the US markets are down again today on the latest jobs data showing unemployment at 5% in the US
i had to do a double take and re read the headline number and yep there it was 5% again.
There was a time and when i say time, 3 years ago if anyone would have posted 5% unemployment we would have been doing handstands and saying how brilliant it was to deliver such low unemployment numbers.
5% unemployment is considered to be full employment in western economies and today we get a 5% number and the market goes into panic.
What did they expect?
The US has been putting interest rates up to curb the economy and by default inflation raging out of control.
Employment numbers are lagging indicators so as you raise interest rates and the economy slows as sure as night follows day,unemployment rises.
Increasing interest rates is a measure to prolong the good times and are conversely lowering interest rates is a measure to initiate or prolong good times.
Its a crude measure but effective and difficult to get timing exactly to deliver a soft as opposed to a hard landing.
In Australia we are still in the increasing rate phase which makes us cyclically out of sync with what is happening in the US.
We have unemployment under 4% and we are expanding our economy,the US economy is in the contracting phase.
Heaven help us if interest rates rise to 5% in Australia!!!!
The language by commentators today in all media is bordering on hysterical and they have hijacked the debate.
Its amazing how having it so good can be spoilt by constant bleatings of how bad things are by the media and of course of how good things are by the media.
