Is the economy really that bad? Sure, everyone knows oil is tearing a hole in our wallets, banks are struggling to tread water, the auto industry is in shambles, and don't even get me started on housing. But, really, where's the line between an economic downturn and an economic calamity? This week provided us with some answers.

Here's the latest from the economic front.

More job woes
National unemployment is now at its highest mark in four years, coming in at 5.7% in July after shedding a net 51,000 jobs for the month. Starbucks (NASDAQ:SBUX) and GM (NYSE:GM) both announced job cuts this week, while Morgan Stanley (NYSE:MS), of all companies, announced that it was actually on a hiring spree.

Beyond all the chatter about unemployment, The New York Times cited the surge in underemployment, or workers who are working part time against their will. The number of workers who are underemployed now stands at around 5.3 million -- up more than 1 million from last year. I'm still gunning for three-day weekends for everybody.

When Greenspan speaks, you should listen
Some have accused former Fed chief Alan Greenspan of playing a role in the mess we're now in, but you should still be willing to lend the guy an ear. On Thursday, Greenspan sounded a bit critical of his successor, Ben Bernanke, when noting that the bailout package granted to Bear Stearns should have rested on the Treasury Department, not the Federal Reserve.

Greenspan joined a chorus of Fools concerned that such proposals could do a number on inflationary pressures, saying:

[The Federal Reserve] balance sheet is the creator of the monetary base and if you allow major fluctuations in that base as a result of other-than-monetary-policy reasons, I think you're taking undue risks with the notion of the stability of the financial system and very specifically the Fed's control of inflation.

Don't worry, Ben. Some of us still have your back.

The next great bond boom?
Treasury Secretary Hank Paulson is pushing a new plan to encourage banks to fund mortgages. Already huge in Europe, "covered bonds" are similar to mortgage-backed securities, except the loans backing the debt stay on the books of the bank that funds them. JPMorgan Chase (NYSE:JPM), Bank of America (NYSE:BAC), Wells Fargo (NYSE:WFC), and Citigroup (NYSE:C) have all agreed to start issuing these securities.

What will the new bonds mean for the mortgage market? First, they align the banks' interests with the quality of the mortgage, rather than the shell game of pawning the risk off to investors through mortgage-backed securities. Second, the new structure in and of itself assures much stricter lending practices, meaning would-be home buyers with weak credit, low down payments, and sketchy job histories should have a tougher time getting a loan. (Isn't this the way it should have been all along?)

Still hangin' in there
Despite the myriad problems hovering over the economy, GDP managed to eke out 1.9% in annualized growth in the second quarter, adjusted for inflation and whatever other contortions the calculation goes through. Part of the growth was juiced by the stimulus package, but that one-time boost isn't likely to bring sustained growth. Meanwhile, 2007 fourth-quarter growth was revised downward to show a contraction of 0.2%, rather than the 0.6% growth originally reported. Easy come, easy go.

Quick economic numbers:

  • Gas prices fell $0.12 per gallon this week, sitting now at $3.91 per gallon.
  • Nationwide foreclosure filings surged in the second quarter as 740,000 properties, or one out of every 171 households, fell into some stage of foreclosure.
  • Las Vegas and Miami take the cake for the worst housing markets tracked by the S&P/Case-Shiller Index, with average home prices down 28.4% and 28.3%, respectively, from last year in May.
  • Banks borrowed an average of $17.45 billion per day from the Federal Reserves last week, a new record.

That's the latest for this week!

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Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. He appreciates your questions, comments, and complaints. The Fool's disclosure policy swims with dolphins.