US Unemployment Hits 7.2% - 16-Year High
By Charles Rotblut on January 9, 2009 | More Posts By Charles Rotblut | Author's Website
The U.S lost 524,000 jobs in December, roughly inline with forecasts. November’s nonfarm payrolls loss was revised up to 584,000 from 533,000.
The unemployment rate jumped to 7.2% from 6.8% last month. The unemployment rate is at a 15-year high.
What the numbers don’t show is the number of people who are underemployed. Many job-seekers are settling for large cuts in pay because of a lack of suitable jobs. And none of this even factors in the likelihood of even more layoffs…
Though stocks have been rallying over the past several weeks, all signs point to weakening consumer spending. Wal-Mart (WMT) warned yesterday, Macy’s (M) is shutting down stores and Saks (SKS) - well, even the wealthy are keeping a tighter grip on their wallets.
And if consumers can’t earn enough to support their families, banks will have to significantly adjust mortgages to keep houses out of foreclosures. And even that might not be enough.
The massive stimulus package proposed by President-elect Obama should help. But it will take time for it to both be passed and implemented. In other words, we won’t see a recovery until the second-half of this year, at the earliest.
The U.S. has been in worse financial crises and pulled through. This one is no different and things will get better. It is the timing of a recovery that remains uncertain.
In this type of environment, investors should not chase stocks. Rather, be selective and patient. At the same time, understand that things will eventually get better, so have a shopping list ready of stocks that could benefit from a recovery.
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