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Tags: sean | hyman | unemployment | currencies | dollar

The Lone Bright Spot in the Dismal Jobs Market

By    |   Monday, 12 July 2010 10:47 AM

I was shocked when I heard the latest report from an economist at the Federal Reserve.

Yolanda Kodrzycki’s conclusion was that even if you had GDP grow at 4 percent a year each year, it would still take until 2015 to bring unemployment back down to more of a normal 5 percent.

Then right after that, I ran across a comment from South Carolina Gov. Mark Sanford that said, “The worst is yet to come for the states because the economy is bound to fall back into a recession as government spending contracts both in the U.S. and elsewhere.”

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You see, states have to balance their budgets and the problem is that they still have a $127 billion shortfall as a whole through 2012. So they’ve either got to raise taxes, cut spending or ask for more bailouts from Washington (or some combination thereof).

However, the head of President Barack Obama’s debt commission told states not to expect much from Washington in the way of bailouts.

The bad part is that any one of the three options that these states could take will all be a bad option in the medium term (months to a year or more).

This is just one more sign that the U.S. economy will have more municipalities fail and more states have huge problems.

When you couple this crippling blow with the problems in Europe that are slowing down its economy and the fact that China is purposefully slowing down its economy, then you can only draw one conclusion in my opinion.

It means that you should buckle up because we’re about to go through a double-dip recession.

As if that weren’t enough, I recently ran across many more interesting facts that confirm my suspicions.

For instance, the U.S. government will issue more debt in 2010 than the rest of the governments of the world combined. (Our government debt already stands at 90 percent of our GDP.)

Also, corporate income tax receipts are down 55 percent for the year ending September 2009.

Eight counties in California already have employment rates higher than 20 percent.

Also, more Americans filed for bankruptcy in March than at any time since the bankruptcy laws were tightened in 2005. (In 2009, more than 104 million Americans filed for bankruptcy).

Just in March alone, there were more than 367,000 foreclosure filings, which are more than at any time since RealtyTrac started keeping records back in 2005. Even with those people that are still in their homes, you still have more than 10 percent of them who have missed a home payment at least once between January and March.

In fact, it gets even worse. For the first time in U.S. history, banks own a greater share of residential housing net worth in the U.S. than all individual Americans put together.

At least six states have announced that they are delaying their tax refund checks because they are so cash-strapped right now.

If you think that’s bad, 32 states have already run out of funds to make unemployment benefits too. The only way they’ve continued to make the payments is with the federal government’s help.

So, I could go on and on with the shocking statistics that I found but the deal is … it’s bad out there. The U.S. and global economy is going to take it on the chin again.

The good news?

Believe it or not, there is a bright spot in all of this. Currency traders have the best shot at making money throughout all of this than almost anyone.

You see, stocks won’t prosper in this type of environment. Neither will most commodities except for gold, etc. Real estate will still continue to be dismal at best because of the glut of supply out there.

Some types of bonds will do OK but others could default (such as munis, etc., in some places). So that gets shaky, too.

The bright spot is that the “defensive currencies” like the U.S. dollar, yen and Swiss franc will likely perform very well in these types of conditions. In the last global recession, these were the only major assets (besides gold) that were heading higher. Everything else, overall, was heading south in a major way.

That’s the beauty of the currency market. In good times, we have some great plays. In bad times, even horrible times … we still have some great plays. So if you don’t have any currency exposure in your portfolio, you’re probably doing yourself an injustice.

About the Author: Sean Hyman
Sean Hyman is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He is also the editor of Money Matrix Insider. Discover more by Clicking Here Now.

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I was shocked when I heard the latest report from an economist at the Federal Reserve. Yolanda Kodrzycki s conclusion was that even if you had GDP grow at 4 percent a year each year, it would still take until 2015 to bring unemployment back down to more of a normal 5...
sean,hyman,unemployment,currencies, dollar
Monday, 12 July 2010 10:47 AM
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