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Two-party system not good for Singapore, says Lee Kuan Yew
Ong Dai Lin
Speaking at a forum during the 7th anniversary celebrations of the Lee Kuan Yew School of Public Policy yesterday, Mr Lee felt a two–party system will not be good for Singapore.
Mr Lee, who was Prime Minister for more than three decades, said that he had “simpler problems” to tackle when he was in charge of the Government. “We are in the First World and many highly-educated people believe we must have more competition, more pressure on the government,” he said.
“A generation that grows up in a period of affluence believes that we have arrived and as the saying goes the ‘First World Parliament’ must have a ‘First World Opposition’.
“So the restlessness, whether that leads to better governance, I am not able to say.
Mr Lee addressed a broad range of topics during yesterday’s 50-minute long dialogue.
They included how the European debt crisis would evolve to addressing widening income gaps. He said Singapore has no plans to buy bonds from European countries facing a debt crisis, and felt Europe’s monetary union will eventually break apart into two or three separate tiers because of economic differences among the member states.
EURO wIll be deAd ? ? ? ?
The US dollar rose as high as S$1.2517, its highest level since May 25, from S$1.2404 late in New York. The rise tracked a stronger dollar against other
Asian currencies yesterday.
European countries are facing sovereign debt problems.
We’ve said countless times that China is willing o give a helping hand and we’ll continue to invest there.
Chinese Premier Wen Jiabao
DBS-OC BC merger?
No Thanks
Once again the possibility of DBS Bank and Oversea-Chinese Banking Corporation merging is being raised — this time by Nomura Equity Research. While certain quarters in Government and at Temasek Holdings may welcome the possible move, a merger of the two will certainly be met with dismay by the business community.
Conrad Raj is Conrad Raj
conrad@mediacorp.com.sg
Nomura’s speculation comes a year after former Minister Mentor Lee Kuan Yew called for a consolidation of the local banking sector. Mr Lee felt that the three local banks had to combine to expand meaningfully within and outside of Singapore.
“I would have preferred personally that there be only two banks, because I don’t think Singapore is big enough for three banks,” he told 600 bankers gathered for the 37th annual Association of Banks in Singapore (ABS) dinner on June 25 last year.
Mr Lee further noted: “You can’t go abroad in a big way because there’s a limit to what you can do in the Singapore market and you need a big solid bank with the capabilities and the capital to debt ratios to go abroad.”
Like Mr Lee, the advocates of merger almost invariably cite size as the main reason for such a move.
As Nomura put it: “A merged banking group would rank well within the top 30 banks globally by market capitalisation and provide a distinct, wholly pan-Asian franchise headquartered in AAA-rated Singapore, boosting customer acquisition and franchise valuation.”
It further noted that: “Geographically, we believe OCBC would deliver dominance of the core SGD (Singapore dollar) market (citing a 35 per cent market share) and a deep, scaled up ASEAN presence, the latter a key gap for DBS that otherwise would require expensive and integration challenging acquisitions to bridge.
“Operationally, OCBC’s peer-leading, strongly branded fee income franchise would offer DBS opportunity to integrate and scale-up highly synergistic product platforms i.e. life insurance, private banking and Islamic finance while expertise in SMEs (small and medium sized enterprises), CASA (current accounts/savings accounts) capture and risk management would also be very valuable.”
For the critics, a merger would mean one less competitor — not good where customers really want to be spoilt for choice.
I had argued against further consolidation then and do so again.
Barely two decades ago, we had more than half-a-dozen independent local banks, now we have just three–four, if you include the locally-incorporated company of America’s Citibank and six if you look at the Monetary Authority of Singapore’s website.
According to the MAS, besides United Overseas Bank, OCBC Bank and DBS, there is also the UOB subsidiary Far Eastern Bank, and the OCBC subsidiaries, Bank of Singapore and Singapore Island Bank.
Earlier the market had more than a dozen local banks. First Tat Lee Bank merged with Keppel Bank and that entity was swallowed up by OCBC which had previously taken over the Bank of Singapore. POSB Bank got bought up by DBS while Overseas Union Bank got taken over by UOB which had earlier taken control of Far Eastern Bank, Lee Wah Bank and Chung Khiaw Bank.
The inital round of mergers — prior to the mid ’80s — did indeed help UOB and OCBC to scale up.
