Consumer spending makes 70.9% of the U.S. GDP. This week 601,000 Americans lost their jobs. New jobless claims dropped by 30,000 compare with previous week,but still it is very high compare with historical data. New jobless claims staid above 600,000 since February, if it would not drop in coming weeks we are going to end up with +9.7% unemployment by end of this year.
Today we got the Nonfarm Payrolls data -539,000,it was slightly better than analysts expectations (-810,000 to -580,000),but here is the catch, government hired 66,000 temporary workers. Yes you heard it right! that's why we end up with better than expectation data. You do the math, 539,000+66,000=605,000.
I need to remind my readers that if someone loses his/her job and not looking for a job, he/she does not consider in this data. It means the actual unemployment rate is much higher than 8.9% . Plus this data lacks the number of unemployed illegal immigrants. Other important data that did not reflect in headlines was the number of unemployed who have been looking for job over 5 months is increased by 500,000.
Considering consumer spending makes big portion of GDP, the high unemployment makes the rate of recovery slower than many investor beliefs. I have a hard time to believe the GDP will be +5% by 4th quarter 2009 as some analysts believe. The math just simply doesn't add up,consumer spending dropped significantly and the stimulate package is not big enough to cover the lack of consumer spending.
Democrats stimulate package or as I call it "Democrats wish list" could not compete with the high rate of Job lost. So you figure it out if we are going to get a big jump in GDP by end of year or not!