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Catching a Falling Financial Knife

State of The Union - Where is U.S. Unemployment Headed?

Politics / Unemployment Feb 12, 2013 - 07:09 PM GMT

By: Ian_R_Campbell

Politics

This evening Eastern Time U.S. President Obama is scheduled to give his annual 'State of the Union' address. Favoured topics are said to be U.S. unemployment and jobs creation, and gun control. I expect Mr. Obama also to address the issue of defense spending, where he recently has been reported as saying 'Deep cuts' threat to security, Obama says in reference to pending defense budget cuts.


With respect to unemployment, i will be listening carefully tonight to see if, and if he does 'how', Mr. Obama addresses:

specific government programs aimed at creating meaningful, lasting manufacturing and service jobs - with emphasis on manufacturing - or speaks in general terms about job creation. Simply put, the less specific and more general he is when he speaks about job creation tonight, the more 'smoke' will be in the room. As the old saying goes 'where there is smoke there is fire'. Generalities will not help Main Street Americans searching for jobs;

whether he and his government believe a strong manufacturing base is essential to U.S. near and long-term economic growth, and hence meaningful economic recovery;

the issue of whether his government does or does not believe the U.S. suffers from 'structural unemployment'. Structural unemployment in simple terms means that either worker skills and required job skills are mis-matched, or workers are not in geographic proximity to available jobs. I believe structural unemployment does exist in the U.S. If Mr. Obama discusses it tonight, he may claim it either doesn't exist, or is not an important U.S. employment impediment;

what U.S. defense spending cuts are going to mean to American manufacturing jobs. This is an issue I have not seen addressed very often, but I think it could be an issue of significant importance - not only from the perspective of America's military strength going forward, but may prove to be negative to near term American employment. Cuts in U.S. defense spending may also negatively influence employment in countries whose manufacturers sub-contract to the U.S. defense sector;

employing unemployed skilled and semi-skilled workers in government sponsored infrastructure projects and, if he does speak to that, whether he specifically addresses where the money is going to come from for such a program;

possible repatriation of manufacturing jobs to the U.S. pursuant to enhanced protectionist trading policies or special taxes on imported manufactured goods - the latter being a different way of getting at the same thing. If he does speak to that, I will be curious to see if he speaks to the likely inflationary effect of such a program on Main Street America;

technology and automation advances, and how he and his government see those things play out going forward, where technology and automation advances generally increase productivity outputs - but at the expense of manufacturing job losses; and,

what I think to be the 'survival of the fittest' nature of American capitalism at its best (or worst, depending on one's point of view). Recently by a libertarian friend of mine who resides in North Carolina told me (paraphrased): "America is driven by opportunity, and at a base level it is every man for himself". I seriously doubt my friend and Mr. Obama would see 'eye to eye' on that, and I will be interested to see if Mr. Obama addresses what I refer to as the 'democratization of America'.

I suggest you listen carefully tonight to what Mr. Obama has to say, as he has four years to govern with no possibility of re-election - in an environment where the Republican Party will have less sway over Main Street Americans than it now has, and where Republican Party 'currency' given a broad 'we are on the side of capitalism, and don't believe in taxing the rich' stance is not likely to help it much in the 2016 or subsequent Presidential elections.

The foregoing should mean that President Obama, beginning tonight, ought to take strong positions based on a carefully conceived and practical economic strategy. Look for that. If it doesn't happen, watch as the American economic boat lists ever more to the left, at ever increasing risk of capsizing.

Ian R. Campbell, FCA, FCBV, is a recognized Canadian business valuation authority who shares his perspective about the economy, mining and the oil & gas industry on each trading day. Ian is also the founder of Stock Research Portal, which provides stock market data, analysis and research on over 1,600 Mining and Oil & Gas Companies listed on the Toronto and Venture Exchanges. Ian can be contacted at icampbell@srddi.com

© 2013 Copyright Ian R. Campbell - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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Catching a Falling Financial Knife