Unemloyment Rate Rises: Oil Prices Drop
The news that the unemployment rate in the United States has jumped in recent months and will continue to rise had an ironically positive effect on the prices of oil: moments after the news about the unemployment rate was published, oil prices dropped to under $106 a barrel.
Unemployment was predicted to increase, but it did so by a bigger margin than most anticipated. The rate was 5.7% in July and expected to be 5.8% in August. Instead it spiked to 6.1%.
“There’s been a terrific amount of growing concern about the outlook for demand globally,” said John Kilduff, senior vice president of risk management at MF Global LLC. “Today’s employment report emboldened that concern.”
As a result oil prices dropped to $105 today.
However, analysts and politicians alike worry that prices may go up again soon, or at least not drop more because OPEC may decide to cut back production. If the oil producing countries indeed decide to do so, prices will logically go up again.
One of the main reasons prices went down after news about the unemployment rate hit the newswires is that investors expect Americans to cut down on their energy use to save money. The poorer people are, the less energy they use. It is a simple but correct assumption (which is probably why progressives come up with economic policies that cause tremendous economic misery in the long run).
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