Friday, June 18, 2010

Jobless claims extension defeated in the Senate

Extension of jobless benefits was defeated again in the Senate late Thursday night by a filibuster.

Accordingly, about 900K claimants will lose their eligibility by the end of this week, which is now upon us. This means that next week's EUC 2008 number will be drastically lower, as we mentioned earlier on Thursday morning. It could also mean lower consumption by the ones that were receiving those benefits. With consumption already not very inspiring, this will likely further cut into consumer spending.

This is exactly what the economy does not need. Its a perfect example of a drug addict facing difficulty in first quitting the drug use and then actually recovering from the addiction, if possible. The government made the economy dependent on these stimuli and now the economy is begging for more and more. Although the equity market has had a rally the last few days (driven by technical indicators as we mentioned before), it may begin sweating in the future, nearly as much as the economy has already begun to. Maybe the economy should attend some SA (Stimuli Anonymous) meetings.

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