Unemployment claims drop further than expected, actually getting closer to the magic number of 350,000, the number that signals the labor market is strengthening for “reals.” Now, one would think the number would have shot up this week, since the rap against the good December numbers was “all the temporary hiring” for the holidays. So much for the naysayers, as today’s numbers demonstrate employment is still heading in the right direction but with a bit more gusto.
The Labor Department said initial claims for state unemployment benefits dropped 50,000 to 352,000, the lowest level since April 2008 and the biggest drop since September 2005.
We can add to this scenario of higher employment the real possibility that 2012 will see a dramatic shift in the number of folks who are paying too much or are “underwater” on their mortgages. The number of homeowners who could refinance or get principal reductions could easily reach into the millions, as there are now several programs working to help these distressed folks get both their principal reduced and/or their payments lowered. This will go a long way to mitigate the effects from the increase in foreclosures predicted for this year as banks resume their halted foreclosures. It will also go a long way to injecting more money into the economy, which will help ease the unemployment problem. Remember, excess money in the pocket of the consumer is hot enough to burn a hole, allowing that money to slip into the economy.
About one million American homeowners would get write-downs in the size of their mortgages under a proposed deal with banks over shady foreclosure practices, Housing and Urban Development Secretary Shaun Donovan said on Wednesday.
Confidence that European politicians might actually find a path to resolution seems to be on the rise as well. Not only did the Spanish and French long-term bond sales go better than expected, producing lower yields, but the politicians seem to be stepping up with tangible steps to get to resolution.
BRUSSELS (Reuters) – The euro zone and Finland are close to a deal on a new voting system for a 500 billion euro bailout fund central to fighting the debt crisis, euro zone officials said, which would remove one of the last obstacles to the scheme’s launch in July.
The above is a really big deal, as it suggests politicians are wending their way through the thicket of ideological opposition with political maneuvering and this means the actuality of the bailout fund is getting closer. Add to this, another reality, one I have mentioned before as well – China (the country with the largest foreign cash reserves – trillions of dollars) has a vested interest in seeing the global economy stay alive and well. It is directly using its money to shore up Asia, as well as Europe.
China is filling a lending vacuum in Asia as European banks limp home to preserve capital, and is making sure loans have spin-off benefits for Chinese manufacturers and exporters …
Yes, China and the U.S. are the last big men standing, and it is up to them to support the global economy. Along with support from Brazil, Russia, and India, the strong but smaller siblings of the economic giants, Europe just might have a chance of avoiding a deep recession this year and, as well, returning to growth. Now, wouldn’t that be a kick in the pants for global markets?
Trade in the day – Invest in your life …
