Fundamental Forex Research

EURO will down to 1.2040 ?!?

2013-05-05T00:13:00.003-07:00

As you can see, we are in the 2nd wave, EURUSD retracement will stop around 1.3250 and then continue riding the third wave to 1.2040. Long term trend is down and look like we are having a Head and Shoulder forming, we are on the right shoulder now.
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Target for EURUSD downtrend

2010-11-08T08:53:00.001-08:00

Target for the current EURUSD downtrend is 1.3855/1.3533/1.3210

Forex Market Daily Technical Levels

2010-10-06T04:49:00.000-07:00

MARKET NEWS: Daily Technical Levels

Wednesday, October 06, 2010 - 9:00 AM

EUR/USD intraday: further advance.

Pivot: 1.3785.
Our Preference: LONG positions @ 1.3795 with targets @ 1.3895 & 1.3955.
Alternative scenario: The downside penetration of 1.3785 will call for a slide towards 1.372 & 1.37.
Comment: the break above 1.3785 is a positive signal that has opened a path to 1.3895.

GBP/USD intraday: intraday support around 1.586

Pivot: 1.5860.
Our Preference: LONG positions @ 1.587 with 1.599 & 1.603 as next targets.
Alternative scenario: The downside penetration of 1.586 will call for a slide towards 1.58 & 1.578.
Comment: the RSI is supported by a bullish trend line.

USD/CHF intraday: the downside prevails.

Pivot: 0.9705
Our preference: Short positions below 0.9705 with targets @ 0.961 & 0.957 in extension.
Alternative scenario: Above 0.9705 look for further upside with 0.975 & 0.979 as targets.
Comment: the RSI is capped by a bearish trend line.

USD/JPY intraday: under pressure.

Pivot: 83.50.
Our Preference: SHORT positions below 83.5 with 82.95 & 82.75 in sight.
Alternative scenario: The upside penetration of 83.5 will call for a rebound towards 83.85 & 84.1.
Comment: the upward potential is likely to be limited by the resistance at 83.5.

GOLD (Spot) intraday: the bias remains bullish.

Pivot: 1330.00
Our Preference: LONG positions above 1330 with 1357 & 1368 as next targets.
Alternative scenario: The downside penetration of 1330 will call for a slide towards 1320 & 1312.
Comment: the price has broken above the upper boundary of its intraday bullish channel but caution, the RSI is posting a bearish divergence.
Trend: ST Bullish; MT Bullish

Crude Oil (Nov 10) intraday: the bias remains bullish.

Pivot: 81.50
Our Preference: LONG positions above 81.5 with 83.9 & 85 as next targets.
Alternative scenario: The downside breakout of 81.5 will open the way to 80.8 & 80.
Comment: the RSI is mixed to bullish.
Trend: ST Bullish; MT Range

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Euro Is Doomed , Off The Cliff To 1.2

2010-04-29T01:22:00.000-07:00

With the announced bail-out plan, the situation tension is somehow eased but actually the fund from the rescure package is just enough for short term plan, it does nothing to resolve many other longer term. The fact that Greece is sitting on debts that are expected to hit 290 billion euro this year and the cost of servicing future due debt is already too high (10-year bond yields rose to 8.56% lately, the most since 1998 and more than double the rate on comparable German debt) which Greece themselves admit it would not sustainable. They can’t expect from the income of their main industry tourism alone either.

There are 2 solutions for Greece :

- Pay the debt off ( Unlikely)
- Declare bankruptcy ( Probably )

The second option will likely happen, because the recure money from the package of EU and IMF is not sufficient , even if they increase it significantly , it still can’t help resolve the crisis while citizens from other EU countries don’t like their money to rescure other mistake either.
The longer this rescure plan continues, the more debt will be built up and the more dangerous the situation will get. On the other hand, with Greece’s default, the Euro currency will depreaciate much more and the big countries in EU like Germany, France, Italy will benefit and they prefer this scenario since they are major exporters and their product will become cheaper and more attractive.

