The number of people who filed first time claims for unemployment benefits was 478,000 which was 15,000 more than the last recording. Economists were expecting 470,000 so it was troubling because people thought labor markets couldn't get any worse than the last recording. This is a major concern right now because economic and corporate forecasts look terrible. Consumer spending is shrinking which will mean lower GDP and companies left and right are readjusting their outlooks for the next fiscal year. The economy needs a functioning labor market in order to provide goods and services but it looks like people will be making less money doing it. Right now unemployment is around 6% nationally (varying across regions), but it will almost certainly go higher. During tough times unemployment always goes down but once wages are corrected you see a turnaround in the labor market. A rebound in the economy will come once we have a rebound in the labor market, but don't expect that to come anytime soon. People are slashing jobs in all areas of business from health care to Wall Street and they obviously aren't hiring right now either. There are going to be a lot of unemployed people in the next year, but the question remains whether the government will create jobs for them or just pay them unemployment benefits. Right now with the current budget deficit I don't see any major spending programs coming through Congress so people have to be patient.
The more I think about the mess we are in the more I think we are a long way from recovery.
Thursday, October 23, 2008
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The Recent jobs report that came out is really not anything to get very excited about. If you take a far deeper look into the data released you will find that much of the increase in employment was temporary employment during the last couple of months of the year. I believe that much of the current employment problems stem from a lack of real wealth creating companies. Untill the country gets away from all the jobs in the financial service sector. I believe that the unemployment situation will not improve. Jim Rogers has stated this in many of the interviews that he has given to the news media that the financial services sector is much to large. Jim Rogers also believes that the savings rate must be much higher if we are to sustain any high degree of economic growth. Many retailers can make more money loaning money to their customers at 20% interest than they can make selling product to their customers. What does that tell you about jobs.
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