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  • Jobless Claims At 4-Month Highs, But Stocks will Keep Going Up [Edit or Delete]0 comments
    Apr 19, 2012 12:40 PM

    The job picture is worsening, which brings me back to a post I wrote six weeks ago where I predicted a sudden worsening of the labor market, but earnings and equity prices would remain unscathed.

    The experts are confounded, but I'm not; companies want more profits, and they are succeeding as evidenced by yet another quarter of blowout profits & earnings (BAC and JPM posted monster numbers today). Exponential gains in technology means more productivity; more productivity means more output for the same number of workers; hence no need to hire more people. Result: fatter profits and rising stock prices. Even a 3rd grader can understand this relationship.

    Oh and let's not forget globalization which compounds the labor problem.

    David Wessel of the Wall Street Journal writes

    "U.S. multinational corporations, the big brand-name companies that employ a fifth of all American workers, have been hiring abroad while cutting back at home, sharpening the debate over globalization's effect on the U.S. economy.
    "The companies cut their work forces in the U.S. by 2.9 million during the 2000s while increasing employment overseas by 2.4 million, new data from the U.S. Commerce Department show. That's a big switch from the 1990s, when they added jobs everywhere: 4.4 million in the U.S. and 2.7 million abroad."

    Apple moved its manufacturing to China, but you can still try to apply for the genius bar, which is a misnomer because it's neither a bar or staffed by geniuses.

    Stocks & commodities will keep rallying even as the job picture worsens, because profits, not employment is what matters to these huge funds. A permanently weak labor market guarantees that interest rates won;t be going up anytime soon, because the fed, traditionally associated with things like inflation and the money supply, has somehow merged with the labor department in its contentment to 'full employment'.

    From Wikipedia:

    In this theoretical framework, the notion of technological unemployment leading to structural unemployment (and being macroeconomically injurious) is called the Luddite fallacy

    We're seeing permanent jobloss due to automation and outsourcing . There is a huge mismatch between skills and job openings, but furthermore there's enormous competition for a relatively few job positions. This confers with the Luddite argument, but they predict, incorrectly, that because of high unemployment the economy will suffer, and this is where the author differs because since March 2009 there is no evidence that the perpetually weak labor market is hurting profits & earnings. The US is presently in a position of economic dominance that rivals any time in its history, with faster economic growth than any country in the Eurozone.

    WASHINGTON -- The American labor market showed further signs of weakening as the number of workers filing jobless claims went back up to their highest level in nearly three months.

    The Labor Department said Thursday that there were 386,000 first-time claims for unemployment benefits last week. Although that was down 2,000 from the prior week, filings for that first week of April were revised sharply higher. And that bumped up the more reliable four-week moving average to 374,750 -- the most since late January.,0,6477781.story

    This is bad news for the Obama's reelection prospects, but somehow his intrade contract has remained above 60%. This is unsustainable as a combination of surging gas & oil prices, worsening labor market, increased Iran & North Korea tensions, and a backdrop of pessimism about the economy will seal Obama's fate as a one-termer.

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