Unemployment Rate May Impede Economic Recovery

Even as some analysts hail the end of the global economic slowdown with the stock markets gaining momentum, the 10% unemployment rate, one of the highest in decades is a worrisome issue and certainly does not support the positive outlook.

What inevitably draws attention are hundreds of thousands of unemployed people, even in the bigger cities of US, for whom the economic recovery still hasn’t brought about any good news.

So then, why are the stock markets rising again? One possible reason could be that the bailout has been successful and the bigger companies are finally beginning to gain ground. The effects are seen in the revived confidence in stocks of these companies after having hit rock bottom in the recent past.

But a set of experts have cautioned that the foundation of recovery is shaky and the consumer demand in the American market and unevenness in world trade still has to see the light of the day. Even though the banks have been fixed for the time being, but the primary imbalances have not been fully corrected. One of the biggest imbalances of the economy is of course the dismal unemployment scenario.

It will be no surprise if the market momentum sees a reverse swing if these primary balances are not soon taken care of. The optimism shown by the market may just as well turn out to be short lived and temporary.

As for the stock markets, the recent gains and recovery are sort of a moral victory to surge ahead and look positively towards the future. But in this optimism and euphoria, the market may well be over-reacting to the improved situation, which experts believe could be dangerous.

There are grave structural problems eroding the American labour market as businesses alter their order books, production plans and hiring to better suit the lean times. According economic experts, the amount of credit per GDP unit is likely to decrease in the future, which will force companies to cut meat and stay efficient and lean to survive. This will further stagnate and may be even worsen the current unemployment problem almost in a spiral way.

As the government is not likely to withdraw its stimulus package anytime soon, we can expect the market to continue an upward recovery, but this trend should be analyzed with caution. The battle has to be fought on several other fronts and every citizen has to become a participant in the recovering financial situation, else the stability of the system will always remain questionable.

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