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Unemployment Likely to Dampen Market Rally

Published 11/06/09 Craig Harrington - Print Article
E-mail - editor@economyincisis.org

Markets surged during the day yesterday, overcoming nearly one week of losses and pushing the Dow Jones Industrial Average beyond the 10,000 point mark. The NASDAQ led the way with a 2.42 percent gain (49.80 points), followed by the Dow with a 2.08 percent gain (203.82 points), and the S&P 500 which gained 1.92 percent (20.13 points).

The markets were buoyed by positive economic news yesterday, but the outlook for today seems less enthusiastic. CNNMoney.com reported that the markets would be lukewarm at best during the morning, as investors dealt with worse-than-expected unemployment figures. Stock futures dropped as the job report permeated investment and world markets were underperforming across the board.

The aforementioned job report shows the U.S. national unemployment rate soaring to a 26-year high.

According to Bloomberg News, the national unemployment rate now stands at 10.2 percent as of October 2009 – the highest rate since the height of the 1980s recession.

Despite the fact that companies shed just 190,000 employees last month, the lowest monthly figure in over one year, the national average continued to increase. Until this economy starts creating new jobs and breaking even in with monthly payroll figures, the increase in unemployment will continue unabated.

In other economic news, government-owned insurance giant AIG seems to be profitable once again. According to Reuters, the company posted its second consecutive quarterly profit on Friday. With net profits of $455 million may be an indication that the bailed-out firm is on its way to paying back the roughly $180 billion handed out by taxpayers since September 2008.

Rounding out the day, the G-20 is expected to come to a conclusion this weekend regarding continued economic stimulus programs in the wake of this global slowdown. British finance minister Alistair Darling is hosting the third G-20 meeting of the year in St. Andrews, Scotland. Most expect that the emergency programs will be allowed to continue indefinitely as individual nations struggle with their own set of problems and obstacles.

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Article Comments From Readers

biguru says "Going bankrupt" on 11/08/09
On top of our miss-managed trade policies, dumb politicians, ponzi schemes, credit default swaps - we have also created a coprorate culture of Biz Admin and bean counters that take over the company operations.

When the business is under distress, these folks have no idea what to do. They seek out Tecno-Coolies to save them. Then the business goes belly-up and the vultures swoop in. (I have personal experience with many of these companies like Global Crossing, and Bradlees)

guest says "The market rally is a reflection of the flurry of" on 11/06/09
buying and selling that goes on when a business goes bankrupt. Such businesses put everything up for sale dirt-cheap. The vultures swoop in and pick up the inevitable bargains. This business activity is described by the media shills as a "pick up in the economy, ... a sign that the economy is on the mend ... (but aren't the unemployment figures still a little troubling ...)" - the last part tacked on almost as an afterthought, a non-sequitur. Such commentary is designed, of course, to deceive. The true relationship is the other way around: the unemployment figures are the proper measure of how the economy is doing, the little spike in the financial market is the actual non-sequitur here. In reality when the spike is analyzed correctly, it underscores how terminal the economy, in fact, is.

guest says "Money Printing can keep anything rallying for awhile regardless of fundamentals" on 11/06/09
The real unemployment number is like 20%. The current market rally since March 2009 has been due to easy money. The federal funds rate is close to 0 so not much to be earned parking cash in a bank. So regardless of the fundamentals, if liquidity keeps created out there it will find some asset class price to raise.

biguru says "Snake Oil" on 11/06/09
Desperate people do desperate things. People have a tendency to buy snake oil to cure Cancer. This is no different. Market is still up without fundamentals. But hype can go so far.