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Weak labor market affects US retail industries and home ownership

By Brian Anderson
Published: Wednesday, July 7th, 2010

1Following the report on the thousands of Census workers who will soon become unemployed after their contract expires, the effects of the weak labor market manifests in recent closing of the stock market. As unemployment rate goes up, the economic activity also surges. It may either go up or down depending on how industries are dealing with the money-saving tactics of the people.

If the workers are not sure whether they will be able to hold on to their jobs for long, the natural tendency is to save the money they have until they are sure that things will be fine and they will not be affected by the weaker economy. But this, saving more instead of spending on usual thing, is in fact the precursor to higher unemployment rates.

Analysts see the biggest effect on retail markets that deal with clothing lines and other things which people could scrimp on. Home improvement shops were also one of the major stores affected by this fear of spending among consumers. The most probable reason for this sudden drop of sales in home improvement store is the fact that more and more people are losing their homes. Since people know that they will soon get evicted from their current homes, they would not want to spend anymore on home improvement projects.

Other than mortgage delinquency, during economic turmoils, there are less grants of credit for home purchase. Most likely, the lenders will have to assess if the person can indeed pay regularly and not default on payment during the course of the payment contract. This is very important especially for lenders whose money are revolving around the investments made by lending it for an interest.

And lastly, the worst effect of the big unemployment figures in the US nowadays is that it is making people spend less on food, clothing, gadgets, and the like. More money is diverted on food and other basic necessities which leave all the other industries on the brink of suffering financial problems, too. This will then force the businessmen to cut back on production which has a direct bearing on their total profits for that period. More than anything, this will lower the value of their assets in the stock market. And falling stocks is a sure sign of an economy getting weaker.

The problem of unemployment sure expands to a lot of things. In order to prevent all worse scenarios from happening, the problem in unemployment must be addressed immediately.

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