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Market Commentary Equities staged a strong advance Equities staged a strong advance as the decline in nonfarm payrolls was less than expected and the unemployment rate remained unchanged at 9.7%. What is the odds job creation could produce an “eight” handle unemployment rate by year end, a suggestion I made about 6 weeks ago? What impact would such job growth have upon monetary policy assumptions? Wow! What an outlandish thought! The Chicago Tribune asked an interesting question whether or not longer jobless benefits produce longer unemployment. The long and short of this story for obvious social and political purposes Congress is more than willing to increase the number of weeks that unemployment benefits is made available to laid off workers. The Tribune suggested workers on the low end of the socio economic spectrum are delaying looking for work because of the extension of these benefits, a reason why 40% of jobless Americans have been out of work for at least 27 weeks, the highest level since the government began keeping records sixty five years ago. The Tribune’s story suggested the extension of these benefits account for about 1% to 1.5% of the 9.7% unemployment rate. If this is remotely the case, and if jobs begin returning at a pace that is consistent with 4% to 5% growth and if benefits stop being extended, amplified by last winter’s massive decimation of the work force to ensure survivability that overshot reasonable bounds, the odds of inflationary expectations becoming unanchored rise dramatically. Radical thought? Probably but this entire crisis is about the radical occurring. How will this week’s data be interpreted? The calendar is relatively sparse in the early part of the week. The Trade Gap, Retail Sales, Business Inventories and Last night the foreign markets were up. The Dow should open nominally higher as The information is the personal views of Kent Engelke and is not necessarily indicative of those of Capitol Securities Management. The information contained herein has been compiled from sources believed to be reliable; however, there is no guarantee of its accuracy or completeness. Any opinions expressed here are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. Capitol Securities Management, Inc. is a Mid-Atlantic based, privately owned brokerage and investment firm with branch offices in Mclean and Richmond, VA, Boston MA, Hickory, NC, Florham Park, NJ and Tampa, FL. Capitol employs over 170 fulltime investment professionals and independent affiliates in locations from New England to Florida and has been serving the needs of its investors for over 25 years. It is a member of FINRA and SIPC. © Copyright 2008 Capitol Securities, Inc. All Rights Reserved. |
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