Unemployment Up, Reason for Optimism

by James & Miel on March 6, 2009 · 0 comments


Hi All,

The latest numbers from the Labor Department are out. The US economy lost 651,000 jobs last month. The unemployment rate is now at 8.1% (1). This in increase over last months numbers and suggests the economy isn’t getting better anytime soon.

Despite this, there is still some reason for optimism. While macro economic conditions have continued to deteriorate, a couple of positive signs are emerging.

First, the panic has stopped. In an interview yesterday, Liz Ann Sonders – a really excellent Schwab analyst btw, noted three things:

1) Stock market selling is becoming less indiscriminate
2) Eight of 10 S&P sectors are outperforming the index this year, most of the bloodletting has been confined to industrials and financials
3) Investment grade credit it starting to come back

If Sonders is right (1), then this indicates that the economic panic is starting to subside. This is really good news, because it means that the business climate will start to return to rationality.

Second, federal dollars are starting to trickle down into the economy. Now, regardless of what you think of Federal spending – I take a rather dim view of it – governments can stimulate aggregate demand, and there are a LOT of federal dollars that are starting to trick down into local economies. For example, the media here on the east coast is reporting that funding for transportation and infrastructure projects is starting to hit city and county balance sheets.

Of course for individuals, its probably still a good idea to think about getting or increasing your emergency fund as well as adhering to good personal finance basics such as living frugally. We’re not out of the woods yet.

Thanks,

James

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