Wednesday, June 30, 2010

ADP And Beyond

This morning we received the monthly ADP jobs report, which was expected to come in at +60,000.  The number came in at a dreadful +13,000 new jobs created.

It is clear at this point that depending on which camp you are in we have either entered a jobless recovery or a jobless recession/depression.  I will let you decide which camp you want to be in, but for now let's focus on where we go next since it is clear that the jobs are gone and they not coming back.

Up until this point the unemployment problem has been masked by a major factor:

Unemployment Benefits

A worker laid off has been able to collect unemployment from the state for 26 weeks.  At that point they can then move into the Emergency Unemployment Federal Claims division and collect checks for an additional 73 weeks depending on the state.  That is a total of 99 weeks of free government pay, or 1.9 years.

After a recent vote, however, the emergency claims are being reduced.  As of this Saturday 1.2 million unemployed Americans will stop receiving checks.  Estimates show that by July this number will have reached 2 million.

Now this is where the story gets frightening.  I fully expect Congress to overturn this vote and come back with some sort of new "emergency" benefits program because we are in an election year.

However, the important thing to remember is that our country is rapidly closing in on both a government debt and currency crisis.  There will come a day when our government wants to send checks to everyone that is unemployed, but they will not be able to.

As the creator of the Trends Journal likes to say, "when people lose everything, they lose it."  During the later stages of this depression it will be important to prepare yourself for an environment where personal safety will be an important issue. 

As an investor if you understand now that this is coming, you will be less focused on the fear and chaos around you, and more focused on the assets that will be on sale.

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