But the later rounds did not deliver as much and for their respective customers, especially the SMEs, the reduction in choice left many of them stranded without loan facilities as a different set of risk management rules kicked in.
In the case of DBS’ purchase of POSB Bank, thousands of the latter’s customers were denied banking facilities as DBS felt, at the time, that it was not at all viable to maintain accounts below a certain level
(the policy was later changed).
With less competition, transaction costs also went up as the banks started charging for services previously free or minimal.
And will all the benefits cited by Nomura be realised?
After all, there are plenty of overlapping customers, especially among the sought-after wealthier customers who are loath to keep all their eggs in one basket.
Many are likely to move — at least part of their wealth and business — to other banks, perhaps to foreign banks like Citi, Standard Chartered or HSBC.
So the merged entity may not have the sum total of the separate banks.
Like I had said previously, instead of spending their time, money and effort in the local mergers in the mid/late ’80s, perhaps they would have been better off purchasing banks overseas. But then in those days, the MAS did not really encourage our local banks from venturing too much overseas. The MAS probably felt that our banks just did not have the capacity or the resources to take on foreign partners.
Although much of their more recent experience overseas has been far from satisfactory, our local banks should take another look at foreign ventures.
Let’s at least maintain the current trinity and if someone or some group here can raise the money and resources to start another bank, it should be looked upon favourably.
The long slide into protectionism
Three years after Lehman Brothers’ collapse, the G20’s mood has shifted dangerously
This week marks not just the 10th anniversary of 9/11 — it is also the third anniversary of 9/15, the day when Lehman Brothers collapsed.
But while world politics is no longer dominated by the “war on terror”, a different form of terror is stalking the world’s financial markets.
The current mood among top financiers — the people formerly known as Masters of the Universe — is now more panicky than at any time since the financial crisis broke.
Last week, George Soros warned that the European debt problem “has the potential to be a lot worse than Lehman Brothers”.
Top bankers have been saying similar things in private for months.
European politicians provide little cheer, either.
One of the men charged with sorting out the euro could be heard speculating last week about “a new Great Depression and the resurgence of nationalism”.
This gloom is even more worrying because there is little sign of effective international co-operation or global leadership to deal with mounting concern about the international economy. Without such leadership, there is a rising danger of a drift into protectionism and “currency wars”.
The new mood of barely-suppressed hysteria set in over the summer, when the European debt crisis spread to Spain and Italy.
The European Central Bank has had to step in as a major buyer of Italian and Spanish bonds — a policy so controversial that it has just provoked the resignation of Mr Jurgen Stark, a German member of the ECB’s governing board.
European politicians are desperately trying to cram the genie back into the bottle.
One finance minister says it is imperative that “Greece should be isolated”.
But it may be too late for that.
The fear is that a serious worsening of Greece’s situation would lead both to bank failures elsewhere in Europe and to further sovereign debt crises, as the markets refused to lend to the likes of Italy and Spain.
The economy of the European Union, taken as a whole, is larger than that of China or the US. So a European economic, banking and debt seizure inevitably has global ramifications — particularly when the US economy is so weak.
But while there are plenty of politicians who can eloquently describe the current dangers, there is little sign of a global response.
That is a stark contrast to the reaction to the collapse of Lehman Brothers. In 2009, the world’s leaders, meeting at the Group of 20 summit, agreed on a coordinated blast of economic stimulus that helped to restore confidence to the markets.
Just as important is what they did not do. In the face of widespread predictions of a drift into 1930s-style tariff wars, the major powers committed themselves to resisting protectionism.
Now compare the mood today.
The appetite for international cooperation is gravely diminished. Key political leaders are looking inwards.
The European Union’s leaders lurch from one emergency summit to another.
Mrs Angela Merkel, Chancellor of Germany, spends most of her time managing an increasingly fraught domestic debate, which has now taken a new twist with the resignation of Mr Stark.
Mr David Cameron of Britain wants to avoid paying the bills for the euro-mess, so is content to watch from the sidelines.
In France, Mr Nicolas Sarkozy would clearly like to use his leadership of the G20 to burnish his own re-election campaign — but that means that any initiatives he proposes are likely to be tailored to the media rather than the markets.
The G20, once touted as a more efficient alternative to the UN, is in trouble.
US President Barack Obama is preoccupied by America’s own daunting economic problems and engaged in a never-ending punch-up with the Republicans. The Chinese government remains reliably egotistical.