Here’s How my Profitable projection system project the EUR/USD target automatically based on it's internal formula and market analysis.

This indicator shows the predicted move of the price in the near future (pink). This indicator doesn’t mirror the last move and reverse it like many others. But it really predicts the next move based on very complicated formula and market analysis. It’s better used with 1 Hour and 4 Hour chart. You can see how precisely it predicts EU drop lately compared with reality, somehow it know the crisis, lol.
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Expects Euro to Decline to 85 Pence

2010-01-23T08:29:00.000-08:00

BY: PAUL DAY :
Tthere is a very good correlation between UK yields and the direction of EURGBP which suggests a further shift higher in the UK yield curve should see the Pound outperform. As such, I continue to favour EURGBP to head lower, potentially to the 0.85 region over the next few weeks.

For the EURGBP trade, we continue to look at the good correlation between UK 10yr Gilt Yields and the GBPEUR rate. Since the collapse of Lehman, this correlation has worked very impressively, with a rise in Gilt Yields being coupled with an outperformance by Sterling. Over the turn of the year however, Gilts yields rose 50bps, with no corresponding bid to the pound. We look for this correlation to remain steady and expect EURGBP to drift potentially as low as 0.8450-0.8521 during the first quarter.

For the Euro, there has been little in the ECB decision to make us alter out early 2010 outlolok for the Euro. We retain our bearish outlook for the first part of the year and expect EURUSD to fall to 1.3750-1.39 during the first quarter and also continue to look for EURGBP to head lower.

BY: HOWARD FRIEND

The ECB press conference produced a big yawn, rates 'on hold' as expected and inflation and economic outlooks unchanged from December. Of note was his stressing that downside risks remain for consumption and investment, and that M3 and credit growth are "likely to remain weak" - hardly cause for panic for bond holders. No bombshells on the Greek situation, and Eurozone break-up not an option. We remain dovish on the Eurozone while credit growth remains subdued, and see further downside risks to the Euro going forward. Technically, we look for EUR/USD to decline towards the 1.3750 to 1.3900 region over coming weeks.

Dubai concerns eased, E/U trading strategy

2009-12-14T10:55:00.000-08:00

The news that Abu Dhabi would be assisting it's ailing neighbour to the tune of $10bn has seen a sharp reverse in Dubai shares overnight. Indices in the UAE are up between 7 and 18% at present.

Nakheel has stated it will be able the fulfill it's Sukuk obligations for 2009 in the next 14 days and Abu Dhabi have also stated they will provide assistance to local banks.

The kneejerk reaction has been for a small jump in equities in the Asian session with the likes of StanCHart - one of the more exposed global banks to the region, moving into positive territory for the session. Despite a small jump in carry trades on the news, the market in currency space has been unable to retain initial gains with USDJPY again drifting below the 89 level and GBPJPY now down 1 yen on the day.

The post-Dubai news rebound in EUR/USD has stalled at 1.4686. The move saw an expansion of the daily range of over 50% suggesting that significant impact has been seen due to the news setting up what I call a “Big News Day Trap” trade. If, after seeing such a move the origin of the news at 1.4622 trades again during the global session, all of the buyers on the news will be underwater and will most likely exit their long positions in stop-loss selling which typically lasts for 1-3 days. My strategy would be to place a sell stop at the 1.4622 news origin (good until the US ‘close’). If the short trade is triggered, I would then place an initial stop just above today’s high so far, looking to trail it as the trade (hopefully) moves into profit. Objectives will be set if the trade is triggered.

Update 15 Dec :

The 1.4622 news origin has now been breached triggering my SHORT trade. Stop-loss at 1.4687, exit the trade in 3 stages, first target at 1.4557. Updates to follow......EUR/USD 5-minute chart.

Update 16 Dec :
My Post-Dubai News Trap SHORT from 1.4622 has met my first objective at 1.4557. I have lowered my stop to entry price for a risk free trade. Next targets are at 1.4492 and 1.4427. Exit at 22.00 CET on Thursday if still in the trade. Good luck! EUR/USD 30-minute chart.

