US job data first sign of double-dip recession
Posted on 09 January 2010 with no comments from readers
US jobs data in December did not turn positive as expected. In fact another 85,000 people lost their jobs, according to these widely followed statistics.
So has Uncle Sam got the swine flu, or is the US economic recovery not what it is cracked up to be? Economists seemed unpleasantly surprised by the news, although Wall Street still managed to take its long rally marginally higher.
Employment trending down
Over in Europe the record on unemployment is very similar. Indeed the European Union’s 10 per cent jobless tally is identical to the US. But clearly the latest figures show that a stabilization in employment levels is not happening just yet.
Those who see a double-dip recession as inevitable following such a massive collapse of global trade and financial dislocation followed by huge government stimulus packages have another indicator on their side.
Meanwhile, the underlying weakness in bank lending and consumer spending suggests that the traction to pull the US economy out of the slump just is not there. Inventory rebuilding from the slump is done. Arctic weather and soaring energy costs will not help in the first quarter either.
Stock correction
All it now takes is for reality to begin to sink in and Wall Street will suffer a massive reversal – at the very least a sharp correction – and that will also add to the downward pressure on the very weak recovery, which if you are one of the 85,000 jobless in December is just not happening.
No doubt there would be a stimulus package part two in the event of a stock market decline. But this artificial support of the economy can only go so far, and another shake-out in the real economy is coming before a true bottom is reached. Standby for the double-dip recession.
no Comments posted by readers:
As the Dryships CEO once said “American investors are among the dumbest in the world.” I am inclined to believe the rally will end with a confirmation of policy change, that is, the money printing will stop. Since we have no political will whatsoever I continue to invest heavily in the inflation trade. Note the advance of metals, mining, fertilizer, etc. There is an exit strategy, but it’s not the rational one: it is money printing until the rest of the world, especially Europe, is drowned by the falling dollar.