Tuesday, June 29, 2010

1.3 Million Americans Are About To Lose Their Jobless Benefits This Week

The government handout machine will be shut down.
The party is over... and it looks like people will now have to really look for a job - any job.

According to Zerohedge, Consumer spending, of course, will take a huge hit.
"the WSJ reports that "a total of 1.3 million unemployed Americans will have lost their assistance by the end of this week." Furthermore, the cumulative number of people whose extended benefits are set to run out absent this extension, will reach 2 million in two weeks, and continue rising: as a reminder the DOL reported over 5.2 million Americans currently on Extended Benefits and EUC (Tier 1-4). The net result is yet another hit to the US ledger, as soon 2 million Americans will no longer recycle $1,200 per month into the economy. In other words, beginning in July, there will be $2.4 billion less spent each month by America's jobless on such necessities as LCD TVs (that critical 4th one for the shoe closet), iPads and cool looking iPhones that have cool gizmos but refuse to hold a conversation the second the phone is touched the "wrong" way. As the number of jobless whose benefits expire grows, the full impact of lost money will progressively increase, and absent some last minute compromise, the monthly loss will promptly hit $5 billion per month. Annualized this is a hit of $60 billion to "consumption", and represents roughly 120 million iPads not purchased, and about half a percentage point of GDP (ignoring various downstream multiplier effects)."

People will have to take jobs that will pay less than what the government is currently paying them to stay home. So now there will be intense competition for whatever jobs are out there - including the lower paying jobs. People may even have to.... start their own businesses!

Zerhodge's posting
concluded by stating:
In our view, what will happen is that the 1.3 million who had gotten used to receiving benefits (and for whom we certainly feel sorry, as once again expectations and reality under the current administration diverge in a dramatic fashion) and had no desire to look for work, will immediately flood back into the labor force to find some job, any job, that pays even remotely as well as what the government did. What this means is that the total labor force (which incidentally dropped by 322,000 From April to May) of 154.393 million, is about to grow by at least 1.3 million, and as much as 2 million, in July. And since census employment peaked, and the number of employed will stay flat (at best) at 139.420 million, the expansion in the total labor force, will increase the unemployment rate by almost 1% in just a month, growing from 9.7% in May to 10.5% in July. That number will be reported in late August. But by then the sequel to the Great Depression v2 movie will be playing in every theater across the land, and this number will be the least of our worries.
Then again if they can't find work then they will totally be screwed, and they won't be counted in the unemployment numbers either!

But on the bright side - since the unemployment rate is derived from the number of people collecting benefits, and less people will be collecting those benefits, then the unemployment figures put out by the Feds will look good.

How's that for instant imaginary green shoots!

Peter Schiff says we are already in a depression.
He's right, you know.