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Rising Unemployment Takes Its Toll

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Job cuts will increase economic stress.

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Corporations are slashing jobs. States are in on the act too. Let's take a look at a few headlines, all of which are from last weekend.

Dismal Job Reports

Those are dismal job reports. There are hundreds more you can find.

It's question time.

Which way are foreclosures going to head? Bankruptcies? Credit card defaults? Home equity defaults? Commercial real estate defaults? Corporate loan defaults? Corporate profits?

The answers: Up, Up, Up, Up, Up, Up, Down.

Unemployment Is Lagging Indicator

Somehow the fact that unemployment is a lagging indicator is being spun as a positive thing. Unemployment is indeed lagging, but it isn't positive at all. We have not yet bottomed. When we bottom, unemployment will keep rising for as much as another year.

In normal economic times, with more household savings and less debt, consumers would be better prepared to weather the storm. That is what happened in 2002-2003.

Now, most consumers have virtually no savings to weather the storm. Worse yet, unemployment is likely to rise for at least two more years. I called for 6% in 2008 and 7% or more in 2009. California is nearly there. Michigan is over 8.5% already, perhaps on its way to 10%.

Should Congress act to stem rising unemployment with, in my opinion, silly makeshift job programs, the dollar is likely to sink further, which will put still more pressure on those with jobs.

Some suggest we are in the eye of a hurricane. However, as I said on Sunday, the reality is there are Many Hurricanes, Many Eyes. Most have not even reached shore yet. Very few people are prepared for the series of storms about to hit. And for those barely hanging on, each storm will be worse than the one before it.

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