Jobs, Schmobs

So the unemployment report came out much worse than expected this morning. Signs that the economic recovery is over? Probably not. Signs that the economic recovery is going to be very slow and muted? Yes. But that's been the expectation. It's only been the somewhat overly exuberant stock market that has priced-in and expected a normal "V" shaped, quick recovery. So while the news this morning was bad, don't fret. We're really still on track to where the economic consensus expected. The real question/risk is the double dip recession in early 2010 - when government stimulus wears off and the unemployment drag potentially becomes a brick wall to consumer spending and GDP growth.

What I'd rather notice this morning are two side points:

(1) Housing -- look at those 30 yr rates on treasuries (which basically translates into mortgages)!! They're plummeting as the market goes down (meaning investors will flee to the safety of bonds. This is SO important because it means that refis and home buying MAY continue at or only slightly below the current rate --- and a stabilized housing market has been as key the underlying economic recovery as the government stimulus. We can't have both wear off at the same time. 30 yr mortgage rates are at all time lows of 4.75% right now and should continue to decrease. Great news considering the expiration of the first-time home buyer tax credit!

(2) Credit Crunch -- famed and awesome financial analyst Meredith Whitney (who predicted bank collapse of October 2008 as well as the exceptional bank earnings of March 2009) now says that the credit crunch for banks may be only halfway over. That's because the credit crunch is now hitting SMALL BUSINESSES -- which account for 50% of the nation's employment and 38% of GDP, she states. Implications? Well, banks will have alot of writedowns and losses coming (a decent amount of which is already known/expected/priced-into the markets). It also means that job losses will continue with small businesses. So, while corporations cut costs and fired people extremely quickly in early 2009 and have now eased up on that (altho still doing so as proved by today's jobs report), NOW unemployment is going to be further fueled by the mom & pop store going out of business due to lack of credit/funding and the strip malls around the nation losing occupancy and business. Not good. But inevitable.