Monday, August 8, 2011

Unemployment Duration At a Glance, and the Market Reacts to the S&P Downgrade

The latest update on the unemployment situation (explained in terms of average length of unemployment in weeks) has been posted on Business Insider on its 'Chart of the Day' page, with the added moniker of 'Scariest Job Chart Ever' (used here with the intrinsic meaning of '. . . up to this moment'):

(Again, click here to see a better visual; I have not yet mastered the technique of 'click on enlargement'.)

This is before today's events that react to the Standard & Poor's downgrade of US Treasury debt from AAA to AA+, placing the US behind such financial luminaries like Luxembourg and Liechtenstein.  At the closing bell moments ago, Dow Jones was down over 634 points (- 5.5%), and is now down 10.7% since the debt deal.  Trading was trending sharply downward throughout the day, but accelerated after Obama finally spoke in an abortive effort to calm the market.  After an expected rally about 30 minutes prior to close, it nosedived.

Gold closed at $1710 per ounce, and platinum closed under the price of gold for the first time since 2008, which can show a realisation on a global scale that the world economy is in a slowdown.  Perhaps more importantly, people are moving away from industrial metals.

For those who favour reality over emotion, it was a good day to hear of the downgrading of Fannie Mae and Freddie Mac, as the mismanagement of both did so much to start us down this path.

So, do you believe this chart will improve over the near-term?  Not bloody likely.  We would first need an outlook (call it a 'plan' for want of a better word, apparently archaic in this administration) that investors can see.  The administration is running out of options, and this is after its dearth of ideas other than spending massive amounts of money that it didn't have.

Update: Reuters reports agree:
"This massive move in the equity market does dim the economic outlook for the next six months," said Carl Riccadonna, senior U.S. economist at Deutsche Bank in New York. "We would put the recession odds at about 40 percent and about two weeks ago they were at about a 10 percent chance." . . .
Businesses stepped up hiring in July, adding 154,000 jobs after holding back in the prior two months, but declining equity prices could see them wanting to conserve cash.
"We had already been flying too close to the ground and clearly the risk of a crash is no longer negligible. I don't suggest that we will go into a double-dip, but I would no longer consider it a laughable scenario." [emphasis mine]

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