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Unemployment and Complacency

Unemployment and Complacency

"Job and Man" by krishnan on freedigitalphotos.net

I read an article today on CNBC about how unemployment is expected to fall in the United States through 2012. This got me to start thinking about one of those ideas that the talking heads on television allude to every once in awhile. If you read that article and believe what it says, then all of the “experts” expect unemployment to fall and consequently job growth. The current reports that we are seeing don’t point to this at all. I started thinking about what would happen if unemployment stayed high and why it may not fall as predicted.

No Spike Up

First off, with all the government stimulus that has happened, I don’t believe there will be a spike in unemployment. That doesn’t mean that lackluster job creation can’t continue. A double dip recession doesn’t look to be in the cards, but that doesn’t mean we have growth ahead. What if we kept getting tepid employment numbers month after month. How long would it take for people to get tired of waiting for growth to resume as if it was a sure thing? What if people have found a way to live off of unemployment checks and no longer see a reason to find a job?

Main Street

It feels like a lot of the stimulus made its way into Wall Street, and only a small portion made it into Main Street. I don’t think it is any surprise that people were heavily involved in the bond market. The United States government was supporting that entire market! At the same time, the stock market was rallying and I believe that is because stimulus money was flowing from bond markets into the stock markets. The next crucial step of the cycle is for all the wealth building that occured in Wall Street to shift to Main Street. What if people just want to hoard their money and stay in those markets instead of supporting the economy by spending?

So?

What if all the factors stated above  line up? What if the events that everyone thinks is going to happen don’t happen? Remember, the events that we don’t prepare for because we don’t see it coming are the most dangerous. I am not an economist or a market analyst so I can’t predict what may happen. If the perfect storm arrives, I believe the equity markets should trade in a range until the Federal Reserve raises interest rates. At that time the equity markets should slowly decend in an orderly fashion as people pull their money out and put it into savings. If the employment picture ever becomes brighter, then we’ll be able to take all this off the table. The United States government could, at any time, start some kind of employment boosting program. I will be watching these monthly employment reports very closely. I sure hope the lackluster numbers don’t continue.

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