Thoughts on Dubai

2009-12-03T11:05:00.000-08:00

The fallout from the potential Dubai default continue to reverberate amongst the markets much as one would expect. For the country itself, CDS spreads have widened dramaticallyu with 5yr DPWORLD CDS being priced at 800-950 this morning - but bank shares have recovered a touch and the CDS is trading on the bid side.

Stocks generally remain under pressure and a flight to quality bid is helping both the US Dollar and the US treasury market. There remains the possibility the Abu Dhabi will step in and provide assistance - and if things get critical I expect this will occur. The market reaction again shows how easily people have jumped on the concensus trade and how vulnerable markets remain to aggressive counter-trend shakeouts.

The problems in Dubai have the potential to reemerge in many other regions of the world, with the eastern European corridor another potential trouble spot if the problems escalate.

As many people know I have not been a fan of the liquidity inspired rush to commodities/commodity currencies and much of that has to do with precisely these problems which I think will plague the markets for the next few years. The rise in Aussie and Kiwi dollars and the rise in many hard commodities has come about mainly due to artificial stimulus and not to sustainable long-term growth.

I think that by this time next year, hard commodities and the commodity currencies will be markedly lower than current levels, the US Dollar will be higher and both stocks and bond yileds will have drifted - the latter seeing significant curve flattening, even if some emergency front end rates have been taken back.

One thing to watch out for is the possibility of some Japanese intervention here. The breakdown in USDJPY has taken the yen relative to the Yuan to very elevated levels and as you know, I believe much of the rhetoric regarding the US Dollar weakening is actually directed at the Chinese and their very uncompetitive currency practices. Don't discount some unilateral Yen intervention if USDJPY heads significantly below 85.

Golden Collateral

2009-11-15T20:58:00.001-08:00

The Chicago Mercantile Exchange, or CME have just announced it will allow members to use Gold as collateral against futures and options positions traded on their exchange. I expect this has come about due to member demand and folows the birth of some hedge funds during the year that have started products based in Gold.
With concern over the long-term validity and stability of FIAT currencies and bonds priced in same, I would expect other exchanges to follow suit over the months ahead.

Central Banks - attention heads north

2009-11-08T15:03:00.000-08:00

In what is traditionally a busy week for data, we are a quarter of the way through the key central bank meetings that are forthcoming. After the RBA's decision to hike the Australian cash rate to 3.50% we now look towards this evening's FOMC decision ahead of both the Bank of England's MPC and ECB decisions tomorrow.

The rake hike from the RBA was well flagged, but disappointed a market set up for a potential 50bps and the subsequent noises from the RBA were much less hawkish is suggested by the Australian yield curve. This continues to weigh on the Aussie dollar in the short-term and, though further rises are expected during the period of rate normalisation, I remain concerned that the expected rate hikes won't be delivered as aggressively as the market believes. Whether this means we have already posted a medium-term high in AUDUSD remains to be seen and this will still be governed by the overall market risk appetite. In this instance it is interesting to see how stock markets have struggled over the last few sessions, though the key technical support from a DeMark aspect remains below here in the Dow at 9599. Until this level is broken, the risk trade remains on and pullbacks in the AUDUSD remains corrective rather than a change in trend.

For the FOMC tonight, there is an outside chance we will see alterations in the wording to suggest the end to easy policy will happen sooner rather than later. However, my view is such a change in the policy statement is very unlikely. The markets remain very edgy as was noticed when the cessation of parts of the under utilised TAF and TSLF policies was announced recently and I expect the FOMC members will view today as too early to attempt to rock the boat. I expect a very similar policy statement tonight to the last meeting which at the margin would be USD negative, but it will be worth focussing on the ability of the dollar to sustain recent gains should it suffer any post FOMC jitters. With the negative Dollar/Equity correlation remaining pretty much in place, the direction taken over the remainder of this week may wekk drive sentiment into the end of 2009. The key phrase to watch for regarding rates is 'exceptionally low for an extended period'.

