U.S. Economy Forecast: Remainder 2011

The U.S. unemployment rate will be 9.1% or 9.2% for September 2011. Official Labor Department figures will be available on 10/7. This is effectively no change to the unemployment rate with around 17,000 private sector jobs added for September 2011.

Currently, I am pessimistic on the economy for the remainder of 2011. There is a reasonable risk that unemployment will rise to 10% by the end of the year.

In response the U.S. Federal Reserve, The Bank of England and the European Central Bank may coordinate a quantitative easing (QE) in an attempt to shock the economy. This would spur financial markets for approximately three months, the historic effectiveness of QE1 and QE2. Market sentiment eventually turns negative on inflationary risk and market uncertainty.

Corporate earning growth is going to be weak, so the stock market is not oversold. We are not at a stock market bottom yet.  Companies that cut production and services to protect the bottom line will drive further unemployment.

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These predictions underpin the astroturf, anti-capitalist strategic push behind Occupy Wall Street:

"Communism has never come to power in a country that was not disrupted by war or corruption, or both."

John Fitzgerald Kennedy.

For those who consider joining the Occupy Wall Street crowd, I remind you of the following:

"How do you tell a communist? Well, it's someone who reads Marx and Lenin. And how do you tell an anti-Communist? It's someone who understands Marx and Lenin."

"Capitalism and communism stand at opposite poles. Their essential difference is this: The communist, seeing the rich man and his fine home, says: 'No man should have so much.' The capitalist, seeing the same thing, says: 'All men should have so much.'"

"Most people who read "The Communist Manifesto" probably have no idea that it was written by a couple of young men who had never worked a day in their lives, and who nevertheless spoke boldly in the name of "the workers"."

Ronald Reagan

UPDATE 10/7/2011:

Since I normally do not make public economic predictions, lets look at how this played out in the news today:

While Businesses added a respectable 137,000 jobs, that number was bolstered by 45,000 Verizon (VZ, Fortune 500) strikers who returned to work last month. And that hiring was slightly offset by a loss of 34,000 public jobs, mostly at the local government level.

Meanwhile, the unemployment rate remained unchanged at 9.1%, in line with economists' forecasts.

The ECRI produces widely-followed leading indicators that predict when the economy is moving between recession and expansion -- and all those indicators are now pointing to a new economic downturn in the immediate future.