THURSDAY SEPTEMBER 3, 2009

Unemployment Airwaves

The unemployment situation will dominate the airwaves the next two days. This morning, initial claims for unemployment report was disappointing. Tomorrow, the unemployment number will be released at 8:30AM. These numbers will command the market’s attention. All sorts of tales of doom will be told.


Investors need to keep in mind that unemployment numbers are lagging indicators. Think about how businesses work. When times are good, business grows and jobs are created. As the economy slows, businesses hold the line. Only after the economy turns bad, do businesses start to lay-off employees. This recession has seen dramatic job reductions, particularly in construction and finance. As the economy starts to recover, businesses continue to lick their wounds. They once again hold the line on job growth until they are confident the economy is on solid ground. Employment lags on the downside, and it lags on the upside.  For example, only now, after the "cash for cunkers" program has depleted inventories, Ford Motor is rehiring laid-off workers.

 

Recently, the market psychology has turned for the worst and the talking heads are unanimously calling for a correction. If tomorrow’s number is weak, look for the correction to gain steam. However, I think this will be more excuse than valid reason. The recent bevy of strong economic numbers suggests the economy continues to recover. Employment numbers will get better, but with a lag.

POSTED AT 1899-12-30 08:46:00.0

KEN ENTENMANN, CFA
SENIOR VICE PRESIDENT AND
THE DIRECTOR OF INVESTMENT MANAGEMENT SERVICES

Ken is a Senior Vice President and the Director of the Trust and Investment Services at Alliance Bank, N.A. He has 23 years of investment experience and oversees the management of assets totaling $1 billion. He holds a B.S. in Applied Economics and Business Management from Cornell University and an M.B.A. from the William E. Simon Graduate School of Business Administration at the University of Rochester. He has also earned his Chartered Financial Analyst designation. He is a member of the Executive Committee of the Trust Division of the New York Banker's Association. He is also a director of the Central New York Community Foundation.

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The opinions expressed here do not represent the views of Alliance Financial Corporation and Alliance Bank, N.A. This communication is not an offer or solicitation for the purchase or sale of any security, is for general informational purposes only and does not provide personalized investment advice. When making personal investment decisions you should consult your investment adviser or rely on your own research. Copyright 2008.