to price yet.

And at Boeing (NYSE: BA), the company continues to negotiate with labor leaders to avert an expensive strike it cannot afford. Negotiators and mediators are trying to work to avert the strike voted for by the union during the 48 hour extension.

I was out all morning and returned to my desk to find employment and retail numbers sent the Dow Jones Industrial Average tumbling down 345 points today. That made me think it was important to check out how stable my stable stocks -- stocks with the ability to ride out this bearish run -- were doing in bad times.

This update is a spot-check of my earlier post Serious Money: Five stable stocks for troubled times, to see how my picks are holding up so far. Closing prices are for today.

The standard for comparison is the Standard & Poor's 500 Index, which closed on June 30, 2008 at 1,280.00. The S&P closed today at 1,236.82, down 3.37%. The percentage gains do not include dividends. Four out of five of my picks beat all the indices; CB was close.

1) Johnson and Johnson (NYSE: JNJ) -- when recommended the stock closed at $64.34 and paid a 2.89% dividend yield. It finished at $70.45 -- up 9.5%

2) Teva Pharmaceuticals ADR (NASDAQ: TEVA) -- when recommended the stock closed at $45.80 and paid a 1% dividend yield. It finished at $47.92 -- up 4.63%.

With a home near the capital of the world, decades ago the parents of yours truly were able to locate and purchase the best and most effective books for their children during their grade school development years.

Dad usually chose books that emphasized cognitive development, while Mom emphasized books and exercises that stimulated creativity, and that had happy endings.

To be sure, Morgan Stanley economist Stephen Roach's macroeconomic reports would not have met Mom's requirement for happy endings.

Roach's post-bubble world

Roach, who now also serves as Morgan Stanley's (NYSE: MS) Asia Chairman, takes the pulse of the U.S. and global economies, the housing slump, the credit crisis, and the financial system, in his most recent report. (pdf)

And, consistent with Roach's reputation for sobering analysis, his economic forecast for the quarters and years ahead is not pleasant, and it differs markedly from the current consensus in financial circles.

That current consensus argues that the U.S. Federal Reserve's recently-established liquidity facilities, combined with the U.S. Treasury's back-up measures, will enable banks and others with bad mortgages and bad mortgage-backed bonds to muddle-through, slowly working-off these debts as revenues increase as the U.S. economy recovers. Likewise, the U.S. housing sector and consumer demand also will recover, as home prices stabilize and consumption returns to more-normal levels as U.S. GDP increases. It's a sort of 'end to the banking and housing crises by a growing U.S. economy better-able to service those bad debts' argument.

Stock futures were lower this morning as oil rose back above $110 a barrel and investors awaited a barrage of economic data due today including weekly oil inventories. Other economic indicators include data on employment, manufacturing and productivity. Also, retailers will be announcing August same-store sales. Overall, sales are expected to rise 2%. Meanwhile, the Bank of England and the European Central Bank are deciding their interest rate policy today, where the ECB could tighten.

The first of the retailers has already reported August sales. Wal-Mart Stores Inc. (NYSE: WMT) said sales increased 3% in August, beating its forecast. Seems discounts drew shoppers. WMT shares are up over 1% in pre-market.

Unfortunately for Boeing (NYSE: BA), The International Machinists and Aerospace Workers union, which represents nearly 27,000 machinists, voted to strike as they rejected Boeing's contract offer. The union, however, postponed the strike by 48 hours as the two parties go to mediation. Boeing will likely suffer from a strike at a time it's struggling to stand by its Dreamliner obligations. BA stock is down over 1% in pre-market.

BP PLC (NYSE: BP) shares stand to rise after it finally reached an agreement with its billionaire Russian partners have over TNK-BP. While BP remains with a 50% holding in the venture, it has made many concessions, including agreeing to have the CEO Dudley leave. Shares are up over 2% in pre-market.

Wall Street, really a typical, small, village-like setting, save for the fact that about $8-12 trillion dollars in capital passes through its vortex daily, is a pulse-taking community. And for a dose of reality to counter-balance the sometimes too-rosy institutional research, the Street looks to the 'perpetual pessimist,' Stephen Roach, Morgan Stanley's (NYSE: MS) Asia Chairman.

Roach's take on economic state-of-things as the United States gets back to work this fall? Don't play "Happy Days Are Here Again" just yet. Roach said the global economic slowdown has only just begun, with the United States heading into a recession and the impact of the credit crunch still roiling through financial institutions around the world, Bloomberg News reported.

"There's more to this macro event than just the credit-market contagion itself," Roach told Bloomberg News. "Maybe two-thirds of that is behind us, but the impacts on the real side of the U.S. economy and the global economy are at an early stage.''

U.S., global economies slow together

Economist David H. Wang told BloggingStocks Wednesday Roach's analysis and comments should not be ignored by executives, small business owners, or typical citizens as they set their budgets and financial plans for the year ahead.

Today was a mixed bag. Shares spent most of the day in the red but staged a late day rally. Oil prices remained under $110 per barrel, which pulled down energy and commodity stocks yet again. Even the brief relief in today's Beige Book from the Federal Reserve hardly helped the situation despite it starting to see some energy price relief. The good news is that shares came back up in the last hour, masking some of the intra-day selling.

