Ed’s Daily Notes for August 22nd   Leave a comment

Gallup: U.S. Employment

Gallup has released a worrisome poll, which shows unemployment in the U.S. has increased to 8.9% in the last 22 days. On July 31st, their poll showed unemployment was at 7.8%. They don’t speculate as to the cause of this, although I will suggest several potential reasons:

1. The U.S. government has been forced to live under the debt limit for the last several months, and has laid off some of it’s workers.
2. Anticipation of Obamacare is leading some employers to cut workers’ hours. The poll also shows the number of underemployed increased from 17.2% to 17.9%.
3. Some summer jobs may be coming to an end. This wouldn’t account for the full increase, but could be a contributing factor.

Regardless of the reasons, this presents an intriguing question for the Federal Reserve: If the economy is entering a recession, will they still taper QE at the end of September? If other economic reports confirm a recession, and the Fed tapers anyway, it will show that QE wasn’t about the Fed’s directives, but rather propping up the TBTF banks’ balance sheets, since they are the main beneficiaries of QE. Needless to say, such a Fed action would lead to a monster market crash. Even I would probably sell some of my positions. Why stay invested in equities if the economy is tanking and the Fed is tapering QE?

On the other hand, the Fed could decide to leave QE in place, or possibly even increase it. The markets would love that! We might even see the S&P 500 reach 1900 or higher.

You see the problem for investors? We are faced with two distinctly different possibilities for market direction.

CBS News: Fast-food workers urged to stage nationwide strike

Bad news for the fast food industry?

A coalition of labor, religious and other groups are calling for a nationwide strike of fast-food employees on August 29.

The campaign, building on a flurry of one-day work stoppages this year at franchises around the U.S., highlights the efforts by unions to enlist workers in the cause and heighten the impact of the strikes. Labor supporters say that fast-food workers are poorly paid and that their low wages subsidize the profits of multinational corporations.

But many fast-food restaurant owners and other critics of the strikes say that profit margins at franchise are so thin that higher wages would put the companies out of business, costing workers their jobs.

Based on the previous news story, I would say a strike by fast-food workers would be an epic failure, as fast-food restaurant owners would have no trouble finding replacements. That said, I would avoid buying any fast food on August 29th…

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