Huh? Wall Street figures higher unemployment is good news?
You’d think that last week’s jump in the August unemployment rate to 9.7%–the consensus among economists was for just 9.5%–would have sent stocks tumbling. After all, if more people are out of work, consumers will buy less. And it’s not exactly a vote of confidence in the economy that CEOs still aren’t hiring.
But when Wall Street’s in a bullish mood it manages to find a way to turn bad news into good—at least for the short run.
The current story on why high unemployment is good for stocks runs like this: Because companies are still cutting payrolls—another 216,000 jobs lost in August—while the economy is stabilizing, corporate profits will be higher than expected in the third quarter. Read more
GDP numbers show the recession crawling to an end but followed by a very slow and weak recovery
The government’s reports on quarterly GDP (gross domestic product) are the most detailed picture investors get of the state of the economy. The initial report for the second quarter shows an economy that’s still contracting but at a much slower pace than in the last two quarters. It also shows an economy where growth is very dependent on the much maligned Obama stimulus spending package and where consumers and CEOs are still sitting on their wallets.
In short it looks like the recession is coming to an end but that the recovery is going to be so slow and so shallow that many of us might not notice a whole lot of improvement. Certainly not initially. Read more
The long-range problem
Green shoots won’t fix the long-term problems with our economy.
Yes, the economy is getting less worse, less quickly.
And yes, there are signs that the economy is starting to stabilize.
And, yes, if you’re really optimistic you can see a day in 2010 (or 2011) when unemployment will stop climbing.
But all this means is that the economy is ready to crawl off the mat. But it’s sure not ready to challenge for the champ’s belt.
It’s not ready to start producing millions of jobs, or providing the rising incomes needed for a comfortable retirement by all those who took a beat in the bear markets of 2000-2003 and of 2007-2009, or to give us a painful way to pay off the huge debt we’re run up in this crisis.
The truth is that the economy went into this crisis with major long-term problems. And we’re going to come out of this crisis with the same problems—and then some.
Economists know—or they’re supposed to know—that to get a true picture of the long-term health of an economy, you don’t measure from the bottom of an economic cycle to some point in the recovery and conclude that everything is wonderful simply because things aren’t as bad as they were at the very rock bottom. Instead you measure from the top of one cycle to the top of the next (or bottom to bottom) to see if your economy is making progress.
And on that measure, we’re in deep, I mean really deep, trouble. Read more
