Rising Unemployment = Dow Catastrophe
By David Williamson
After weeks of hand-wringing over the eurozone’s crawl to the precipice, it was almost refreshing that today’s broad market sell-off is about one concretely domestic issue: unemployment. Data released this morning had no silver linings, except maybe that we aren’t losing jobs on an absolute basis. Only 69,000 jobs were created, far less than the 155,000 predicted, as the manufacturing work week fell and the prior two reports were revised down as the unemployment rate ticked up to 8.2%.
As if his former stewardship didn’t do enough damage to the economy already, Alan Greenspan refuses to go away graciously took time to appear on CNBC warning of bond markets turning against U.S. debt and high interest rates. Does Greenspan bother to look at data before cowering before imaginary bond vigilantes? Right now the U.S. Treasury real yield curve rates on five-year, seven-year, and 10 year TIPS are negative. Don’t believe me? Look for yourself.
And more importantly, with the euro potentially unraveling, where will investors turn to put excess liquidity outside U.S. debt? Japan, with its even worse debt issues? Communist China? And if inflation is your fear, remember that it’s hard to get inflation without rising wages, and it’s hard to get rising wages when unemployment is over 8% because of budget cuts and weak consumer spending. Greenspan’s dedication to dogma despite clear evidence to the contrary cements his folly.
That said, let’s take a closer look at the three major indexes and drill down on a few stocks caught up in the action.