The government has just told us that the official U.S. unemployment rate surged to 9.4%, the worst in a quarter century!
Now, here’s what the government has NOT told us:
- This official number is grossly understated: It doesn’t even begin to count the millions who suddenly find themselves trying to live on a part-time income ... or the millions more who have given up looking for a job altogether.
- The worst layoffs are yet to come: Not only from giants like Chrysler and General Motors ... not only from thousands of auto dealerships and part suppliers ... but also from millions of small businesses all across America.
- The government’s recent bank "stress" tests were flat out wrong. They assumed an average employment rate of 8.9% this year. With today’s announcement, it is now clear, beyond a shadow of a doubt, that the actual rate will be far higher.
- The unemployment rate is CLOSELY correlated with the delinquency rate on mortgages. That means it’s now virtually INEVITABLE that mortgage defaults and foreclosures will surge FAR more.
And history also teaches us that, despite the hype and happy talk coming from Washington and Wall Street, the fundamental trend will always prevail. The lesson is clear: those who ignore the fundamentals, such as the surge we just saw in unemployment, are too easily seduced by Washington and Wall Street spin. They fall victim to the lullaby that “the worst is over”.
Now, it doesn’t take a rocket scientist to figure out what’s coming next for the U.S. economy in the weeks and months ahead. Just connect the dots ...
- Consumer spending is 70% of the U.S. economy.
- Those consumers are now either out of work or are terrified that they could be the next to lose their jobs.
- So consumers are avoiding unnecessary purchases like the plague.
- And that means corporate earnings will continue to plunge and inevitably, so will stock prices
