The stock market has collapsed, down 38% from September 26, and down 52% from its high of October 11, 2007. This ranks as one of the worst markets in history. So you'd think that the economy would be absolutely miserable, right? But it's not, according to this chart. This plots the ratio of weekly unemployment claims to the total amount of people working. As of the end of October, this barely ranked as a modest recession. We're far lower today (actually about 50% lower) than the ratios which prevailed in most recessions in recent decades.
It would seem from all the gyrations of late surrounding the question of whether or not Detroit will be bailed out, that the failure of GM and Ford would put a huge segment of the working population at risk. But that is an exaggeration. There are many ways a GM and Ford bankrutpcy could be resolved that wouldn't have a significant impact on the U.S. economy. Simply renegotiating existing labor contracts could save most of those jobs. But even if their plants close, the economy will continue to function. Other automakers would step in the to fill the gaps that GM and Ford might leave.
The panic reflected in the market these days is unwarranted.