Increase in Jobless Claims Surprise Analysts: U.S. pumps more money into the market

Increase in Jobless Claims Surprise Analysts: U.S. pumps more money into the market

The weekly jobless claims for unemployment benefits increased to 457,000, up 20,000 from the week prior.  This surprised business analysts that predicted the number would stay below 450,000 which is the barometer for the job market as to whether our economy is adding enough jobs to pull the U.S. out of the deepest recession since the recession.


The total number of jobless claims to date is 4,343,000. The 4-wk moving average is up by 2,000. The uninsured emergency rate is at 3.4% from 3.7%  This rate correlates to the percentage of people that are unemployed.  It’s a bit confusing and economists look at this number closely, but suspect that the number is going down because more people have exhausted their unemployment benefits.


In the meantime, under pressure to “jumpstart” the U.S. economy, Bernake is pumping more money into the market causing the rate of T-bills to tumble to a record low and the dollar to drop.  The theory behind Bernake’s decision is to force investors into the stock market out of T-bills.


If T-bills are making no money investors will delve into risky equity positions in the stock market.  This will inflate the true value of the stock market and in my opinion create more losses for the already battered investor. I am keeping whatever money I have left in T-bills, until I see some real growth in the U.S. economy.


Business analysts contend that Bernake is using this last ditch approach to stimulate the economy by making consumers believe that all is getting better due a rising stock market.  It allows investors to finally make some money in the stock market which feeds their 401K and makes them feel that our economy is improving.


I don’t buy this concept.  Yet, 70% of our economic growth is based on consumer spending.  Unfortunately, the consumer has overspent creating record debt, which will take years to pay off.  If the consumer doesn’t buy things, people don’t have jobs, and the savings rate increases, evidently our economy doesn’t grow. 


People like to spend money and use credit, so my suggestion is that the U.S. government pressure the banks to loan money to small business at a reasonable rate, and let capitalism take over. If businesses have money to grow, they will hire and jobs will be created.  I am not an economist but I even know this. Bernake, are you listening?.


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