The jobless rate was announced today. It has climbed to a 16-year high of 7.6%.
Bizarrely, the stock market rallied on the news, and is currently up almost 3%, apparently on the mistaken and deluded belief that this means the stimulus will pass and thus everything will be happiness and light soon.
The stock market had the same disconnect from reality in the early days of the subprime and credit crisis. It defied gravity and logic for quite a while. While it’s certainly true “the markets can stay irrational longer than you can stay solvent”, reality eventually always does intrude.
I am of the opinion that the stock market improved because of Obama finally getting in there and speaking out for the stimulas.
People where beginning to think that the ‘Taliban Republicans’ were going to be successfull in sabotaging the bill.
So it is a market response to maybe we will see a stimulas bill passed and signed.
The market is jumping for joy because the target unemployment rate has been reached. That is that according to markets a 7% or higher unemployment rate equates lower wages for more productivity.
Its a very old formula, but what these entities don’t realize is that the current unemployment rates are hugely deflated for political gains and having these many people out of work is counter productive to their bottom line. Its like the very old cartoon: “If all the workers are robots that aren’t paid…who will buy our products?”
Nobbs