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Labor Market – Finally Some Good News?

After almost a year of painful job cuts, employees finally have a breather. Wall Street is rejoicing as well. There are indications that the labor market might be on the road to recovery. Stock gauges are at their highest in over a year even though economic data reports only modest gains. Highlights include the improvement on consumer sentiment, increase in retail sales, and reports on the trade gap.

For the month of November, employers laid-off 11,000. While still significant, it is the smallest job cut since December 2007. The unemployment rate is now at 10 percent from the 10.2 percent high in October. Phil Orlando from Federated Investors observed that it’s going to be years before the labor market goes back to where it was in 2007 although he acknowledged that it was already improving.

Yet, for the positive signs, there are also disturbing factors under the statistics. The drop in real unemployment rate may be because millions of Americans who had lost their jobs almost two years ago may have given up looking for work. Thus, the figure was not included in the data.

On the investor front, the stocks are expected to remain at a certain range. According to Jamie Cox of the Harris Financial Group, “The broad averages are probably going to go sideways and for a while…it’s not going to be as hard or as easy as it’s been in the last 24 months”. At many stages, the market rose dramatically and then fell, and then the trend continues.

The next few months are going to be different. Analysts predict that investors will focus more on stocks, rather than the market as a whole. As a whole, many are betting that the recession is about to end. Combined with the fiscal stimulus, the stocks are currently at their 9 month high.

Middleclass America: Going, Going, Gone

For decades, middleclass America has been the bastion of economic growth and activity. Today, the United States might be witnessing the fall of this segment as their debts shoot through the roof. The financial crisis has definitely hit ordinary Americans the hardest. But before you blame everything on the bankers, it should also be noted that over 100,000 middle-class families filed for bankruptcy every month since 2007.

Statistics shows that one in five Americans today is either unemployed or underemployed. One in eight is in foreclosure or default. And one in nine can’t pay the minimum repayment required on their credit cards. People who are about to retire are also facing incredible challenges because the crisis has just wiped out more than $5 trillion on their wealth (savings and pensions). The list of blogs below highlights other developments that might signal the end of middleclass Americans.

The Rebel News, in the post “US Middle Class Hit Hard by Current Economic Vows”, summarizes key findings that show the vulnerability of ordinary Americans. It also stated that classic lifesavers such as real estate ownership and higher education have lost its powers in the current condition. It has, in fact, become liabilities to the financial system.

Ronni @ Time Goes By wrote a post titled “Imagining Life without a Middle Class”. He gives readers the big picture and the small picture. In the latter, he recounted that most people are spending most of their income on necessities. If this trend goes on, there will not be enough disposable income for any other activity.

Elizabeth Warren @ Huffington Posts compiled research statistics in the post “America without a Middle Class” that demonstrate the fall of the United State’s middle market. Among the key figures that were showed include the comparison between productivity & compensation, income growth during boom times, and the median income of households.

E-Commerce Sales Might Go Up, But Not Enough

With almost every American feeling the pinch, every little bit counts. Some hopes are pinned on e-commerce sales in the United States. However, even as it toppled analysts’ sales estimates, it is unlikely to be large enough to change the outlook in holiday spending this season. According to Forester Research Inc, e-commerce represents only about 6 percent of total spending, while significant, it is not enough to offset the pace of decline in in-store sales.

Online retailers have a lot to be happy about though. Online sales are around 14 percent higher so far compared to last year. A lot of consumers are going online to compare holiday deals and search for discounts. As such, traditional retailers are given a chance to increase their sales by offering irresistible deals.

But people are not only looking for deals on the internet, they are also browsing in stores like Best Buy Co, Target, and Wal-Mart to save money. This year, more people visited stores during the Thanksgiving weekend but they spent less on average. The trend worries many retailers but they are coming up with ways to stay profitable.

According to the chief executive officer of Mercent Corp, “retailers are being aggressive with promotions and a low-cost assortment of goods and value-conscious consumers are responsive to those deals.” Mercent tracks sales associated with internet advertising from 120 merchants. That is, the number of clicks on internet ads that result in sales.

The last several days marked the start of the holiday shopping season in America. Black Friday, the first day after Thanksgiving, is traditionally the time when retailers start becoming profitable. This year, it was promoted as “Cyber Monday” because of the boost in internet shopping.

Holiday Spending – Should You Save Instead?

Individuals listening to politicians, looking at the movements of the stock market, and reading recent news reports almost inevitably get a boost in confidence. After all, “improvements” are being seen everywhere. But does the macroeconomic upturn really affect your daily life? It is good to have some level of optimism. It is a different matter altogether if you use this as an excuse to spend more or become irresponsible with your financial obligation.

Take note that even if the stock market improves, it does not necessarily mean that there is an improvement in the GDP, which is the factor that decreases unemployment. Spending too much money at this point is not only ill-advised; it can also be devastating to your finances. Also, try to ask yourself whether you really want to return to your old holiday shopping habits under these conditions. Some blogs that tackle this topic further are listed below:

Marketing Profs uploaded a recent blog post titled, “Weaker Online Holiday Spending Expected”. The article revealed that despite the improving economy, consumers will still hold on tightly to their money. Nielsen’s survey showed that 42 percent of consumers intend to spend less this year compared to last years. In addition, they will spend a smaller percentage of their budget online.

The Project Economy Blog has an interesting article titled “Investors Eye Consumers’ Holiday Spending”. While research shows that shoppers will spend less this year because of the difficult economic times, the number of buyers will actually increase. It also talked about the importance of holiday shopping because most retail outlets rely on it for 40 percent of their profit. The actions of consumes during this period can make or break the industry.

Kelly from Almost Frugal asks her readers “How Much Are You Spending for the Holidays?” She recounts her own family’s experience when it comes to spending. This is a more personal blog post because she talked about how her family coped with spending for birthdays, weddings, Thanksgiving, and anniversaries.