double dipping

Unemployment hit 10.2% nationwide, a number not seen since 1983. In some states, like California and Michigan, it is much higher. And for those unfamiliar with the "US method" of calculating unemployment, or those eager to compare unemployment across different countries, it is good to point out that real unemployment in the US is much higher than 10.2%. The real number probably hovers well over 15% and in some states it may top 20%.

The discrepancies arise because the US jobless benefits are very short term compared to those of other countries. The US has the smallest safety net of any developed country. Many people do not qualify for unemployment benefits and have to make do with part-time jobs or employment that is much below their skill and competence (and pay) level. In other countries citizens are far less likely to be forced into such situations. The US also does not count people who have given up looking for jobs altogether.

Although the rate of unemployment is slowing, I predict that a pickup is to be expected. Foreclosure rates are still quite high and new foreclosures are likely now that people are losing employment. Many odious ARMs are also expected to reset leading to further foreclosures. It seems very likely that the Christmas shopping season will be another dismal failure and when that happens more retailers are expected to go out of business. At the very least new rounds of layoffs are coming.

So why is the stock market rallying? The reason is rather simple. There is tons of money sitting on the sidelines. Many have made fortunes in the bubbles and a lot of money is constantly added to retirement plans (even though it is decreasing now that jobs are lost). The money has to go somewhere and there are few palatable options. Investors have been waiting for (what they consider) a long time and so a rally was unavoidable. Unfortunately this is just more churning and it will lead to further losses which may end up damaging the "recovery" even more.

It is obvious that the stimulus package was way too small. Unfortunately the appetite for more stimulus money is gone. What that means is that the recession will last much longer. But given how destructive our economy is and how it is threatening our long term survival on the planet, that may well be a good thing in the long run. If people were rational, one could hope for a two-pronged solution, where people agree to change their destructive lifestyles in return for help from the government. That seems about as unlikely as convincing an alcoholic to stop drinking. All the money that is put in will quickly go to feed further addiction. And so it is that we, like the drug addicts that we are, will rather go down in flames, than wake up and change.