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Debunking more Doom & Gloom: Job Loss Not Such a Big Deal

Yesterday Seeking Alpha published Andy Abraham’s redundant, farcical article questioning the sustainability of the rally and economic titled; Will Banks Lead the Way to 1929 Crash Part II? Not surprisingly I disagree.

The markets are brushing off the doom and gloom. Intel report brushed off. Retail sales brushed off. Goldman Sachs offering brushed off, as I astutely predicted would happen a few days ago. There will be no repeat of the Great Depression because fed policy is far more proactive. The fed is the enabler of prosperity & innovation though easy, market friendly monetary policy as it has been since the 80’s.

Rising jobless claims and high unemployment isn’t as big of a deal as the doom and gloom media would have you believe. Why?

To be blunt, jobs just don’t matter that much. In the long trend due to automation technology and globalization the mean unemployment rate will continue to rise. But also the definition of the worker is also changing. Instead of regimented, documented payroll work, more people are earning a means though free lance work and and other entrepreneurial endeavors, which may not be tracked by the U.S. Bureau of Labor Statistics.

In addition, One of the main purposes of job cuts is to not only respond to shrinking demand, but to improve efficiency, which subsequently improves the bottom line and leads to technological growth and innovation. There are three types of unemployment recognized by economists. One of them is called structural unemployment, which is when less skilled workers transition to more skilled jobs. if it weren’t for structural unemployment people would still be using vacuum computers or living in hovels. Therefore, rising unemployment and joblessness isn’t necessarily bad for the economy and stock market if efficiency is improved. Creating or subsidizing inefficient jobs as in the case of bailing out General Motors doesn’t help the economy. I write more regarding the insignificance of GM and the changing dynamics of the labor market here iamned.com/blog/?p=198.

Jobless recoveries are now inevitable for all future recessions, including this one like it or not. The bull market lasted for five years despite elevated unemployment in 2003.

People keep talking about a recession but I can’t see it. Please help me find it. Facebook, Twitter, Google, Apple, Slide.com are leading the we 2.0 boom in the silicon valley and are immune to the supposed credit and liquidity crisis. Consumers are still maxing out their credit cards miraculously despite there being no credit, but unfortunately the savings rate is at 4%, but I predict by end of the year it will go negative.

True, things may seem bad now, but the market is looking ahead. In the United States our recoveries are ‘V shaped’ unlike that of Japan, France, or Germany whose economies are bogged down by fiscal conservativeness, consumer frugality, social welfare programs, employer regulation, and higher taxes. The economy is still fundamentally strong.

Also, as a reminder Google is reporting earnings after closing bell today. As I wrote a few days ago, they will smash the estimate and surge in after hours. Just keep buying all the dips and make money.

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