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Jobs? Who needs jobs?

Scott Jagow Nov 9, 2009

The stock market seems to have no interest in the unemployment rate. 10% unemployment? 17% underemployment? No worries. Just order me some more stock, please. Today, the Dow hit a new high for the year.

At the same time, George Washington’s condition continues to weaken. Investors are selling dollars in large quantities after the Federal Reserve indicated that miniscule interest rates will be around for a while. Over the weekend, the G-20 said the stimulus will continue for everyone.

So, we have: Companies aren’t hiring, but theoretically they can export more with the weak dollar. The markets in stocks, oil and gold are flush. But check out the interest rate on your savings account. Canada’s Globe and Mail points out the economic disconnect:

The seeming disconnect between individual economic hardship and the market’s wealth results partly from the actions of the world’s main central banks. U.S. Federal Reserve chairman Ben Bernanke indicated that rates won’t rise until there’s improvement in what the Fed called “resource slack,” which includes both underutilized equipment in factories and unemployed workers in the market…

But the disconnect cannot continue for long.

“If we don’t get the upturn we anticipate for U.S. employment in 2010, America’s economy will wither as the boosts from fiscal stimulus and inventory restocking run dry later next year,” warned Avery Shenfeld, chief economist at CIBC World Markets. “And as we saw in 2009, far too many Canadian jobs depend on America’s fortunes to put our unemployment troubles behind us on our own.”

At Goldseek, Alex Merk makes this point:

No country has ever depreciated itself into prosperity and corporate America is well aware of that: it is highly unlikely that the U.S. will thrive exporting sneakers to Vietnam. A weaker dollar may indeed help out corporate America for the next quarter’s earnings in making foreign income look more attractive. However, with a weaker currency, corporations lack an important incentive to invest in quality.

The Europeans have long learned that they cannot compete on price, but must produce value added products such as luxury cars or complex machinery; incidentally, producers and service providers at the higher end of the value chain have more pricing power. China’s industry has also recognized this, allowing its low-end industries (e.g. toy industry) to fail and move to lower cost countries.

Sounds like we’re not only getting a jobless recovery, but a cheaply made one at that.

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