Unemployment Rate Hits 8.1%: Which Companies Remain Stable?

The unemployment rate soared to 8.1% last month as 651,000 jobs were cut. February was the 3rd consecutive month that more than 600,000 nonfarm payrolls have been lost.

Anyway you look at the data, it’s just ugly. The unemployment rate is at its highest peak since 1983, and the current downturn is the worst the U.S. has seen since the Great Depression.

The U.S. is in both a recession and a bear market. Worse yet, visibility remains poor because of the rapid pace of deterioration and falling earnings estimates. The only positive sign is that the number of job cuts appears to have stabilized over the last 3 months, albeit at a terrible level.

Though some political pundits are claiming the weakening economy and the Dow Jones Industrial Average’s (^DJI) sustained drop signifies the market’s rejection of the new administration’s policies, they are wrong. The current downturn is no more President’s Obama’s fault than the bursting of the tech bubble in March 2000 was the fault of President Bush.

Rather than focusing on who should be blamed, however, you should seek out stable companies trading at discounted valuations. The current market environment has put many companies on sale, such as Abbott Laboratories (ABT) and Johnson & Johnson (JNJ).

Conversely, avoid taking unnecessary risks by betting on the survival of troubled companies like General Motors Corp. (GM) or on the success of a new product, such as with Palm, Inc. (PALM).

Subscribe by RSS Subscribe by Email