Here are today's unofficial closing bell levels:
DJIA 11536.87 (+19.95)
S&P500 (1275.35 (-2.22)
NASDAQ 2334.74 (-14.50)
10YR T-Note 3.697% (-0.049%)
Top Analyst Downgrades
Top Analyst Upgrades

Lehman Brothers Holdings Inc. (NYSE: LEH) shares managed to show gains of more than 4% to $16.72 in today's final minutes after indicating down early on. Despite the on-again off-again stance with the Koreans, Doug was right ... this is like getting a root canal. CNBC's Charlie Gasparino noted that he has also said that HSBC may be interested.

We can all sense it even without looking at the numbers -- gas prices rose very quickly when oil prices had their huge run-up, but since oil prices started falling, gas prices didn't match the declines. Indeed, since oil reached its record price of $147.27 a barrel on July 11, it dropped over 26% to around $107-108 today. Gas prices peaked at $4.14 a gallon on July 17, but have fallen only 10% since. Comparing weekly data from the EIA shows a similar, if less extreme, picture. Why is that?

Economists differ in their views of why this asymmetric pricing happens. In the case of gasoline, it seems to be the "fault" of the consumer. Since information about oil prices is readily available, consumers know what to expect even before they go to the pump, therefore behaving differently during times of rising and falling oil prices. This, in turn, limits or allows for larger gasoline price changes.

During times of rising oil prices, consumers are very price conscious and shop for deals. Sure, since gas stations take delivery often, they'd be eager to pass on the price increases to consumers immediately. But as most consumers comaprison shop, gasoline retailers are limited by the amount they can hike up prices.

Starbucks Corp. (NASDAQ: SBUX), reeling from declining consumer spending, is betting that healthier breakfast items such as a hard boiled egg platter will lure new customers. I wonder whether this gamble will pay off.

First of all, anyone who has eaten in a Starbucks can testify that food is not its forte. I just don't see people craving their morning Starbucks muffin. Plus, in places such as New York City, people have tons of breakfast options ranging from fast-food joints to delis to food trucks. They view Starbucks as a mid-afternoon indulgence. At least, that's how I thought of Starbucks when I worked in New York.

Getting people to change their breakfast habits will be difficult. In tight economic times, people will gulp down their morning meal at home. If they do eat out, they will look for cheaper alternatives than Starbucks. McDonald's Corp. (NYSE: MCD) has made serious inroads in the breakfast market, as has Dunkin' Donuts. Sorry, Starbucks lovers, but I found their coffee far less biter than Starbucks. I even have two bags of Dunkin' java (regular and decaffeinated) in my house.

Stock futures were lower this morning as investors digested the decline in commodity prices and awaited a slew of economic readings. Data on employment, manufacturing and auto sales will be reported during the morning and throughout the day. At 2:00 p.m., the Federal Reserve's Beige Book, which gives an overall picture on the economy will be released.

Coca-Cola Co. (NYSE: KO) said it is offering $2.4 billion for China Huiyuan Juice Group Ltd., triple Huiyuan's market value. This is Coke's largest acquisition by value to date in China and gives the company a leg in the fast-growing and dynamic Chinese juice market. Coke also said that it expects to buy back a total of $1 billion of its stock for the full year.

The Boeing Co.'s (NYSE: BA) workers are prepared to vote Wednesday. Union members are scheduled to cast two ballots: one regarding Boeing's latest offer, which union leaders are recommending to reject, and another on whether to begin a strike. Results of the vote are expected Wednesday night.

More information is coming out regarding Korea Development Bank interest in Lehman Brothers (NYSE: LEH). According to reports in The Chosun Ilbo, South Korea's largest mass-circulation daily, state-owned KDB has made a proposal to acquire 25% of U.S. Lehman for as much as 6 trillion won ($5.3 billion). HSBC Holdings (NYSE: HBC) and an unnamed Chinese bank are said to be vying with the KDB for the Lehman stake.

The losses from Gustav are significant, but not nearly as bad as they could have been.

That's the early read regarding onshore / offshore property and infrastructure damaged caused by Hurricane Gustav, with losses pegged at $4 billion to $10 billion, according to estimates by Risk Management Solutions. In contrast, Hurricane Katrina in 2005 caused about $50 billion in damages.

Risk Management said losses from Gustav were lessened by the fact that the storm weakened, and hit the coastline as a Category 2 hurricane, and the fact that it came ashore about 70 miles southwest of New Orleans. Those factors, combined with better preparation by companies with vulnerable property in the area, will result in lower damages totals, Risk Management said.

However, RMS was quick to point out that the $4-10 billion damage total does not include loses from flooding in New Orleans that could occur in the days ahead.

Gustav: Little U.S. GDP impact

Economist David H. Wang, who runs U.S. GDP models each quarter, said Tuesday he expects "only a minimal U.S. GDP impact from Gustav."

"Of course human safety is the primary concern. But regarding regional GDP, the Southeast U.S. will incur a 0.1-0.3% GDP reduction in the third quarter from the hurricane, but the overall impact on U.S. GDP will be minimal," Wang said.

With fuel prices coming down some, it was easy to think that the airline industry would be fine. But then one of the largest airlines in Europe went under.

According to the AP, "Alitalia has been losing some $3 million a day - hurt by labor unrest, competition from budget airlines and high fuel prices." That does not sound entirely unlike some U.S. airlines.

Oil is still above $115 a barrel and that is probably going to go higher, at least in the short term. Airlines would have been slaughtered at $140, but they may still have trouble surviving with crude at its current levels.

Coupled with rising fuel, Alitalia was brought down by a heavy debt load, another factor which is not foreign to U.S. carriers. Add that to a recession that is cutting passenger demand and Alitalia may not be the last big carrier to bite the dust.

Douglas A. McIntyre is an editor at 247wallst.com.