Issue: 269
Sent: 28-06-2011 15:19:04
In this issue:

US Unemployment RevisitedA How To Book Of Self Managed Super FundsA short break
Return to full article list
HomeFree weekly newsletterSelf Managed Super Fund ArticlesContact usLogin AllThingsConsidered.biz

US Unemployment Revisited

Click here to buy - A How To Book of SMSF's by Tony Negline
John Robertson

A disappointing recovery in US employment is taking its toll on expectations about overall global growth rates and US equity markets with consequences for a range of other international markets.

Over the year to May 2011, US non farm employment has grown a meagre 0.7%, the slowest recovery in any cycle since the second world war, with unemployment at 9.1%. Over the past month, weekly initial unemployment claims returned to levels that have usually characterised a recession.

Progress on the US unemployment front is important for several reasons.

In grappling with their employment situation, US consumers are also reluctantly having to come to terms with a change in the global economic pecking order. The emergence of China and the apparent strength of other developing economies in Asia and South America are all depressing features of the world economy for Americans seemingly mired in endlessly high unemployment. This is aggravating their lack of confidence about the prospects for recovery.

The ATC email on 9 November 2010 highlighted the parallels between the current US predicament and the time it took for unemployment to fall in the early 1990s in Australia after a severe financial crisis and recession.

The tone of that note was intended to be optimistic suggesting that Australians, too, had once despaired about how long it was taking to see a meaningful reduction in unemployment but it eventually came.

Seven months on, it is worthwhile revisiting the progress that is being made against this Australian benchmark especially with equity markets becoming ever more depressed about the prospects for US company earnings as labour market conditions fail to show more substantial improvement.

The chart is an updated version of the one from the November email. It brings together Australia's late 1980s unemployment experience with the current US situation. The two series have been aligned so that the low point in Australia's unemployment in November 1989 coincides on the chart with the low point in US unemployment in May 2007. For each series, the chart also shows the previous 24 months of unemployment history.

In Australia's case, 36 months passed before unemployment eventually peaked. For the US, the peak occurred 29 months after the trough in unemployment was passed.

In November, we observed that the US unemployment rate had been moving lower at a slightly faster pace than the experience in Australia but that the Australian experience also suggested another seven or eight months without any substantial change in the US unemployment rate.

If this comparison is valid, we are closer to the point of a more rapid drop in US unemployment. Despite the current pessimism, the Australian experience highlights how quickly this can happen. Duplication would provide an unanticipated fillip to US and global markets.


Share this article
Click to share this article on Facebook Click to share this article on Twitter

Previous article         Next article

 
If you liked this article and would like more by email, subscribe! It's free.

[Bold fields are required]

Your details

Your alternate email address is used only if messages to your primary email address are returned to us.

Industry

Do you work in the financial services industry?

This email is general in nature only and does not constitute or convey specific or professional advice. Legislation changes may occur quickly. Formal advice should be sought before acting in any of the areas discussed. Be aware that the information in these articles may become innaccurate with time. Responsibility is disclaimed for any inaccuracies, errors or omissions. Particular investments are neither invited nor recommended and hence this publication is not "financial product advice" as defined in Section 766B of the above legislation. All expressions of opinion by contributors are published on the basis that they are not to be regarded as expressing the official opinion of any other person or entity unless expressly stated. No responsibility for the accuracy of the opinions or information contained in the contributor's articles is accepted by any other person or entity. Copyright: This publication is copyright. If you wish to reproduce this article you require a license, which can be purchased here, to do so.

 
 
Site design by Raycon