Subscribe: RSS Feed | Twitter | Facebook | Email
Home | Contact Us

Unemployment Report Review, April 1, 2011: We Need Yeast

Posted by Larry Doyle on April 1, 2011 8:52 AM |

This morning’s Unemployment Report may be presented as another in an ongoing series of gradually improving signs of economic recovery. That said, the report lacks one vitally important ingredient. What is that?


What? “LD, what the heck are you talking about?”

As any trained chef knows, “it’s the yeast that makes the dough rise!!” On that note, while pundits and analysts may care to focus on the headline unemployment rate declining to 8.8% and non-farm payrolls increasing by 216k, for those focused on the structural health and well being of our economy, I encourage you to focus on wages.

Once again, we see ZERO increase in terms of earnings. That reality will continue to relegate our economy to what I have categorized as a serious bout of ‘walking pneumonia.’

No wage growth in the face of increasing costs for food, fuel, health care, and a wide array of other household expenses leaves very little dough left over for increased discretionary spending. Additionally, the ongoing wealth destruction in terms of declining real estate valuations will also perpetuate our ‘walking pneumonia.’

Do not get me wrong, I am happy to see some positive prints on some of the headline numbers but the major structural issues, which have left almost half of our current unemployed out of work for greater than six months, are still searching for real answers.

How might the Fed react to this report? While selected Fed governors have started to make rumblings of a need to increase rates, I do not expect Ben Bernanke will follow their lead. I still believe Bernanke thinks our ‘walking pneumonia’ economy needs all the help it can get. In light of that, I would be willing to bet he extends the end of the QE2 ‘punch bowl’ from this June to later this year.

While he may leave the punch bowl out for the benefit of the banks and the markets, he may want to figure out how he can add a little ‘yeast’ to the mix to help raise the dough people earn and lessen the pain at the pump and the grocer.

Beyond that, the structural unemployment issue in our nation which is the key to our ongoing ‘walking pneumonia’ economy can only be addressed through real reform in education, an increase in our net savings rate, structural reform in our entitlement programs, and an end to the politics as we know it in Washington.

I am not sure that our nation currently possesses the leaders and the character to truly take on these issues.

Navigate accordingly and store your own yeast in the process.

Larry Doyle

Please subscribe to all my work via e-mail, an RSS feed, on Twitter or Facebook.

I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

Recent Posts