Rising Unemployment Means Recession

Today’s lead story in The New York Times is titled, “At 8.9%, Unemployment Still Rises, but Pace Slows.” It describes the latest employment statistics from April and their meaning for the larger economy.

According to analysts, the statistics are less bad than expected, and, combined with the better-than-expected results from the banks stress tests, that means our economic situation is starting to get better.

But if you read between the lines (and it’s really not that much between the lines), the economy is just deteriorating a little more slowly. Whether this is a pause before we fall off the next cliff or a braking action that will eventually lead to improvement remains to be seen.

In my opinion, there are just too many fundamental indices pointing in the wrong direction. The current “rally” in the stock market is based on a very flimsy hope after months of disasterous news. People desperately want to believe things are getting better so they’re looking for anything to hang their hat on.

This rally of the stock market looks like a mini-bubble of its own. It just needs one major shock before starting a precipitous declinen. And then investors will experience the same woes magnified.

It’s unpleasant to throw cold water on the news when so many want to see a glimmer of hope. But it’s better to be a realist about the situation than to be whistling in the dark.