Fertiliser one month, herbicide the next. Sorry about the continuing gardening metaphors, but the Americans started it with their talk about “green shoots” of economic recovery.
May’s sharp fall in jobless numbers added to the greenness of the ‘recovery’ (or less bad) thesis but overnight, June’s unemployment figures were so awful that they could have stunted that growth.
Instead of the 350,000 to 360,000 job losses forecast by the market, the actual figure was a gut-crunching 467,000, with the unemployment rate edging up to 9.5% (that’s slightly up from the 9.4% rate of May and the highest since 1983.)
Since the recession began, in December 2007, 6.5 million jobs have been lost.
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Markets tanked by between 2% and 3% in Europe and the US, currencies fell as the US dollar rose and commodities lost ground, led by oil.
The figures seemingly confirmed the feeling gnawing at the confidence of markets: that the rebound since March was overdone and things were not that good. In some respects it’s a mirror of the rebound a year ago as markets settled after the rescue of Bear Stearns. We know that ended in tears as the financial system shuddered in August to October and came close to collapse.
The stimulus from the US Government is still working its way through the economy and demand has been supported mostly by the Fed’s rate cuts (last year’s smaller stimulus) and the trillions of dollars handed out to banks and other financial groups. Without that spending and support, the US economy would still be in freefall today and in Australia, we’d be falling in its wake.
The Financial Times wondered this week why, 19 months into the recession in the US, there were no genuine signs of the economy recovering, no stats showing unambiguously that things were on the improve.
That was about Wednesday’s survey of US manufacturing conditions which showed a small rise in June, of 45, despite such levels remaining consistent with a shrinking economy.
“But a peek beneath the headlines reveals that manufacturers are far from cosy,” Lex observed
And the accuracy of that observation was confirmed not only by the US figures, but by the latest unemployment figures for Europe where the rate is now at a 10-year high for the 16 nation eurozone.
In the US, nothing is getting better. Even if unemployment is a lagging indicator, such a sharp rise of 140,000 or more (depending on your forecast) in June from May’s lowered figure, was a shock.
The US Labor Department said job losses were widespread across the major industry sectors, with large declines in manufacturing, professional and business services, and construction.
Then there was the sting in the tail of the report for retailers and alike: the wages of US workers are stagnating. Average hourly earnings were flat at $US18.53 in June, (earnings are up 2.7% in the past year to June after being up 3.1% in the year to May). Average weekly earnings have risen by only 0.9%, reflecting a decline in the average workweek in the US in that time.
The average workweek fell six minutes to 33.0 hours, the lowest ever recorded in the series which started in 1964.
There was some good news in the US yesterday; new orders for manufactured goods to US factories rose by 1.2% in May, far better than the 0.8% forecast from the market. Non-durable goods orders (plastic, wood paper and packaging etc) rose 0.8%, which was the best for months. Leaving out plane orders, overall factory orders rose 0.8%, the best performance since June 2008.
However inventories held by manufacturers are still falling. And the jobs figures squelched any optimism.