The Bank of England remains caught between a rock and a hard place. Though there has been talk from certain MPC members of the end of the now spent QE program, the bare economic statistics suggest the market is right in looking for at least another £25bn expansion in this APF strategy. Credit passthrough remains minimal and I would actually err on a rise by £50bn, purely so they have enough leeway to keep the purchases ongoing until the next quarterly inflation report in February. Of all the meetings this looks to have the biggest binary risk in the currency space. GBP has been extremely volatile recently with money markets flying all over the place. Should QE not be expanded there is a risk that Sterling flies considerably higher - remember there are still some entrenched GBP shorts in the market even though the speculative shorts on the CMA have dropped from a all time high of 75,000 contracts to around 53,000 at the last report. Should my view of a £50bn QE extension be seen, sterling should remain under pressure on a braod basis. The UK remains the only G7 nation still in recession.

The ECB is likely to be the least interesting of the remaining meetings. I expect an unchanged policy decision. Of note would be any alterations to the wording regarding growth and lending. The former may be highlighted a little more favourably than the tentative comments from October but lending data remains unimpressive. Staff forecasts are not available until December, so the ECB meeting has, of the three, the lowest risk of casuing a significant market reaction.

Russian Banks

2009-11-03T11:55:00.001-08:00

Once again it is sounding like a broken record or the game ‘I can name that tune in ONE note’ as Russian banks are committing to funding costs so high they risk becoming unsustainable, a trend that constitutes a greater threat to the country’s financial industry than stalled credit flows, the central bank warned on Monday
Banks are offering returns higher than 15% to attract funding both in the form of wholesale financing and deposits as they try to offset inflation of 10.7% in September, albeit it was the lowest level in 2 years, and offer a premium above the central bank’s key refinancing rate of 9.5%, Bank Rossii First Deputy Chairman Gennady Melikyan said at a conference in Moscow today. “It would be very difficult to get the same returns after you raised money at rates of 18 to 20%,” Melikyan said. “This will be a problem for banks.”
As the market has witnessed for the past 6 months, lenders are struggling to remain profitable as they reduce loans to corporations and households on growing, and justifiable, concerns they will be unable to service their debt, cutting banks’ main income source to cover interest costs. The central bank has lowered its key rates eight times since April as policy makers try to avert an entrenched financial crisis that threatens to undermine the world’s biggest energy exporter’s fledgling recovery. Banks seeking to attract funding at these high rates are “potentially bankrupt,” Melikyan said. Some of the country’s top 30 banks offer returns ‘in excess’ of 17%, he added. Excluding short-term deposits, the average rate on deposits was 12.6% in September, central bank data show.
The central bank last week said it is reducing interest rates in part to stem RUB gains and prevent the accumulation of risk on the stock and currency markets as investor appetite for high yields starts to return. The RUB remains very attractive as a carry trade, but earning enough to cover the high financing costs is proving difficult for the banks, as the country’s biggest lenders post losses, or big declines in earnings. State-controlled OAO Sberbank’s 9-month net income plunged 91% from a year earlier to RUB 9.1 billion, the bank said on October 22nd. VTB Bank, also majority-owned by the government, posted a net loss of RUB 12.4 billion in Q2, compared with a profit a year earlier, the bank said on October 21st.
Lenders’ corporate loan books fell 0.7% from August after staying unchanged the previous month, the central bank said in a report on its Web site today. Consumer lending dropped 1.1% for an eighth consecutive monthly decline, and the financial industry’s total assets fell 0.5%, while total equity capital rose 6.5%. Last week Bank Rossii once again lowered its key interest rates to record lows, reducing the refinancing rate 50 bps to 9.5%, and said the move was aimed at “additionally stimulating lending activity of the banking sector.”
The ratio of non-performing consumer loans climbed to 6.4% from 6.2%, according to data posted on the central bank’s Web site. Household and business delinquent lending as a share of the total was unchanged in the month at 5.8%. Banks set aside RUB 1.82 trillion to cover overdue debt, an increase of 3.2%, compared with a month earlier. Overdue corporate loans fell to 5.6% of total lending in September from 5.7% a month earlier. The central bank estimates that bank provisions exceed bad debt by 70%, according to Melikyan. Provisions aren’t big enough to cover total bad debt, he added. Russian banks only book missed payments as non-performing loans, compared with international accounting standards, where the total loan is written off once debtors fail to make payments after 90 days.

