| According to what I have read, unemployment is currently a little less than 5 percent, and is expected to rise to about 6 percent in the event of a recession. That is pretty low for recession. Also, the market is rallying in a show of confidence about a spring recovery, and in reaction to the stimulus package, and has gotten back to pre- crisis levels. Mainly, I think that the economy is fundamentally sound, and that the big shock was the meltdown in high tech stocks. After a "tulip bulb" frenzy, there came a bust, and a general sell- off to cover margins and rebalance portfolios. As equity values decreased, companies got very nervous about expansion, and consumers started worrying about their retirement. However, compensation levels have decreased only slightly compared to the previous year, and housing prices have held up. Both things tend to calm fears, since the house is often a major investment. With incentives like low interest rates, businesses and consumers should start spending again, and the main problems remaining are sectoral, associated with travel and entertainment. This too shall pass, as people feel more confident and restless as summer approaches....... |
