Sunday, September 6, 2009

Unemployment, Recession & Recovery

Many financial news services are parading analysts on their programs, proclaiming that the recession ended in August or is about to end shortly; but is this really true? Friday's unemployment report shows that 26 million, or 16.7 % of the population is under employed or unemployed. The actual unemployment rate is 9.7 %, the highest in a couple of decades. This does not account for people who are not reporting or have given up looking for jobs.

I am sad to say that part of the increase in unemployment is due to teachers being laid off around the country. Also, the National Association of Manufacturers stated that it will take quite a long time before things improve.

People focus on the decrease in unemployment claims being reported and say that unemployment increases towards the end of a recession. That may be true, but employees are still being fired every week, and until that changes, we will not be out of the woods.

Some feel that the consumer is coming back as they look at the back to school purchases in the prior month and Labor Day, but that is seasonal necessity buying. Have you walked around malls lately? Many are emptier than ever, with some mid to high-end stores discounting as much as 75%, and still there is tremendous inventory that is not moving. If people do not have jobs they will cut back their spending and again, until this improves, we will not have a meaningful recovery. The consumer accounts for 70% of the economy.

Also, most agree that we must have a robust Equities market to support a recovery. We have come off the March lows nicely, but over the last few weeks trading has been in a narrow range. There are many double-dippers out there who believe we will go through another big correction before things get better.

Let's see what happens in the coming weeks. For now, we should maintain an air of cautiousness. click for part 2

C. Cohn

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