Final Day of the Year, Investors Remain Away from Markets

The year has come to and end dear reader, where the world’s largest economy continues to feel the heat from the worst financial crisis since the Great Depression, however, the U.S. economy started to show some signs of improvement over the past few months.

Economic activity started to rise gradually during the third quarter of this year amid the ongoing support from the U.S. government, however, the government was still unable to counter elevated unemployment levels, and accordingly the economy is expected to remain weak.

Unemployment continued to rise over the past few months to reach the highest level since 1983 at 10.0% in November, where U.S. employers continue to layoff workers, though the pace of layoffs has been easing recently, as conditions started to improve recently, yet it will take more time before U.S. companies start to hire new workers, as the economy remains somehow weak, as demand levels are still subdued.

The U.S. Labor Department will release today the weekly initial jobless claims for the week ending December 26, where jobless claims are expected to have edged higher by 8,000 to 460,000 from the prior reported estimate of 452,000, while continuing claims for the week ending December 19, are expected to have risen to 5.100 million from the prior reported estimate of 5.076 million.

The U.S. labor market remains on the receiving end of this recession, where now the U.S. Congress indeed passed a law that can further boost activity in the labor market, however, it will take some time before activity is restored fully, as even if companies stop firing workers, we shouldn’t expect companies to start hiring new workers and even if they did, we shouldn’t expect the pace of new hiring to be strong.

Elevated unemployment will indeed affect income growth, and accordingly consumer spending will remain subdued, and that means that economic growth will remain weak, since spending accounts for almost 2/3 of economic activity in the United States.

Meanwhile, investors are still away from the equity markets, as the volume of trades dropped noticeably this week, where investors seem to be trying to enjoy the holiday before returning to markets next week, and accordingly we should expect low volatility levels to prevail over today’s trading.

A lot of people are counting on 2010 to be a better year for the U.S. economy as well as global economies in general, as global economies fell into their first synchronized recession since WWII, where the misery prevailed all over the world, however, the second half of 2009 signaled that there’s still hope that the worst is indeed over, and that global economies are on their way to recover, though most economies are still expected to continue recovering during 2010, but still that should mean that 2010 will be a much better year than 2009…

Ecpulse

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