Global Unemployment: It’s Time To Act
Greg Michalowski | Aug 22, 2014 05:16AM ET
The economic data - with the exception of Canada CPI and Retail Sales to be released at 8:30 AM ET - have stepped aside (no economic data will be/was released in Europe or the Far East today).
The two largest central bankers in the world will take center stage at the invite only affair in Jackson Hole, Wyoming (yes Wyoming), where everyone has to pay the $1,000 a person fee and even pay for their own accommodations - the press is no exception. NO GATE CRASHERS ALLOWED.
Janet Yellen is up first - giving the opening remarks with the conference's theme being "Re-evaluating Labor Market Dynamics". Is it ironic - or by design - that the FOMC minutes released just two days ago showed a definitive shift toward an acceptance that the job "dynamics" were doing better than the Fed expected. They even stated that "job gains might bring a rate rise sooner". Well what do you know!
The glass is FINALLY more than 1/2 full. It is now time for the Chair to stand up, and tell us in her words how she feels Her speech starts at 10 AM ET.
Later at 2:30 PM ET, all the participants at the midday luncheon (2 hour time difference to ET) will get to hear what the leader of the ECB, Mario Draghi has to say about the "Employment Labor Dynamics" in the EU. The chart below shows the unemployment rates trends for the top 5 developed nations of the world.
The peak unemployment rate and date of the peak, the current unemployment rate and the change from the high rate are the following for each country:
- US: 10% Peak in October 2009. Current 6.2%. Change -3.8%
- UK: 8.5% Peak in December 2011. Current 6.4%. Change -2.0%
- Canada: 8.7% Peak in August 2009. Current 7%. Change -1.7%
- Japan: 5.5% Peak in July 2009. Current 3.7%. Change -1.8%
What Mr. Draghi can report today is:
- EU: Peak 12.0% in September 2013. Current 11.5%. Change -0.5%
Yikes!
Get The News You Want
I don't think Mr. Draghi will be using any PowerPoint slides showing the comparative improvement of the Eurozone's Employment picture during his speech. The other's in the audience might be whispering across the lunch table, "What's wrong with the Eurozone?"
Draghi will likely repeat the oft repeated lines that "Inflation expectations are firmly anchored" (I wonder if at 0.4% the inflation rate is firmly anchored or tied to a sinking anchor?). He will likely repeat that the the huge TLTRO program which was announce in June - but won't be initiated until September 18th (what's with the long delay anyway?) - will likely provide the stimulus that is needed to open up the lending spigots and also recapitalize banks. He might even explain how the ECB is looking to fast track other QE-like stimulus measures. By the way, none of those are guaranteed to be a success or implemented..
Meanwhile, the US has added on average of 174K jobs per month in 2011, 186K per month in 2012, 194K per month in 2013 and in 2014 are averaging an accelerated 230K jobs per month. What is wrong with the Eurozone and the ECB?.
Almost as puzzling, however, is that the EUR/USD remains near 1.3300 - just 38.2% down from the May 2014 peak (yes just 3 months ago we were pushing 1.4000).
Sure we are down 700 pips from the high, but In July 2012, the EUR/USD was at the 2 year low at 1.2041. The EU Unemployment rate was at 11.4% and going higher.. The US rate was at 8.2% and going lower.
Two years hence, the EU unemployment rate is 11.5% and the US rate is 6.2%.
The EUR/USD must surely be at 1.0500-1.1000. Nope. 1.3300. Really?
Thank goodness I trade with technicals, because things just don't make sense.
Maybe both central bankers today will come to their senses and tell it like it is - tell the truth about where things are. Yellen can admit that things are not so bad after all and smile about it - in fact they are getting progressively better, and Draghi can admit that the EU needs more stimulus, and that can include a lower EURO.After all, it is during times like these, where the currency rate adjustments are supposed to help to bring relative strong and weak countries back in line. Stay tuned.
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