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US Economy in Recovery Despite Rising Unemployment Rate

5 October 2009 - News - Editor

While stock has retreated in the past two weeks, optimists are quick to point out that in comparison to the advance over the past seven months or so, the retreat can be considered as minimal. With investors having had the task of dealing with various reports on manufacturing, jobs and consumer activity that have missed forecasts in the past week, it is not surprising that stocks will have taken a bit of a beating. The S&P 500, for example, lost 4.3 percent, but when compared to the 51.2 percent gain over the past seven months many agree that the loss it nothing to panic about. Pessimists, otherwise referred to as realists depending on who you are talking to, believe that things are only going to get worse as third quarter reporting looms on the horizon.

The pessimist/realist point of view may appear to have been supported by former Federal Reserve Chairman Alan Greenspan on ABC's Sunday edition of "This Week" where he noted that the nation's current unemployment rate of 9.8 percent will rise above the 10 percent mark before going down. September's unexpectedly high unemployment rate figure of 9.8 percent is seen as one of the factors behind last week's disappointing performance on Wall Street. With investors being cognizant of the fact that consumer spending is a driving force behind the health of a country's economy, it is also of concern that US authorities have noted that many Americans claiming unemployment benefits have been doing so for some time, with an increasing number reaching the six-month cut-off limit with no job prospects in sight. Greenspan addressed this matter, stating that "Temporary actions must be taken especially to assuage the angst of a major part of the population."

United in their concern for fellow Americans, Sen. John Cornyn, R-Texas and Sen. Charles Shumer, D-New York have called for extending unemployment benefits, as well as health care benefits to the unemployed. They are also calling for extending housing credits to assist people in buying homes. In the light of increasing anxiety among unemployed Americans, it is anticipated that the bill for extending unemployment benefits, which will reach the full Senate in the upcoming week, will be passed without delay. In the meantime the Obama administration is focusing a lot of attention on job creation, which is having a measure of success and will eventually filter through. Greenspan's observations were not all doom and gloom as he expressed his confidence that the economy is in recovery, pointing out that the September unemployment numbers do not alter that fact. This is backed up by President Obama who has been reported as saying that unemployment is a lagging indicator when it comes to economic recovery. Greenspan also adjusted his 2.5 percent growth prediction to an expected 3 percent in the third quarter, as Dow component Alcoa is expected to kick off the third quarter earnings reports this week.

 


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