Jonock's Blog : The Unemployment Rate as a Real Market Indicator.

The December 2009 unemployment rate was 10 per cent, yet the US Markets are rallying and are in an uptrend. Why? The current American stock markets are a bubble fueled by the US stimulus plan. Money is streaming out of the U.S. mint and in to the markets at a totally unprecedented rate. Proponents of President Barack Obama's $787 billion stimulus bill continue to insist that the massive government bailout played a decisive role in moving the economy out of the recession. I do not share this opinion, If this were true the unemployment rate would be dropping. Government spending as method of “jump starting” the economy has resulted in a $ 1.8 trillion Federal deficit in 2009. This method of capital market manipulation has been tried by many governments over the years. The “ New Deal” lawmakers during the 1930s, doubled federal spending--yet unemployment remained above 20 percent until World War II. You cannot spent your way out of debt. It did not work in the 1930's and is not working in 2010. Capitalism is self correcting and will adjust to its environment regardless of manipulation or government involvement. The best yard stick for measuring the health of Capitalism is the unemployment rate. When the unemployment rate drops three months in a row the Markets will be on the mend. Until such time as the unemployment rate starts a meaningful decline the markets are in an “artificial state” and the volatility will continue, and could result in swings of as much as 10%.