Recent memory fails to remember a week bigger than what we have in store for us as a total of 16 economic reports are set to be released, which should help verify if a recovery is in place. None of those reports will garner the attention of worldwide investors and lawmakers on Capitol Hill as much as the jobs data, culminating with Friday’s October payroll report.
Four of the 16 reports pertain to employment: Challenger Report; ADP Report; Jobless Claims; Nonfarm Payrolls Report, which will include the current unemployment rate. With unemployment hovering just below the 10% mark, many Wall Street economists are predicting a break above the double-digit barrier. The question remaining, though, is what happens if the unemployment rate remains above 10% as the recovery takes shape; a higher rate is expected to have a negative impact on the overall economy.
As Bloomberg reported:
The U.S. unemployment rate reached a 26-year high of 9.8 percent in September and Federal Reserve Chairman Ben S. Bernanke said last month the rate may remain above 9 percent through 2010. High unemployment and a depressed economy have prompted businesses to cut investment on plants and equipment as well as on product development and worker training.
“At current growth rates, we’d be lucky to see the unemployment rate fall by half a percentage point per year, meaning that it would take a decade to return to something like full employment,” Nobel Prize-winning economist Paul Krugman said in an op-ed published by The New York Times yesterday. “The government needs to do much more. Unfortunately, the political prospects for further action aren’t good.”
This week’s data comes on the heels of the Income and Spending reports released this past Friday, and the third quarter GDP rate released on Thursday. Spending in September dropped 0.5%, an exact print that Wall Street consensus was anticipating, but challenged the 3.5% growth rate seen in the overall economy.
Several Wall Street analysts and traders reviewed the Gross Domestic Product report with skepticism, failing to see evidence of an actual recovery taking place. Considering, it looks as if the Cash for Clunkers program helped the GDP print, many will wonder if these short-term fixes can result in a sustainable recovery; particularly if the jobless rate rises above 10%.
To quote The Washington Post:
But if the [unemployment rate] disappoints again, particularly if the jobless rate crosses into double-digit territory, it would signal that the 3.5 percent rate of gross-domestic-product growth in the third quarter wasn’t enough to get the job market back on track and could send Washington back to the drawing board to try to find ways to stimulate the job market.
Wall Street is expecting Friday’s report to show October eliminated 175,000 jobs, and the unemployment rate to rise to 9.9%.
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