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Friday, September 5, 2008

Unemployment Reaches 6.1%

The US unemployment rate climbed to the highest in five years to 6.1%.  Payrolls fell by 84,000 in August.  And remember when I thought the last one was going to be the big bad one.  Well, a revision added 58,000 more job losses to prior two(not just one) months. 

With more layoffs and hurricane effecting job losses, this number will get worse.

``It certainly increases the probability that we really are in a recession,'' William Poole, former president of the Federal Reserve Bank of St. Louis, said in an interview with Bloomberg Television. ``It is a weak number, including the revisions.''

....

Service industries, which include banks, insurance companies, restaurants and retailers, subtracted 27,000 workers after cutting 12,000 in July. Retail payrolls fell by 19,900 after a drop of 18,100.

``We're losing jobs in all kinds of industries now,'' Roger Kubarych, chief U.S. economist at UniCredit Global Research in New York, said in an interview with Bloomberg Radio. ``This is the clearest recessionary signal we've seen.''

So much for the housing recovery that "analysts" seem to predict everyday. 

In other news, a record 9.2 percent of homeowners were either behind on their mortgage payment or in foreclosure at the end of June. 

The latest quarterly snapshot by the Mortgage Bankers Association on Friday broke records for late payments, homes entering the foreclosure process and for the inventory of loans in foreclosure.

Breaking records in delinquency or foreclosure is not good news for the housing market. 

The percentage of loans at least 30 days past due or in foreclosure was up from 8.8 percent in the January-March quarter, and up from 6.5 percent a year earlier.

Folks, we are just at the beginning of this downturn.  We've got a long way to go.  Along the way, you are going to have analysts calling bottoms.  Here is Jim "Bubble" Cramer on Tuesday (From SeekingAlpha)

“The rally this morning was the real deal,” Jim Cramer told viewers. He said that market expectations have turned too negative and when companies report their earnings they should blow away those estimates. Cramer said he was buying into today's afternoon selloff for his charitable trust and said now is the time to start building positions. Cramer told viewers not to pay any attention to the Dow Jones Industrial Average, which traded as high as 230 points before closing down 26.63 points today. Instead he said they should concentrate on the KBW Bank Index and Philadelphia Housing Sector Index, which he says are the real indicators of where the market is headed. He said the markets will not see a meaningful rally with the Philadelphia Housing Sector Index in free fall. “The markets need home prices to stabilize,” he said. Cramer reiterated his views that the markets will not re-test the lows of July 15, noting his prediction of a bottom in the housing market is now just 302 days away. He said a market rally will likely precede that bottom.

Cramer cited several reasons why he feels a market rally is on the horizon.

  1. There will be an uptick in consumer spending when gasoline hits just $3 a gallon.

  2. The Federal Reserve won't raise interest rates as long as commodity prices continue to fall.

  3. Any companies who raised prices due to higher commodity costs will now reap the rewards as those commodities begin to recede in price.

Cramer told viewers not to wait until next year to start buyer, as a recent Wall Street Journal article suggested, but rather to start buying now ahead of the positive news that's on its way.

Since Cramers "bottom" call, the S&P has gone from a high of 1302 to 1220.  Good call Jim!

 


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