With international politics drifting, there is now a clear danger that the world will belatedly slide into protectionism.
Last week Mr Mitt Romney, one of the front-runners for the Republican party nomination in the US and a man who is generally regarded as a free-marketeer, called for the imposition of tariffs on Chinese goods, if China does not allow its currency to float.
Brazil took action last week, as the government imposed “anti-dumping” duties on imports of steel tubes from China.
President Dilma Rousseff’s statement was a text-book example of how an economic crisis can lead to protectionism:
“In the case of the current international crisis,” she announced, “our principal weapon is to expand and defend our internal market.”
It was Brazilian Finance Minister Guido Mantega who gave the world the expression “currency wars” to describe the process of competitive devaluation, as struggling economies seek to promote their exports.
Last week also saw a further twist in the currency wars, as Switzerland decided that it could no longer allow the markets to drive the Swiss franc up to unprecedented levels.
If other countries follow the examples of Brazil and Switzerland, and adopt drastic measures to manage their currencies, then the principle of free movement of capital around the world — one of the underpinnings of globalisation — will be weakened.
There is also no scenario for the break-up of the euro zone that does not involve the reimposition of capital controls, at least for a period.
Historical parallels are never precise.
However, politicians might be jerked into more urgent action if they recalled the history of the 1930s.
Back then, what began with a financial crisis on Wall Street turned into a Great Depression when it was followed by the rise of protectionism and a banking crisis in Europe.
The Financial Times Limited
| Average monthly BID rates @ +/- 0% | |
|
USD / EUR
|
|
| Period Average | 0.8498 |
| Period High | 1.1710 |
| Period Low | 0.6336 |
| April 2003 | 0.9208 |
| March 2003 | 0.9271 |
| February 2003 | 0.9276 |
| January 2003 | 0.9417 |
| December 2002 | 0.9805 |
| November 2002 | 0.9978 |
| October 2002 | 1.0192 |
| September 2002 | 1.0204 |
| August 2002 | 1.0221 |
| July 2002 | 1.0071 |
| June 2002 | 1.0473 |
| May 2002 | 1.0905 |
| April 2002 | 1.1285 |
| March 2002 | 1.1417 |
| February 2002 | 1.1489 |
| January 2002 | 1.1305 |
| December 2001 | 1.1208 |
| November 2001 | 1.1249 |
| October 2001 | 1.1036 |
| September 2001 | 1.0959 |
| August 2001 | 1.1097 |
| July 2001 | 1.1617 |
| June 2001 | 1.1710 |
| May 2001 | 1.1404 |
| April 2001 | 1.1201 |
| March 2001 | 1.0983 |
| February 2001 | 1.0837 |
| January 2001 | 1.0640 |
| December 2000 | 1.1109 |
| November 2000 | 1.1703 |
| October 2000 | 1.1685 |
| September 2000 | 1.1462 |
| August 2000 | 1.1039 |
| July 2000 | 1.0631 |
| June 2000 | 1.0528 |
| May 2000 | 1.1005 |
| April 2000 | 1.0562 |
| March 2000 | 1.0350 |
| February 2000 | 1.0159 |
| January 2000 | 0.9874 |
“SocGen’s announcement flagged the deleveraging that we believe will take place across the EU banking system,” said Matt Spick at Deutsche Bank. “In isolation, this is helpful, but when the whole banking sector delivers, the risks of recession go up substantially.”
In Paris, the CAC 40 fell 1.6 per cent to 2,809.13, making the index the worst performer among Europe’s major exchanges. The FTSE Eurofirst 300 moved down 0.5 per cent to 885.86.
Italy’s banks, though remaining broadly higher, were off their peaks as the country’s bond yields soared to their highest levels since the introduction of the euro after an auction of five-year notes.
Most of the country’s banks had been higher ahead of the auction on hopes the sale would see “substantial” Chinese purchases after talks last week aimed at getting support from sovereign wealth fund China Investment Corp.
“All this cheer over an Italian bond buyer looked exaggerated, especially with the threat of a Greek tragedy still looming, so sustaining the rally without any fresh datapoints was always going to be a challenge,” said Cameron Peacock at IG Markets.
| Company: | Singapore Banks |
| Event: | Negative - BNP Paribas says it can't borrow dollars in US money-markets funds |
| Recommendation | Neutral |
What happened: Bloomberg has carried a Wall Street Journal qoute about news that BNP Paribas SA cannot borrow dollars because US money-market funds are no longer lending to it.
