Archive for October, 2008

Are things going to get worse?

Wednesday, October 8th, 2008
Oh yeah! Hold on. Sure, your stock holdings are down - but if you hold long enough, that might all work itself out. However, job losses will cause real near-term pain and the reality is: the job losses are not there yet. This is one stat that is really easy to measure and fairly reliable: non-farm payroll figures are released by the government on the first Friday of every month and these numbers frequently kick off a frenzy of speculative trading in the foreign exchange markets. Interestingly, the unemployment rate in September stayed steady at 6.1%. About a year ago, the unemployment rate was 4.7%, so it has grown, but there have not been any recent surges. I am not sure of the typical lag, but I have to believe the job losses are coming. The unemployment rate has not hit 10% since the government reported it in it's current form in 1942 - - the highest being 9.7/9.6 in 1982/83 respectively. Those were the only years it ever rose above 9%. When people start losing their jobs, this will be a lot more painful than the loss of homes from bad loans (which should not have been made anyway). The unemployment rate reached almost 25% during the depression in 1933, but I can't imagine that we will screw up that bad this go around. So, things are not that bad yet. I am sure they will get worse, but confident they would be nearly as bad as they have been for those before us.