Unemployment continues to grow. We’ll get an updated report in early August.  It will likely continue to disappoint. Maybe this is the reason President Obama has not provided an update on his budget progress. Keep I mind that the total unemployed, under-employed, and those that have given up looking is in the 17% range and looks like it will hit 20% later this year. Also keep in mind that the unemployment data followed in the financial media is based on unemployment claims. What happens when your allotted claim period runs out? You no longer are tracked in the core unemployment stats but are of course economically worse off and a drag on the economy.

Many economists (& pundits) claim we can ignore unemployment data in forecasting a recovery because it is a “lagging indicator”. This may be true, but I’d rather wait to see that unemployment has stopped worsening – or close to it – before I get aggressive in buying risky assets. This means I’ll miss a chunk of early/speculative stock market gains, but then since I miss most of the downside that aligns with my core investment strategy of risk mitigation.          

Did anyone notice that in the latest GDP report the US consumer was seen contracting (not contributing)? This is not good (but it is as I expect). There is zero chance the US consumer is going to be contributing to GDP anytime soon. They have to get/keep a job and pay off the debt they’ve amassed on their multi-decade binge. Sustained US recoveries have always had a large element of the consumer leading the charge (no pun intended). Consumers are tapped out and unable to lead a spending recovery. Far too much GDP growth is coming from government spending. Yes government spending contributes to GDP growth, but you pay for it later in higher taxes. There is no free lunch.