Friday, August 7, 2009


Great news on the unemployment rate today---unexpected by me and everyone else I have been reading online. Though economists and govt officials will quibble with each other about what the number means (yes, there are fewer people looking for jobs, so the denominator decreases, therefore lowering the overall %), the trend line that most of us pay attention to is moving in the right direction.

This is potentially good news, of course, for consumer spending, which is the one economic variable that has to get back on track if we're going to have a recovery. Making credit more available to companies and individuals is a necessary but not sufficient condition to crank the engines--- we must spend. And the perception of job losses or imminent job losses has been the #1 factor keeping consumers' wallets shut. The 9+% unemployment rate is still unacceptably high, but today's report, among other good news on the housing front, is a hopeful sign. Got to keep that cash for clunkers program rolling, too, and maybe add other product categories into the mix, as I suggested in a recent post.

The dark cloud on the horizon is the projection I cited from yesterday about the forecast growth in home mortgages that will be 'under water' over the next 18 months. Since housing is such a significant component of household net worth for most of us, the realization that the net asset value of our homes (collectively) keeps shrinking may be an offset to the good news on employment.

Not out of the woods yet, but, along our path, the dense foliage is thinning out.....

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