US GDP - Clunkingly Good!

2009-11-03T11:49:00.001-08:00

So, there we have it. The Good Ol' US of A is out of recession. The first estimate of Q3 GDP saw a better than anticipated jump of 3.5% quarter on quarter. One of the main factors in the good outturn was the huge jump in Personal durable goods comsumption. This jumped from -5.6% in the second quarter to a mighty +22.3% in the third. One of the components of this sector is the purchase of new vehicles. This obviously raises a few points. Firstly, the Cash for Clunkers program 'worked' in that the boost to the auto sector of 660,000 new cars has had a positive effect on GDP growth. Secondly however, one wonders what ramifications this will have on future GDP numbers given it has brought such a large chunk of consumption forward and also lumbered the US consumer with more debt.

With the Obama administration running such a huge deficit the financing of future versions of the C4C program will become increasingly problematic. The continued retrenchment of the consumer sector, the continued failure of small US banks and the continuing restrictions in availability to small businesses will all weigh on GDP numbers heading into 2010. At a time when the Treasury buyback program has run out of funds the gradual creep higher in bond yields - US 10 years are up from 3.10 to 3.45 this month - may become a real concern over the next few months.

As noted in technical reports this week, stocks continue to hold in, and whilst the Dow holds 9599, the reent bounce in the USD remains corrective.

Out of Ammo

2009-11-03T11:41:00.001-08:00

Worth bearing in mind that the QE arsenal of both the FED and the Bank of England has run dry. Today will see all $300bn of funds in the US Treasury buyback program exhausted just as yesterday saw the Bank of England hit it's cap of £175bn for its own Asset Purchase Facility. Much of the gyrations in Sterling in the currency market has been dominated by whether the BOE will need to again expand the APF program. Certain rhetoric from MPC members have been suggestive that they will not look for an expansion, whilst the initial Q3 GDP numbers showed all remains not well with UK Plc. UK 10yr yields spiked 42 basis points in the 2 weeks that followed the suggestion that the program has run its course but have since drifted back from 3.78 to 3.60. With currency direction still tied closely to respective intrest rates, the key focus for sterling traders is now on next Friday's MPC meeting. Around two thirds of analysts polled by the Times expect QE to be continued by between £25bn and £50bn. If the latter were to occur, I would be very concerned as to the pound's ability to hold onto the gains it has eeked out on a broad basis since early October.

Canada holdd steady as strong Loonie bites

2009-11-02T16:36:00.000-08:00

The Bank of Canada left it's target overnight rate on hold at a record 0.25% today with a small downgrade for growth borne out of the persistent strength for the Canadian Dollar against it's more southerly neighbour the greenback.

They shifted out expectations of inflation returning to their 2% target to the 3rd quarter of 2011 and pulled 2009 growth expectations down a tenth of a percentage point to -2.4%. Though an economic recovery is 'underway' (they continue to expect at +3% GDP result for 2010) the recent strength of the Canadian dollar is expected to largely offset any positive signs that have been seen over recent months.

They remain committed to keeping rates on hold until June 2010 - the next meeting is in early December - but it is intersting to see the divergence between Canada and the other members of the Dollar Bloc in removing rates to more normalised levels.

Though all three have been helped by the commodity rebound, it is clear that Canada, who are much more reliant on the US than are Australia or New Zealand, is counting the cost of the post-Lehman Brothers shift in trade away from an impotent US consumer to a liquidity fuelled Chinese economy. Whilst Australia seems increasingly worried about letting the inflationary genie out of the bottle, Canada remains stuck in the mire. I continue to have doubts over whether the current Chinese support for the antipodean economies continues, but for the timebeing, being aligned with the new superpower seems better for one's health than being paired by the old guard.

