American Breadwinners vs. American Bread Lines: What To Expect for the U.S. Economy

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American Breadwinners vs. American Bread Lines: What To Expect for the U.S. Economy
Butcher, baker and computer maker: Who will bring home the bacon?

By Bob Stokes
Wed, 20 Jun 2012 14:15:00 ET

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U.S. unemployment has been over 8 percent for 40 consecutive months.

Moreover, the jobless rate just climbed from 8.1 percent to 8.2.

And judging from recent news reports, jobseekers should expect the figures to climb even higher:

U.S. Planned Layoffs Jump 53%: Challenger Report

The above is a May 31 CNBC headline. In the article, the chief executive of the executive outplacement firm Challenger, Gray and Christmas says the computer sector and food industry could see an exceptionally higher number of lay-offs in coming months.

For those who fear layoffs or have been looking for a job, a June 19 Bloomberg headline provides little encouragement:

Job Openings in U.S. Decrease by Most in Almost Four Years

But even for those who are fortunate enough to have a full-time job, the news has not been all good.

Over the past five years, 40% of working adults have seen their employer-sponsored benefits reduced or eliminated entirely.

CNNMoney, May 31

The news reports about the job market and the unemployment trend do not surprise the analysts at Elliott Wave International. In fact, EWI expects to see more such stories as the economy continues to deteriorate.

As we have long argued, because the current bear market is of one larger degree than that of 1929-1932, the depression it creates will be deeper, which in turn means that the unemployment rate will exceed that of 1933. The peak rate in 1933 was 25 percent. Therefore, unemployment in the U.S. should rise to about 33 percent at the trough of this depression.

The Elliott Wave Theorist, January 2009

The question is, how close is the U.S. economy to the bottom?

Look to the stock market for a clue.

Most people believe that the economy leads the stock market. But EWI's extensive research says it's actually the other way around. The endogenous mood of investors that drives the stock market also drives the economy. As a prime example, the Great Depression of the early 1930s developed after the severe stock market drop. Also at other times in our history, economic contraction occurred after a bear market. By the same token, economic expansion follows rising stock market prices. If the opposite was true, economists would easily be able to predict all bear markets simply by recognizing economic downturns.

Knowing that the stock market leads the economy instead of follows it, your next question should be, what is EWI's forecast for the Dow Industrials and the S&P 500?

Well, a just-published Elliott Wave Theorist Interim Report gives you the answer.

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How Close is the U.S. Economy to the Bottom?

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Tags: conquer the crash, credit crisis, debt crisis, deflation, Dow Jones Industrial Average (DJIA), economic depression, economic indicators, Elliott wave, financial forecast, great depression, S&P 500, social mood

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