What we think: This is dangerous.
When the last credit crisis broke out in 2008.
Bear Sterns was having short-term funding problems as early as 1Q08.
The mortgage market had cracked then and banks were unwilling to lend to it short-term rollover money.
It eventually collapsed from a shortage of funding... and Lehman was almost six months down the road.
This case now is an even more outright pulling of the plug.
If unconfirmed news is true, it means that more and more banks will start to doubt BNP ahead and cite counter-party risk as the danger.
Watch this space!
We have issued a note " Watch the liquidity squeeze!" last Friday, when we downgraded Singapore banks.
If this thing continues, there will certainly be some contagion impact. Banks will be trimming their exposure to European banks. Foreign banks will be looking to depend less on interbank liquidity and shore up their own customer deposits.
In any case where there is a short-term funding shortfall for any of the European banks, it can trigger a bank default and a banking contagion (even if none of the PIIGS declare default first)
What you should do:
Cut positions in Financials across the board, follow this space - this is a worrying potential trigger.
| Technically: |
|
Dow Jones Industrial Average - Wave V targets 10,247-10,312. S& P 500 - Wave V targets 1,048-1,064. Nasdaq Composite - Wave 5 Fibonacci targets 2,257-2,273. |
UK banks face up to
S$13.7b cost on reforms
whAt cOst On SINGAPORE BANKS refOrm ? ? ? ?
Is inflation the answer?
Recently, a number of commentators have proposed a sharp, contained bout of inflation as a way to reduce debt and re-energise growth in the United States and the rest of the industrial world. Are they right?growth relatively subdued, typical troubled households could be worse off — with higher food and fuel prices cutting into disposable income.
To understand this prescription, we have to comprehend the diagnosis.
As Ms Carmen Reinhart and Mr Kenneth Rogoff argue, recoveries from crises that result from over-leveraged balance sheets are slow and typically resistant to traditional macro economic stimulus.
Over-levered households cannot spend,
over-levered banks cannot lend, and
over-levered governments cannot stimulate.
So, the prescription goes, why not generate higher inflation for a while?
This will surprise fixed-income investors who agreed in the past to lend long term at low rates, bring down the real value of debt, and eliminate debt “overhang”, thereby re-starting growth.
It is an attractive solution at first glance, but a closer look suggests cause for serious concern. Start with the question of whether central banks that have spent decades establishing and maintaining anti-inflation credibility can generate faster price growth in an environment of low interest rates.
[SINGAPORE has been dOing this ? ? ? ?]
Japan tried — and failed:
Banks were too willing to hold the reserves that the central bank released as it bought back bonds.
Perhaps if a central bank announced a higher inflation target, and implemented a financial-asset purchase programme (financed with unremunerated reserves) until the target were achieved, it could have some effect.
But it is more likely that the concept of a target would lose credibility once it became changeable. Market participants might conjecture that the programme would be abandoned once it reached an alarming size — and well before the target was achieved.
Moreover, the central bank needs rapid, sizeable inflation to bring down real debt values quickly — a slow increase in inflation (especially if well signalled by the central bank) would have limited effect, because maturing debt would demand not only higher nominal rates, but also an inflation-risk premium to roll over claims.
Significant inflation might be hard to contain, however, especially if the central bank loses credibility:
Would the public really believe that the central bank is willing to push interest rates sky high and kill growth in order to contain inflation, after it abandoned its earlier inflation target in order to foster growth?
[SINGAPORE has been dOing this ? ? ? ?]
Consider, next, whether the inflationary cure would work as advertised. Inflation would do little for entities with floating-rate liabilities (including the many households that borrowed towards the peak of the boom and are most underwater) or relatively short-term liabilities (banks).
Even the US government, with debt duration of about four years, would be unlikely to benefit much from an inflation surprise, unless it were huge. Meanwhile, the bulk of its obligations are social security and health care, which cannot be inflated away.
Even for distressed households that have borrowed long term, the effects of higher inflation are uncertain.
What would help is if their nominal disposable income rose relative to their (fixed) debt service. Yet, with high levels of unemployment likely to keep nominal wage
Of course, any windfall to borrowers has to come from someone else’s wealth.
Inflation would clearly make creditors worse off.