China wants a strong Dollar

2009-10-29T01:14:00.000-07:00

Market News Services are reporting that a Chinese official has raised concerns about the current path of the US Dollar. With the dollar and Yuan been effectively fixed since the middle of last year around the 6.83 mark, the unnamed official with links to SAFE suggested the Chinese wanted a stronger dollar from here to help curtail heavy losses on existing USD demoniated reserve holdings and to nip in the bud potential inflation of even stagflation going forward.

The demise of the dollar and, with it, the cheapening of Chinese exports relative to many of it's trading partners risks putting us back exactly whence we came with widening and potentially unsustainable trade balances.

If the unnamed official's views are shared by SAFE, it will be interesting to see what action they could possibly take in the market - especially with around 66% of their reserve holdings being USD denominated already. The SDR basket lets not forget has a 44% USD weighting, so a long-term strategy to buy the dollar looks very unlikely. However a short-term shot across the bows can't be ruled out. With the likes of NZDUSD having rallied 53% since March and 21% over the past 3 months alone, any decision by China to attempt to support the dollar could engender a violent reverse of USD shorts. From a DeMark perspective, there are many weekly counts that have completed recently that make me extremely wary of the short dollar trade at present.

Bill Hubard - Chief Market Economist

2009-10-27T13:43:00.001-07:00

Bill has over 35 years experience in trading and broking working with Tier One houses before becoming the resident bond market and economic commentator for Bloomberg TV. He then moved to CNBC to fulfill a similar function, bringing his charismatic style to bond and and economic commentary. His contribution through his network of Tier One Banks and institutions helps us create abreast of the major economic and monetary thinking in the top end professional market place whilst placing insightful views to what is really occurring. He writes economic and fundamential articles for various newspaper and magazines on behalf of MIG Investment, and plays an important consulting role for the creation and development of new research products.

MIG Forex Research Disclaimer

2009-10-27T13:14:00.000-07:00

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About Paul Day - Chief Market Analyst

2009-10-27T12:27:00.000-07:00

Paul brings to MIG 14 years of financial markets experience gained in the City of London. He spent 12 years at HSBC, and also managed the HSBC Futures Research. Subsequently, he moved to the Strategic Trading division, working as a proprietary trader, covering FX markets, fixed income futures and commodities. Paul has since enjoyed spells at both Tullett Prebon - one of the world's largest Inter-Dealer Brokers - and VTB Europe plc - a European subsidiary of the second largest bank in Russia - in both a trading and an analytical capacity. Paul's specializes in Technical Analysts. He uses proprietary indicators to maintain positions in trending markets, whilst seeking out markets that are susceptible to sharpe trend-reversals before they occurs.

Nonfarm payrolls-A Deep Hole,Steep Slope

2009-10-27T12:04:00.000-07:00

Make no mistake about it the September report on the unemployment situation indicates that the labour market is in horrible shape. Sure, it can be pointed out that the decline in payrolls the last 3 months have not been as bad as the results from the end of last year and earlier this year but the direction is unchanged and the hole that has been dug is deep and getting deeper. Although there is some comfort found in the idea that the unemployment rate is a lagging indicator for the economy as a whole there is good reason to believe that the coincident effect of the troubled labor market will be a weight on economic growth for years to come.

The labour market has fallen a looooong way since this recession began and I think that is the important point, especially when the details of the of the jobs report suggest that the slope remains so slippery. Non-farm payrolls fell another 263,000 in September; this measure of employment has now fallen for 21 months in a row. The most recent 3 month total is a decline of 768,000 jobs. While this is considerably smaller than any other 3 month run since last October, it is the biggest job drop for any Q3 since 1945. But on a relative basis smaller numbers of people losing their job is better than larger numbers getting 'laid off' and on this basis there is reason to believe that the recent months will soon look even better in comparison to what came before, but for all the wrong reasons. The Labor Department’s preliminary look at the Benchmark Revision for the period from April 2008 through March 2009 indicates that job losses were underestimated by 824,000, in other words they expect to make a downward revision of 0.06% early next year on the payrolls for that time frame, or, according to BLS Commissioner Keith Hall, an amount that is triple “the historical average for the benchmark revision over the prior ten years,” which “has been plus or minus two tenths of one percent.”

