Forex Market Commentaries - Jobless Recovery is No Recovery

The Jobless Recovery is no Recovery

Sep 1 • Market Commentaries • 7068 Views • 2 Comments on The Jobless Recovery is no Recovery

With USA unemployment figures remaining stubbornly high it’s encouraging to see President Obama finally grasp the nettle by announcing it’s high on his priority list. As a governor from Arkansas once famously reminded the electorate, “it’s the economy stupid” and despite the fact Obama’s motives may include having one eye on his re-election campaign he no doubt realises the basic politics; the jobless will only vote for the party that stimulates job growth. The jobless rate in the Afro Caribbean community is over 26%, added to that the entrepreneurial spirit, championed in the USA appears to have faded…

From 2007-2009, as unemployment began to bite, many Americans chose the self employment path. Fuelled by optimism and the famed ‘can do’ attitude, with perhaps a small pay off from their previous job, this phenomena was heralded at the time as a potential saviour of jobs. If each new business could employ 2-3 workers then mass unemployment could be avoided. Sadly data has recently been published indicating that the rush to self employment has been a mass failure.

The recession that started in December 2007 initially resulted in more self employed business owners; the number of people who worked for themselves grew to 16.3 million in July 2008 from 15.7 million at the end of 2007, according to data from the Bureau of Labor Statistics. The total has since fallen 10 percent to 14.7 million in July. Circa 1.6 new businesses started since July 2008 have failed and there is no new wave of optimistic entrepreneurs on the horizon willing to pick up the baton.

Small companies in the USA employ about half the private-sector labor force, so it’s “very difficult for the jobless rate to improve when they’re not doing well, because they are a very big a part of the economy,” – Scott Shane, professor of entrepreneurial studies at Case Western Reserve University.

However, President Obama has stated that small companies can help spur expansion, he’ll address a joint session of Congress on Sept. 8 to unveil plans to promote job growth. These proposals will include making it “easier” for entrepreneurs to hire people.

The Eurozone jobless rate, with the exception of Germany is rising. In the UK the suspicion is that clever manipulation of data, for example refusing to allow 16 year olds to receive out of work benefits, has kept the numbers artificially low. The BRICS phenomena may also be faltering. Stocks of international companies, that depend on emerging markets for sales, currently indicate that developing nations won’t be strong enough to buoy the global economy.

Goldman Sachs’ gauge of U.S. companies with the most developing-nation revenue fell 15 percent since April, the biggest drop since the bull market began in 2009. For example, Avon Products Inc., which enjoys circa 74 percent of its operating profit from emerging markets, sank 15 percent in New York last month. Siemens AG, which doubled sales from the nations in five years, lost 21 percent in Frankfurt, the most since October 2008.


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The jobless recovery myth originated due to markets recovering and rising on the strength of; zirp, QE and the various bailouts, both secretive and open. If that ‘recovery’ is hollow then the foundations of any recovery were built on sand, therefore the jobless figures will keep on rising and may actually begin a marked re-acceleration. Similar to speculators and traders the President may have a ‘weather eye’ on the NFP figures due to be published tomorrow, his ‘jobs speech’ of yesterday could in fact be a pre cursor to the publication of very poor figures.

Stocks in Europe have ended a three-day rally, U.S. Daily futures have reversed initial gains and Treasuries have risen, perhaps in anticipation of data which may show American manufacturing shrank. Commodities have fallen and the Swiss franc has once again strengthened.

The SPX daily future is currently suggesting opening at 0.5% down, the ftse is currently 0.5% down. Brent crude is down $80 a barrel. Gold is down $5 an ounce. The Euro is down versus the dollar, the Swiss franc and yen. Sterling is down versus the dollar, the franc and yen.

UK manufacturing has slumped to a twenty four month low. The seasonally adjusted Markit/CIPS (Chartered Institute of Purchasing & Supply) UK Manufacturing Purchasing Managers’ Index (PMI) came in at 49 in August, down from 49.4 in July. A reading below 50 indicates a contraction in activity.

Other data published today includes the USA continuing and initial job claims, expectations are for 410k initial claims (a small fall) and an increase in continuing claims, up to 3,641,000. Labour costs and non farm productivity data is also published this afternoon, all data released at 13:30 gmt.

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