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Down at the Heel

Weekly jobless claims were released yesterday morning and it wasn't a pretty picture. As summarized in the Carnegie Management Group Hotline Report: "Weekly jobless claims rose by 24,000 to 484,000, and higher than the consensus estimate 440,000. The four-week moving average climbed by 7,500 to 457,750. Jobless claims are reverting back to an upward trend. The unemployment rate of 9.7 percent will also revert back upward and back above 10 percent soon.". You need jobs to sustain a recovery because without jobs, people will stop buying things, especially discretionary items. Let's not forget that 70% of GDP is consumer spending. Now, you may be saying to yourself that retail sales were good for March and you'd be right. But don't forget that Easter came early this year and personal savings rates are decreasing at an alarming rate. According to the Bureau of Economic Analysis (a division of the Commerce Department), personal savings decreased from 3.4% in January to 3.1% in February. This is down from 5% in the second quarter of 2009 and 4% of the third and fourth quarters of that same year. People are taking from Peter to pay Paul.

We have a long way to go before we are out of the woods in regards to the employment rate. Check out this piece of information by Daniel Gross from an article entitled "America's Back! The Remarkable Tale of our Economic Turnaround" in the April 19th issue of Newsweek: "To recoup the 8.2 million jobs lost since December 2007, it'll take four years of growth at 170,000 jobs per month. And by definition, it's hard to identify the next transformative economic force - the next steam engine or interstate-highway system.". Granted, we do have growth in the clean energy or green tech sector, but it is more of an evolution than a revolution. The same holds true for mobile Internet technology, whether it be hardware, software, services or the build-out of the infrastructure. The iPad may be a thing of beauty, but it won't be the cause of massive hirings nationwide as some pundits claim. We have an economy that is being propped up by the government and once it exits the picture, there will be nothing to sustain the rebound of the stock market. We just don't have the jobs to support it. It's a sleight of hand, now you see it now you don't illusion that the economy is doing well. As soon as the little guy, or retail investor climbs back into the market to reap big gains, it's going to crash and burn. Those days are almost upon us.