“How did the government get it so wrong?” asked Floyd Norris in the New York Times this weekend. “The official job numbers are based on a monthly survey of employers, augmented by the ‘birth-death model’, which factors in jobs assumed to have been created by employers who are too new to have been included in the survey, and subtracts jobs from employers assumed to have failed and therefore not responded to the latest survey.,” wrote Norris. This mathematical model has consistently added payroll jobs to the Not Seasonally Adjusted total throughout the recession, assuming more jobs were added through newly opened businesses than were being subtracted by businesses that were newly shuttered. This even as another BLS report, the Business Employment Dynamics, showed that the net change in the number of establishments fell for an unprecedented 4 quarters in a row during 2008, a net of 126,000 businesses closed last year. The Times article noted, “Victoria Battista, an economist at the Bureau of Labor Statistics, said the bureau was looking at whether that model needed to be changed as well as at other possible issues, such as changing response rates to the questionnaire sent out to employers each month.” If changes are made to the birth-death model, for instance making it responsive to the ebb and flow of the economy, something the calculation has completely rejected up to now, it could cut into the most consistently additive piece of the payroll report.

In any case, if the benchmark revision estimate is accurate it likely means that the total non-farm payrolls will register a net decline for the decade ending December 2009. The worst previous result for any decade since the 1940s was a payroll gain of almost 17%!!! Another aspect of employment already finds itself in a comparable hole. The Household Survey of the jobs report measures the number of Full Time Employees. This category fell 814,000 in September, it is now down more than 10m since the recession began and at 111.45m is at a level last seen in November 1999. The unemployment rate for Full Time Employees rose to 10.7% last month, up from 4.8% at the onset of the recession. In the last 12 months the number of full time employees has fallen 6.9%; this statistic has been tracked since 1969, the worst previous 12 month decline was 3.2% in 1975. The loss of 'full timers' has been partially offset by several million workers who are part timers because that is the only work they could find, but because of this tradeoff, the Aggregate Hours Index is down by a record 8.6% from the peak and the average work week is at a record low of 33.0 hours; both of these trends pressure overall wages down. Additionally, the alternate measure of the unemployment rate, which includes the workers who are part time for economic reasons and the discouraged jobless who are not longer looking for work, has reached 17%, a record spread above the official jobless rate of 9.8%.

While it is true that the rate of firing has eased there continues to be no indication that the rate of hiring is ready to rise. The average duration of unemployment is now a record at 26.2 weeks, a fraction longer than is the traditional duration for state unemployment benefits; this never got higher than twenty one percent in the early 1980s when the jobless rate peaked at 10.8%. That helps explain why more than 52% of claimants, on average over the last year, exhausted their benefits without ever finding work; never before had this statistic even been as high as 44%.

I could goooooooooooo on, but you get the idea; the labour market is in a hole that is deep and the downward slope has been steep. The problem with the road out is that household debt now amounts to about 125% of after tax income. Back in the early 80s, the last time the jobless rate was as high or higher than the current level, the ratio of debt to income was only about 50% of what it is now. The saving rate for US households back then averaged more than 10%, today it is 'just' 3.0%. There is good reason to believe that de-leveraging by the US consumer is ongoing; a process that could continue for several years, not an event that will occur and be done with in short order. The poor state of the labour market only reinforces the general need and desire to delever. I find it difficult to imagine how the labour market achieves an escape velocity sufficient to break this orbit any time soon.

Contact me

2009-02-07T07:28:00.000-08:00

I am owning this blog http://migresearch.blogspot.com/ and this one http://migbank.blogspot.com/
Please feel free to contact me about any problem or questions you may have.
Contact me : stphnlam906 [at] gmail [dot] com