I will start by saying everything that goes up must come down and that includes the stock market. We have seen the highest levels ever during a pandemic and only a few people questioning how that is possible while many other turn a blind eye or just don’t understand it.
The first thing is the government has been pouring money into the stock market through bonds , it has kept interest rates very low, as well providing millions of people income even though they are now able to go back to work.
The below numbers are from the 2019 and 2021 Department of Labor reports and as you will see in 2019 we had a total of 1,476,491 filing for any type of Unemployment Insurance and in 2021 that number is 11,930,415. The biggest difference is the roughly 8,900,000 that are just on the Pandemic programs.
As of September most of the subsidies (not all) are starting to fade away, which means that all the labor shortage we have been seeing across the country will also start to fade as employees will need jobs to pay for bills. This sounds great in theory, but two big obstacles are ahead as they come back to the workforce.
One is companies will not hire at the same levels as pre-pandemic and people will be unemployed with very little benefits. The other issue is that many of these people were spending their benefits through the economy, but now they won’t and that will impact businesses.
The second is the downward pressure on salaries that will be created by the mass number of employees coming back to the workforce. This will take a few months to playout, but will definitely re-adjust the current salaries that have sky rocketed in many industries.
Now comes the biggest problem is that we have allowed inflation to get out of control and cost of everything is up significantly including basic needs. Unfortunately, most of these costs will not be decreasing at the same rate as salaries.
Now we have people that either don’t have jobs or can’t afford basic needs, but two items that can delay this would be additional benefits to the unemployed or the proposed stimulus bill which will pump billions into the market. The ladder is a whole other issue by itself, which I will provide my prospective on in another post.