Glimmers of hope in Spain, which has adjusted its economy (cut labour costs) and is peering around the corner of recovery. Credit Suisse has sufficient confidence to upgrade its views on some of the banks.
They would now buy Caixabank and Popular, while Sabadell gets a reprieve from the sell list.
We see Spanish banks approaching a ‘turnaround’ in the earnings cycle after material progress in terms of funding, capital and Non Performing Asset recognition, and with superior operating leverage adding appeal to the story…
As a reminder, the big unknown about the US labour market is the extent to which the demographic-adjusted decline in the labour force participation rate has been caused by cyclical vs structural trends. And in addition to the decline in the unemployment rate, a few other economic indicators suggest the potential for a near-term increase in wages.
From a note by Paul Ashworth of Capital Economics: Read more
Here’s a rough sketch of the variables influencing US inflation, which has been remarkably low for two years running:
1) The remaining labour market slack, including a staggering and resilient long-term unemployment problem. The amount of slack remains tough to know given the difficulty of measuring the cyclical vs secular components of the fall in the labour force participation rate. Much more on this later.
2) The output gap. This isn’t a well-defined idea, we know, but few people would argue that the US economy is producing at potential. The US economic recovery does appear to have accelerated in the final two quarters of last year (the December jobs report notwithstanding), and the conditions for growth look better than they have in years. If the nascent acceleration proves sustainable, then the labour market may well tighten up and push wages higher. Obviously this is related to the first point about labour market slack, and plenty of caveats are needed given the head-fakes of the last four winters. Read more
Is it only going to get worse before it gets better?
Societe Generale think so: as the chart says, they’re expecting it to reach 30 per cent in 2015 (from an already-awful and record-breaking 27.2 per cent, at last count). Read more
Some stagnant stats out of Eurostat on Tuesday….
Euro area unemployment rate at 12.1%
EU27 at 10.9%
Here’s the damage, broken down… Read more
(Chart from El Pais with thanks… though please label the axes in the future. It drove us a little crazy.) Read more
From a note Wednesday morning by ConvergEx (emphasis ours): Read more
Hugh Small is an independent economic analyst and management consultant, who was formerly with US-based firms Arthur D. Little and A. T. Kearney. He blogs at mature economy.org, and has a running thesis that mature economies must be assessed differently to developing economies because they share very different strategic goals.
Furthermore, once you factor in the subtle differences that apply to developed economies, things like the UK productivity puzzle begin to look a little less mysterious. Read more
Just passing along this chart (click to enlarge) we came across on page 41 of the big ILO global employment report:
You know what doesn’t often conjure images of economic happiness? The 1970s, that’s what. And the argument coming from some quarters right now is that Europe, or at least its periphery, is heading back into such a period of stagnation and chronic inflation with unemployment leading the way. Read more
You really do wonder how long this trend can be allowed to continue. From Eurostat on Tuesday…
If increased proportions of older workers are squeezing out some of the younger would-be workers there could be a significant downside in the longer term — ironically, due to the ageing population. Read more
Not the kind of youth sacrifice once practiced by the Aztecs, the Inca, and the Carthaginians in order please distant, fickle gods if course. We’ve moved on a bit since then.
Then again, it’s still the younger generation that generally draws the short straw in a crisis… Read more
Today’s China flash PMIs have been a little challenging to unpick. Inventories are down and input and output prices are up — but order backlogs are down, and so is employment, which HSBC notes is contracting at a faster rate. So the mountains of inventory are shrinking and price deflation (against trend) is no longer happening… but employment is down? Read more
Greek unemployment hit a new record high of 25.1 per cent in July, having climbed for 35 straight months. It’s now more than double the eurozone average of 11.4 per cent and youth unemployment — between 15 and 24 years old — has hit 54.2 per cent. That’s scary and pretty hard to argue with but there is always a bit of context available.
A few notes on the report as we make our way through it:
– This sentence caught our eye: Read more
Eurozone unemployment depression is naturally even more divergent on a regional level. Data released by Eurostat reveals just how divergent and paints a fairly consistent, and depressing, picture. So we have Salzburg in Austria sitting pretty with only 2.5 per cent of its populations in the jobless category while Andalucia in Spain has to grapple with a rate of 30.4 per cent. The youth unemployment divide is even starker – 54.4 per cent in Andalucia, Spain versus 4.3 per cent in Tubingen, Germany.
Overall, eight of the ten regions with the highest levels of unemployment were in Spain, while Greece played host to one and France another. The youth unemployment stats share the pain a little more equally between the same three countries. Austria and Germany dominate the opposite columns. Read more
Increasing unemployment disproportionately affects the young. While policymakers have been pre-occupied with sovereign and financial crises, the generation with no actual experience of holding down a job just had to wait. For how long will this spectre haunt economies?
Using statistics from the European Union Labour Force Survey for January 2012 (but November 2011 for Greece), the UBS Global Macro Team gives us the following headline unemployment rates in a note released earlier this week: Read more
FT Alphaville has written a fair amount about seasonal distortions in economic data but thought this latest piece of research from Nomura was worth highlighting
(mostly because it involves time-travel).
