Just Another Manic Monday - What Recession?

Zero Hedge ^ | 5/9/11 | Phil of Phil's Stock World

[Nachum]

Wheee, we're recovering already!

This is not sour grapes, we played for a recovery today (see Stock World Weekly's wrap-up of last week) but it's already getting silly with a half-point gain in pre-markets based on --- nothing. As you can see from the chart on the left, 40 months into the downturn that has given us the worst number of job losses since the Great Depression, we are nowhere near a recovery. This is terrible, this is unprecedented, this is - great for business!

Bill McBride of Calculated Risk, reminds us that Wall Street's "dirty little secret" is that Wall Street and corporate America like the unemployment rate to be a little high. Higher unemployment keeps wage growth down, and helps with margins and earnings - and higher unemployment also keeps the Fed funds flowing freely. Corporations like to see SOME job growth, so people have enough confidence to spend (and they can have a few more customers) but they don't care if that job growth is in the US or China. "A SLOWLY declining unemployment rate (even at 9%) with some job growth is considered OK," says McBride.

[Nachum]

Sooooo... Wall Street actually likes high unemployment?

[Abathar]

Yep, how do you think all these corporations boosted their bottom lines with sluggish sales over the last couple of years. Wall Street loves less employees doing more and the creative massaging of the P and L statements to keep stock prices higher.

[Nervous Tick]

IMHO, the rising market is primarily a widespread bet on future inflation, fueled by large quantities of zero percent money courtesy of Helicopter Ben.

It isn’t grounded in expectations of corporate growth so much as confidence that corporations with pricing power will do better in an inflationary climate than will fixed investments.