Unemployment Up. Stocks Down
This morning, reading the news, it was very evident that the markets were not going to perform well at the opening. Hearing that job terminations actually picked up in June - enough to raise unemployment to 9.5% - usually doesn’t bode well for investor confidence.
Sure enough, as I stared at the YahooFinance homepage, 9:30 a.m. rolled around and within the next ten seconds, the Dow’s 55-point gain of yesterday shot down to a 27.36 loss. The Nasdaq and S&P quickly followed with drops of their own.
By 9:32 a.m., the Dow had fallen by 98.40 points, and another 6 minutes later it had eaten through an additional 36.2.
It’s understandable considering the latest numbers that just came in today. Reducing the workforce by a larger-than-expected 467,000 jobs in June, employers did what they felt they had to do in order to stay afloat. And investors are now doing the same, as we hit a 26-year high in our unemployment rate.
The AP put it this way: “The Labor Department report, released Thursday, showed that even as the recession flashes signs of easing, companies likely will want to keep a lid on costs and be wary of hiring until they feel certain the economy is on solid ground.”
The problem with that statement is that it implies employers are acting out of fear instead of necessity.
Things may or may not be looking up since January - and I’m going to side with Warren Buffet and say that they’re not - but that’s beside the point at the moment. What does matter right here and now is that consumers don’t have the confidence to go back to “life as usual” just yet. They’re still saving, which means they’re not spending, at least not the way they used to.
And in a consumer-driven economy, we’re not going to see any real improvement until they do.
Thursday, July 02, 2009 - by Jeannette Di Louie, Assistant Editor, Mt. Vernon Research
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