It pokes a small but important hole in the surprisingly low 348k new US claims for unemployment insurance which were filed in the week ending 11 February, the fewest since March 2008. Read more
A chart via Nomura to keep in the back of your head as you eagerly anticipate this Friday’s BLS employment situation report in the US:
Unemployment figures have highlighted the widening gap between Germany and many fellow eurozone members, a day after Angela Merkel secured a new treaty enshrining Berlin’s vision for tough fiscal discipline, the FT reports. Unemployment in the 17 euro countries climbed to 10.4 per cent in December, with the November rate revised upwards to the same rate, setting a fresh record since the introduction of the single currency in 1999. So-called “peripheral” members such as Spain and Greece recorded the highest rates, of 22.9 per cent and 19.2 per cent. On the other side of the Atlantic, worries over the job market and higher petrol prices dragged US consumer confidence lower this month, while house prices across the country fell as foreclosures continued to forestall a recovery in residential property, reports the FT. Confidence unexpectedly declined in January to 61.1 from 64.8 in December, the Conference Board said on Tuesday, missing economists’ expectations of a rise to 68. The index is measured on a scale of 100 pegged to the level of confidence in 1985.
When you start talking about US growth in 2012, it’s hard to stop. The huge November consumer credit increase being a case in point. Plus a long slew of comfy data on auto sales, jobs…
So if you’re looking for a snappy corrective — here’s a précis of the opposite view, penned by Bob “the Bear” Janjuah of Nomura: Read more
The latest ADP numbers for private sector jobs in the US have demolished expectations: 325k jobs were created November-December against estimates that ranged from +145k to +225k.
With so much pessimism heading into 2012, we thought it would be prudent to discuss the possibility of positive surprises.
That’s the festive spirit of the economists at Bank of America Merrill Lynch, writing in a report released on Tuesday. Read more
The starkly contrasting economic trajectories of countries inside the eurozone were highlighted on Tuesday as Germany reported unemployment at 20-year lows while Spanish jobless figures rose for the fifth consecutive month, the FT reports. The number of Spanish jobseekers rose to 4.42m, while Germany’s jobless count fell to 2.976m. Another measure, based on household surveys, puts Spanish seasonally adjusted unemployment at 5.4m, nearly 23 per cent of the workforce. The comparable German figure decreased to 6.8 per cent in December from 6.9 per cent the prior month. The divergence of eurozone economies has been a source of tension since Europe’s sovereign debt crisis struck, with northern countries around Germany recording much stronger growth than their southern neighbours, whose less competitive economies have been further burdened by austerity measures to correct unsustainable fiscal policies.
Buoyed by the thrill of the new, investors tend to give growth-focused assets the benefit of the doubt at the start of a year. According to the FT’s Global Markets Overview, the beginning of 2012 looks to be following that trend. The FTSE All-World equity index is up 0.5 per cent, helped by a positive session in Asia, with commodities seeing buyers after global manufacturing activity dataover the past few days were generally a bit better than expected. The burgeoning risk appetite can be seen in a 0.4 per cent fall for the dollar index and a 1.4 per cent bounce for gold to $1,587 an ounce. European manufacturing figures still pointed to contraction in December, at 46.9, but at a slower pace than November’s 46.4. Activity improved most in Greece, though it remained at low levels, with improvements also seen in Italy, Spain and Germany. Data out on Tuesday, revealed that German unemployment fell more than forecast over the previous month, moving the jobless rate down to 6.8 per cent, and business confidence also increased. Bloomberg reports that exports of cars and machinery have boomed, while a mild winter helped jobs in construction.
Japan’s jobless rate rose more than expected in October, says Bloomberg, reaching 4.5 per cent in October compared to 4.1 per cent in September. Bloomberg’s survey of 29 economists’ came up with a median estimate of 4.2 per cent. Panasonic and TDK are cutting jobs as the yen’s continuing strength threatens erodes export profits, while the country continues to recover from the March earthquake and tsunami disasters. Bank of Japan Governor Masaaki Shirakawa on Monday indicated that 55,000bn yen of credit and asset-buying programmes will be expanded if necessary.
This simple graph, pulled from a presentation by economist John Haltiwanger, is a tidy illustration of what David Leonhardt means when he writes that the ongoing labour market ossification is a disturbing mix of both secular and cyclical trends. Read more
President Barack Obama’s $447bn jobs plan has failed its first test in Congress, after the Senate roundly rejected it in a first vote, says the FT. With 46 Republicans and two Democrats opposed to the bill, it fell well short of the 60 votes needed. The plan would cut payroll taxes and increase spending on infrastructure, paid for by a “millionaires’ tax”. Congressional rejection of the jobs bill might in fact be part of the White House’s plan, Politico says, with the defeat allowing the president to claim the high ground and blame Republican obstruction on jobs in the run-up to the 2012 elections.