What Do Unemployment Numbers Truly Divulge?

The first Friday of every month is certain to be a volatile ride. As investors attempt to “pre-game” the employment report and others jump on board the second the report hits the feeds, volatility in the market is certain, at least for one day.

However, the impacts of unemployment are long lasting and will hurt generations to come as the eventual recovery seems to be farther in the distance.

Employment Isn't About the Here and Now

When the numbers record even one job loss, it’s not just one job lost for one day. It could be months or years before that one previously productive member of the workforce re-enters back into the job market. As the number of employed people continues to soar, regardless of the pace, the fundamentals of the economy continue to sour.

The Rate Matters – Not the Numbers

April's unemployment report showed that 8.9% of the present workforce is currently unemployed. Many more are working slack labor or part-time to make up some of the full-time shortfall.

For the macro economy, however, the picture is much bigger. An unemployment rate of 8.9% means that 8.9% of people won't be able to pay their bills, make mortgage payments, or purchase the products they may need or want.

Banking Needs a Band-Aid

Each month of negative growth in the job market is one more month that banks will not receive their monthly mortgage payments, which results in a number of new foreclosures. Many loans made during the real estate boom have not yet recovered enough in monthly payments that the principle has been recovered. Even with extensive bailout cash, the banks simply can't withstand continuous job losses.

Don't Get Fooled

When the reports surface, don't be fooled into the one-time trading possibilities. The job market is a very important part of the economy because the reports practically show how productive the nation as a whole truly is. Even if we're losing fewer jobs, there are still more individuals lining up at the unemployment counter.

Comments

[CJJ:]

Can one person who talks about the unemployment rate please bring up the under the table market which is now 5-10% of the jobs in the US and only going to rise.
Also can one person who talks about unemployment please at least recognize unemployment has existed in the past with the same consequenses.
I would sum up this article that it is a whole bunch of status quo "No S__t" statements that doesn't amount to any special insight and certainly doesn't tell you whether the market is headed up or down.

May 12 11:01 PM