FN: The goal seems to be the magical 1 000 area. Some of the numbers floating around out there are 1 050 and 1 150. That would put the dumb money... err the retail crowd, all in again. Institutional dumb money, like most mutual funds and pension funds, will be fully invested at that point as well. Obviously the shorts will be long gone, having fueled much of this rise. Then what?
To put things into context, 1 575 was the absolute high achieved during the greatest simultaneous credit and asset price bubbles in history.
Things to consider are the rising unemployment rate for example. The drop in continuing claims last week were because individuals ran out of even the extended benefits. They are now completely cut off.
In Canada, the government has been busy proclaiming the end of the recession... even as the employment situation continues to deteriorate.
Just to be clear, employment may be a lagging indicator during normal economic cycles. This occurs because consumers continue to spend even as some jobs are lost or bonuses reduced. They often go into debt to maintain themselves in their accustomed style during slowdowns. However, when job losses are severe enough, as they most definitely are now, the loss in purchasing power to the economy is so great that employment becomes a coincident and even a leading indicator. Simply put, people can't spend until they have a job and they won't spend once they have that job until they have dug themselves back out of some serious holes.
I explained in detail, using a simple economic model how this would work in the post Watch the Divergence Between Earnings and Revenues.
Straight from Statistics Canada:
(Released July 30, 2009)
Payroll Employment, Earnings and Hours: "Total non-farm payroll employment fell by 64,000 in May, down 0.4% from April, bringing total losses to 423,900 since the peak in October 2008. The proportion of industries experiencing job losses edged down in May to 63%.
These data come from the Survey of Employment, Payrolls and Hours (SEPH). SEPH is a business survey that provides a detailed portrait of employees from an industry perspective, complementing information on total employment from the Labour Force Survey (LFS), which is a survey from a household perspective.
In May, 192 of the 305 (63%) industries covered by the survey experienced declines. During this current economic downturn, the highest proportion of industries shedding jobs was in January, at 75%.
Payroll employment fell in both the goods and service sectors in May, with the largest declines in motor vehicle manufacturing; elementary and secondary education; motor vehicle parts manufacturing; and full-service restaurants."
(Released July 28, 2009)
Employment Insurance: " In May, 778,700 people received regular Employment Insurance (EI) benefits, up 65,600, or 9.2%, from a month earlier, with Alberta and Ontario showing the fastest rates of increase. This rise followed an increase of 3.7% in April.
The number of people receiving regular benefits in May was the highest since comparable data became available in 1997.
Following two months of small declines, the number of initial and renewal claims received in May increased 5.2% to 332,800, the highest number of claims since 1997."
To put things into context, 1 575 was the absolute high achieved during the greatest simultaneous credit and asset price bubbles in history.
Things to consider are the rising unemployment rate for example. The drop in continuing claims last week were because individuals ran out of even the extended benefits. They are now completely cut off.
In Canada, the government has been busy proclaiming the end of the recession... even as the employment situation continues to deteriorate.
Just to be clear, employment may be a lagging indicator during normal economic cycles. This occurs because consumers continue to spend even as some jobs are lost or bonuses reduced. They often go into debt to maintain themselves in their accustomed style during slowdowns. However, when job losses are severe enough, as they most definitely are now, the loss in purchasing power to the economy is so great that employment becomes a coincident and even a leading indicator. Simply put, people can't spend until they have a job and they won't spend once they have that job until they have dug themselves back out of some serious holes.
I explained in detail, using a simple economic model how this would work in the post Watch the Divergence Between Earnings and Revenues.
Straight from Statistics Canada:
(Released July 30, 2009)
Payroll Employment, Earnings and Hours: "Total non-farm payroll employment fell by 64,000 in May, down 0.4% from April, bringing total losses to 423,900 since the peak in October 2008. The proportion of industries experiencing job losses edged down in May to 63%.
These data come from the Survey of Employment, Payrolls and Hours (SEPH). SEPH is a business survey that provides a detailed portrait of employees from an industry perspective, complementing information on total employment from the Labour Force Survey (LFS), which is a survey from a household perspective.
In May, 192 of the 305 (63%) industries covered by the survey experienced declines. During this current economic downturn, the highest proportion of industries shedding jobs was in January, at 75%.
Payroll employment fell in both the goods and service sectors in May, with the largest declines in motor vehicle manufacturing; elementary and secondary education; motor vehicle parts manufacturing; and full-service restaurants."
(Released July 28, 2009)
Employment Insurance: " In May, 778,700 people received regular Employment Insurance (EI) benefits, up 65,600, or 9.2%, from a month earlier, with Alberta and Ontario showing the fastest rates of increase. This rise followed an increase of 3.7% in April.
The number of people receiving regular benefits in May was the highest since comparable data became available in 1997.
Following two months of small declines, the number of initial and renewal claims received in May increased 5.2% to 332,800, the highest number of claims since 1997."
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