Ignoring the misspelling of the word “labour” there is both sadness and irony contained in a report published over the weekend indicating the true depth and severity of the USA economic situation…
The percentage of working-age Californians with jobs has now fallen to a record low and employment in the State may not return to pre-recession levels until the second half of the decade, according to the research group Sacramento based California Budget Project. Just 55.4 percent of working-age Californians, defined as those 16 or older, had a job in July, down from 56.2 percent a year earlier and the lowest level since 1976.
Take a pause for breath and just consider the impact of that number; close on half of Californians of working age are economically inactive. If California was a country it would be the seventh largest economy on the planet, at certain points in recent history (1984-1985) it ranked as high as fifth. It’s still the fifth largest supplier of food and agriculture on the planet, and at 13.2bl gallons of ethanol produced in 2010 the USA relies on part of that food and agriculture industry to turn ‘food products’ into fuel to cater for their insatiable appetite for “gas” to ‘drive’ their economy.
After the desperately poor NFP figures released on Friday, zero jobs created in an economy that requires the creation of 250,000 per month to stand still, many commentators are now predicting a fresh slump in the USA – the “double dip”. Mathematical and statistically the recession may have ended but the reality was and is different.
September could mark the start of the new slump according to Julia Coronado, the chief economist for North America at BNP Paribas in New York. Julia predicts the USA economy will shrink at an annual two percent in the fourth quarter; “when there are no jobs and no income, there will not be a lot of spending either”. Simple logic that many other economists could embrace in their narrative. Economists at UniCredit Group also suggest that the U.S. is at risk of tipping into the first recession since the last one ‘ended’ in June 2009.
The handling of the Euro sovereign debt crisis has undoubtedly impacted on Germany’s Chancellor Merkel’s re-election campaign. The Social Democrats, the main opposition party nationally, took 35.7 percent to win yesterday’s election. Merkel’s Christian Democratic Union had 23.1 percent, its worst result since voting began in the state in 1990 after reunification that year between West Germany and East Germany. Her national coalition has been defeated or lost votes in all six German state elections this year as preventing a euro-region breakup, by putting more taxpayer money on the line for bailouts, is not sitting comfortably with an electorate worried over the economy and their savings. The anti capitalists, the Left party, polled over 16%. The Left (German: Die Linke), commonly referred to as the Left Party (German: Linkspartei), is a democratic socialist political party in Germany.
The infectious atmosphere of negativity over lapping from the disastrous NFP figures hit Asian markets hard overnight/early morning. The Hang Seng finished 2.95% down, the Nikkei down 1.86%, the Shanghai down 1.95%. The Dollar Index headed for its longest winning streak in eight months, German bunds have advanced driving 10-year yields to a record low.
The sea of red covering European markets has mirrored the sell off in mid August, the DAX once again being hit, currently 3.3% down. STOXX is currently down by a similar margin. France’s CAC index is off 3.5% and the FTSE off 2.2%. The daily SPX future is predicting an open of circa 1% down. Gold is up $15 an ounce, flirting once again with the $1900 figure. The sell off/correction of Gold mid August looking severely over cooked as the safe haven allure glistens once again. Brent crude is down by $126 a barrel.
The Swiss franc? Yep, you’ve guessed it, up as the safe haven currency as is the yen.