When we reported on the 34th consecutive month of Greek unemployment increases, following the June number hitting a record high 24.4%, the only good news was that the May number had been revised higher from 23.1% to 23.5%, making the monthly jump seem just under 1%. Well, that revision was re-revised, with Greek Statistic Service ELSTAT reporting that the original 24.4% number has now been revised to 24.8%, meaning in June unemployment rose officially by 1.3%.That’s in one month! ELSTAT also reported the July number, and at 25.1% (pre-revision higher next month), it just hit a new all time high, increasing for the 35th month in a row. More than one quarter of those eligible for work in Greece (not many), are working. THis means labor related taxes are now being levied on a record low percentage of the population. Indicatively, Greek unemployment at the end of 2011 was “only” 21.2%. It also means that in order to restore even a tiny iota of confidence, the Greek labor department needs to hire a BLS consultant or two, or least license an old version of the ARIMA goalseek software, to find a seasonally adjusted decimal comma in there somewhere, and report that the jobless rate is really only 2.5%, which would be on par in credibility with everything else out of Europe these days. Finally, our question is at what point does anyone finally admit the Greek situation is not only a depression but outright economic death and the merciful thing to do at this point is to just pull the plug?
Economist Shayne Heffernan takes a look at Germany
Germany’s leading economic think-tanks are set to halve their growth forecast for next year to 1.0 percent, the business daily Handelsblatt reported in its online edition on Wednesday.
The four leading institutes — Ifo in Munich, IfW in Kiel, IW in Halle and RWI in Essen — are scheduled to publish their twice-yearly economic forecasts on Thursday, AFP reports.
Quoting sources familiar with the latest updated projections, Handelsblatt said the think-tanks have also pared back their 2012 forecast to 0.8 percent from 0.9 percent previously.
And they expect Europe’s top economy to expand by only 1.0 percent next year, instead of their earlier forecast of 2.0 percent.
German Institutes Say Downside Risks Prevail This Year And Next, Great Danger Germany Will Fall Into Recession
Greek July Unemployment At 25.1 Pct From Revised 24.8 Pct In June
With government bond markets increasingly manipulated directly via central-bank intervention – and becoming increasingly illiquid – the odd situation we find ourselves in once again is that CDS markets perhaps provide a ‘cleaner’ picture of where credit risk is actually being traded between market participants (hedgers or speculators). To wit, Bloomberg’s ever-insightful Michael McDonough has noticed a significant divergence between market-implied perceptions of risk (CDS) and ratings-agencies perceptions among several nations. Most notably France and Italy (with Belgium close behind) appear considerably ‘over-rated’. Italy’s implied rating is equivalent to BB+ at S&P – well below its average rating of BBB+ and France’s implied rating of A is around four notches below its composite rating. Spain also appears set for more pain as its market price implies a sub-investment grade rating is imminent.
Spain’s debt rating was cut to one level above junk by Standard & Poor’s, which cited mounting economic and political risks.
The country was lowered two levels to BBB- from BBB+, New York-based S&P said today in a statement. S&P assigned a negative outlook on the nation’s debt.
The downgrade comes after Spain announced a fifth austerity package in less than a year and published details of stress tests of its banks. Creditworthiness concerns have grown since the government requested as much as 100-billion euros (US$129-billion) in European Union aid to shore up its lenders and amid signals that the deficit target is in jeopardy.
“But do you know that every day there are people that are literally leaving their children at the doors of the Greek Orthodox Church, with notes around their necks saying, ‘We cannot afford to feed or look after these children, please take them from us.’ Can you imagine that?
This is taking place inside Europe. This is taking place inside a once great nation. The nation that invented democracy. We are on the edge of total social breakdown….
Christine Lagarde has called for decisive action from world leaders to end uncertainties in the global economy that are prolonging “terrifying and unacceptable” levels of unemployment.
Rounding on Europe and the US in particular, the managing director of the International Monetary Fund said this week’s annual meetings in Tokyo needed to be marked by “courageous action on behalf of our members”.
Speaking just days after the IMF slashed its global growth forecasts for both this year and next, Ms Lagarde said the economic weakness was not just a result of “tail risks” such as a eurozone break-up but “the degree of uncertainty in many corners of the world – whether it is Europe or America”.
“It is deterring investors from investing and creating jobs,” she said. “We need action to lift the veil of uncertainty.”
Cummins reduced their guidance this evening as they expect the weakening global economy to hurt their earnings. Of course, Cummins isn’t the first economically sensitive company to reduce their guidance. FedEx and Norfolk Southern have already offered their thoughts on the expected global slow-down. Here are the comments from today’s press release:
Cummins Inc. (CMI) today lowered its full year revenue and EBIT guidance for 2012 and also announced actions to respond to the weakening…
Since the breakdown out of the bear flag on the dollar index hasn’t followed through, the odds now favor that the dollar has generated an intermediate degree bottom. First off, this should be a counter-trend move, as I think the three-year cycle has already topped. Based on the intermediate cycle count in the stock market, the dollar probably doesn’t have more than 3-4 weeks before this rally rolls over and begins another leg down.
Generally, when an asset begins a bear market, it will retest the 200 day moving average once or twice before the trend change is complete. With that in mind, I think the dollar index will test and maybe marginally move above…
Greece may be better off leaving.
Oct. 11 (Bloomberg) – Goldman Sachs Group Inc. President and Chief Operating Officer Gary D. Cohn sees a “small” probability that the euro area will stick together, saying it’s more likely that some countries will exit to pursue growth.
“In federalism, you create a unified Europe, where the countries that are thriving because of the currency subsidize the countries that are contracting because of the currency,” Cohn said in an interview in Tokyo today. “I would put a relatively small probability of that happening.”
The European Central Bank program pledging unlimited support to debt-burdened nations if they sign up for economic reforms deals with the “pre-existing condition” but hasn’t addressed the lack of growth, Cohn said. ECB President Mario Draghi pledged to “do whatever it takes” to defend the euro as officials seek to stem the debt crisis.