Jim Niedelman:
Time for another edition of 4 Your Money with David Nelson, CEO of NelsonCorp Wealth Management. Great to talk with you again David.
David Nelson:
Thank you. You as well, Jim.
Jim Niedelman:
We spoke last time about the ongoing concerns for large businesses in this current economic environment. How does this impact employees when it comes to some of the big unemployment numbers we’ve seen this year.
David Nelson:
Yeah. So if we look at the headlines unemployment… Basically we’ve had this rapid recovery. We’ve gone from 15% unemployment down to roughly 8%. I brought along a chart I think that will visually give people I think a better representation as far as what’s taking place today. This is, again, getting under the covers a little bit and looking at details that really do matter.
David Nelson:
The red line that we’re illustrating here is showing the unemployed classified as temporary, new terminology that came with this crisis that we find ourselves in. These are people that we basically moved to the back but we plan on bringing them back in. That’s the red line.
David Nelson:
Then the blue line is the unemployed that are defined as permanent. What we see in the far right is a pretty disturbing trend here that’s taking place. The number of permanents, in other words in blue, is rising quite rapidly, where the other, the red, the ones that are defined as temporary, are dropping pretty dramatically.
David Nelson:
This is certainly not what we want to see. This is basically saying we potentially got problems ahead. At the start of the crisis almost everybody was defined as temporary. Today we’re seeing more and more that are being defined as permanent.
Jim Niedelman:
And we see them actually practically intersecting now. So what are the implications here for the economy?
David Nelson:
I think the big takeaway is the reduced unemployment that we’ve seen is going to make it much more difficult to see significant increases in employment, not in unemployment, but employment. So that’s going to be much tougher.
David Nelson:
The number of unemployed and the number of those that are permanently laid off basically are going to draw on consumer spending, draw down on consumer spending, and I think everybody probably realizes that’s the main driver of the economy. We do not want to see that take place.
Jim Niedelman:
So the little translation here, what does this mean for the individual investor?
David Nelson:
I think the big thing, if we just look in terms of the investments that are likely to continue are the same trends that we discussed as far as in prior programs, and that is the big companies are probably going to do better, so you want to probably stay with the current trends.
David Nelson:
Now if we look in the history books, what we see in periods of time of crisis is that utilities and consumer staples were the safe bet. That’s where you want to go. Today it’s technology, seems to be the essential type offerings out there, so people want to stay with that, large versus small. And as we say numerous times here pay attention and remain flexible, because this is rapidly changing and people need to be adjusting portfolios accordingly.
Jim Niedelman:
David, good to be with you. Thanks for boiling it down for us.
David Nelson:
Thank you Jim.
Jim Niedelman:
If you missed any of this discussion we have that available for you on ourquadcities.com.