What Does Unemployment Cost a Nation?by Tim Manni
Without sounding like a broken record, allow me to impart a small point that emphasizes just how important jobs are to the survival of our economy. According to this morning’s Wall Street Journal:
Every 100,000 payroll jobs lost takes some $3 billion in disposable income away from consumers, estimates Thomas Lee, equity strategist at J.P. Morgan Securities. With 463,000 jobs gone so far this year, that amounts to nearly $14 billion annualized in lost purchasing power.
For the economy to function once again on all cylinders, all the wheels must be moving forward together. Too often a positive economic report is either released alongside multiple negative reports, or each reading is so volatile there’s no consistency to be found.
According to the Mortgage Bankers Association, mortgage applications rose to 522.2 for the week ending July 11. The number dipped to 419.3 for the week ending August 15, and by last week it moved upward once again to 453.1. The good news here is that applications have been rising for three weeks now, and last week’s numbers were fueled by a 10.5% increase in purchase applications.
If weak unemployment, housing, or other economic conditions continue to persist, it could begin to erode all the good falling gas prices have done for consumers.
Things could be looking up, though. CNBC’s Jim Cramer says this type of information is exactly the news that surfaces when aspects of the different markets begin to correct themselves. According to Cramer, when these types of negative stories begin to pervade the market, a positive turnaround is close by. Here’s why:
1) The housing index increased to 131 from a 52-week low of under 94, great news for the market!
2) Despite the nearly dozen bank failures this year alone, a working model has been created to deal with sunken banks.
3) Just yesterday, a barrel of crude dropped to around $107. Falling gas prices is an encouraging trend all around.
Deflation is key here, too. As commodities decline in price, the Federal Reserve can worry less about raising interest rates, in turn saving banks and maybe even keeping mortgage rates low enough to draw some bargain hunters into the housing market.
The bottom line here is, although certain conditions are poor, others remain positive. Government and education/healthcare did not suffer any losses in this morning’s unemployment report. Yet, for the positive trends to mean anything they have to happen more often and more consistently.