from 24/7WallStreet:
Unemployment Ready To Push Above 10%Posted: August 20, 2010 at 6:27 am
There is precedent for American unemployment to move about 10% and remain there for a protracted period. It did so in 1982 and 198.3 for ten consecutive months. That is about to happen again, probably by October or November, and there is very little the federal government can do about it other than to assist citizens with tens of billions of dollars more in unemployment insurance.
The most visible sign of the jobless problems is weekly jobs claims which rose above 500,000 last week for the first time in ten months. That is, however, not the most important indicator.
The recent CBO review of the federal budget was telling. The headline from the study was that the deficit might move down a tick from previous forecasts. The critical footnote was that GDP growth the rest of this year and next will be only 2%. That number does not have to slip much to be 1% or worse. The forecast will have a profound effect on the deficit, if it is true. It will have a more profound impact on jobs. Companies will not hire in a stagnant economy and are more likely to fire out of concern that stagnant moves to negative. The government may finally take austerity measures, which means that federal employees will lose jobs.
Consumer confidence and manufacturing data are also moving flat or down in many recent months. A strike in consumer spending based on job fear will ruin the holiday shopping season. That will set off a vicious cycle in the retail industry, and layoffs will look like they did during the holiday season two years ago. Those retailers that can hold their own will do so at the cost of margins which leaves them very little better off than stores that lose sales.
Another prevailing wind that will hurt jobs prospects in America is that the Japanese economy is barely out of recession and may be heading back toward negative growth. There has been some optimism about economic activity in Europe, but when the improvement in Germany is backed out, the balance of the region still looks financially troubled. The Administration has bet that much of the GDP recovery in America will come from exports and the jobs that exports create. The process gets less likely by the day.
The last bit of glue that was supposed to hold the jobs market together was the $787 billion stimulus package. It has been pointed our often that most of that money is spent. The portion that is left is for infrastructure spending and that cash is tricking into the economy rather than flooding in.
There is nearly nothing in the American economy that points toward a drop in joblessness and an abundance of reasons that it will grow.
-- Douglas A. McIntyre
http://247wallst.com/2010/08/20/unemployment-ready-to-push-above-10/#ixzz0x90N09Lk
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