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December 5, 2008 Banknotes in Bottles?Despite a steady stream of bad news on both the macro- and microeconomic levels this week, the markets held up reasonably well compared to past performances. We even managed to pull out a mid-day rally today despite a much worse than expected jobs report. The Dow Jones Industrial average lost 1.9 percent for the week, the S&P 500 gave up 2 percent, and the Nasdaq Composite declined 1.7 percent. November’s jobs report was the worst in recent memory, with the US economy shedding some 533,000 jobs in the month, marking the 11th consecutive month of losses. That’s the fastest pace of job loses in 34 years and pushes the current unemployment rate up to 6.7 percent. So far this year 1.9 million workers have lost their jobs and a total 10.3 million Americans are unemployed. Perhaps the most worrisome aspect of the report, aside from the total losses, was the fact that they’re longer concentrated in the few industries most affected by the current crisis. In fact, on a year-over-year basis, only a third of the 15 industries tracked in the report are showing positive growth: natural resources and mining, education and health services, utilities, government and the catch-all “other services.” And with the continued softening of energy commodity prices, we could begin to see losses in the natural resources sector soon. Amidst the losers, the service sector was the hardest hit in November, dropping 370,000 jobs. We’re not likely to see a staff up in that sector going into the holidays as we normally do, meaning employment data will probably remain grim through the end of the year. Although it’s probably not going to come as a shock, the weak employment data coupled with a declining service sector and falling durable goods orders doesn’t bode well for fourth quarter GDP. Given the data, we’ll probably see a contraction of at least 1 percent. Investors Find Safety In Canadian Trusts Not only that, they’re getting juicy dividends as high as 21.8%. The Canadian economy is doing well, compared to our local markets. This is because of the high demand for energy resources. This demand has produced returns as high as 256% so far in 2008! Get the details of how you can bulletproof your portfolio against the bloodbath on Wall Street.
This could be a feather in the cap for The Big Three automakers though; surging unemployment will leave legislators with little stomach to deny their bailout, for better or worse. It would hardly be politically expedient to add to unemployment rolls now. And the automakers are going to need it, with US sales falling 37 percent last month. The employment news helped push Treasury yields to record lows this morning, with yields on the two-, 10-, and 30-year securities falling to the lowest levels since regular sales of the debt began. |
| Friday Market Wrapup is a weekly e-zine written by Ben Shepherd and published by KCI Communications, Inc. Mr. Shepherd is research editor for Personal Finance.
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Friday Market Wrapup - December 5, 2008: Banknotes in Bottles?