Who are they?
Some are rich people, but they also include pensioners who moved into bonds as the stock market scared them away banks that would have to be recapitalised state pension funds that are already in the red and insurance companies that would have to default on their claims.
# # # #
In the best of all worlds, it would be foreigners with ample reserves who suffer the losses, but those investors might be needed to finance future deficits. So central banks would have to regain anti-inflation credibility very soon after subjecting investors to a punishing inflation. In such a world, investors would have to be far more trusting than they are in this one.
This does not mean that nothing can be done about the debt problem. The US experienced debt crises periodically during the 19th century, and again during the Great Depression.
Its response was to offer targeted and expedited debt relief — often by bringing in new temporary bankruptcy legislation that forced limited debt write-downs.
SINGAPORE has been growing ecOnOmy on INFLATION ?
INFLATIONARY INSTRUMENTS:
ENBLOC
COE
ERP
ROV
GST
DC
lOw Interest rAtes
limiting sUpply
mIss-tImIng of sUpply
UNdersUpply in tImes of elevAted demAnds
fOreIgn labour inflUx
lOw interest lOan fInancing flOOding
? ? ? ?
| Obama's Jobs Plan a Tough Sell | |||||||||||||||||||||||||
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Obama's US$447bn " American Jobs Act" failed to impress the markets last Friday, with the U.S. major indices falling more than 2%. Macquarie Economics Research (MER) expects the plan to be a tough-sell in Congress, so will likely ultimately be reduced in size and become tax-focused. However, the introduction of an employer payroll tax cut, extensions to the employee payroll tax cut and unemployment benefits would be incrementally positive for MER's 2012 growth forecast. MER expects the boost to come largely through increased confidence, rather than a direct stimulus effect. (MER report dated 9 Sep) Impact of European sovereign debt woes Sovereign debt concerns in Europe remain a major source of uncertainty for financial markets. For the United States, MER thinks that the key channel of impact will likely be through generalised financial uncertainty and contagion. US banks‘ exposure to sovereign debt of European peripherals is reportedly low, and the outright impact on real US output also looks contained. However, heightened uncertainty would be negative for asset prices, could also crimp credit growth and generate US$ funding strains. (MER report dated 8 Sep) Macro announcements this week This week, two key US cyclical indicators for August will be released: retail sales and industrial production. According to MER, the pace of growth in both is expected to moderate from the July bounce, but should remain consistent with MER outlook for annualised 3Q GDP growth of at least 2.5%. Tue 13 Sep: US Import/Export Prices (Aug) Wed 14 Sep: US PPI (Aug), US Retail Sales (Aug) Thu 15 Sep: SG Retail Sales (July), US CPI (Aug), US Industrial Production (Aug), US Initial Jobless Claims Fri 16 Sep: SG Non-oil Domestic Exports (Aug), US U. of Michigan Confidence (Sep) The following October expiry HSI warrants have exercise prices close to HSI Friday levels:
|
thIs Is
PROPERTY BUY SIGNAL
CONFIRMATION
for
INVESTOR
from
AUTHORITY ? ? ? ?
The inexplicable rise in development charges
Won’t this run counter to efforts to curb soaring property prices?
The Government is supposed to
Conrad Raj conrad@mediacorp.com.sg So if you do not intend to enhance the value of the property further by changing the land use or raising the plot ratio to increase the density of the site, you do not have to pay the DC.
But is that the right attitude to take?
Are we not supposed to maximise land usage?
Government should SUBSIDISE RE-DEVELOPMENT INSTEAD ? ? ? ?
There have been plenty of guesses, with most attributing the higher charges to the authorities playing catch-up on the hot property market.
If this is so, it appears to be another case of closing the stable doors after the horses have bolted.
亡 羊 捕 牢
马 后 炮
be abating property prices to
make residential property more
affordable to the buying public.
So I fail to understand why the
Ministry of National Development
(MND) recently decided to revise
development charges (DC) upwards
as part of its half-yearly review.
To be fair, the DC is a “levy” that
is imposed when planning permission
is granted for a development on
a site for a more valuable zoning use
or in excess of the existing plot ratio.
China’s banks: ‘The fish always stinks from the head’
Simon Rabinovitch
China’s chief banking regulator Liu Mingkang has a folksy way of explaining his work.
The Financial Times Limited
“The fish always stinks from the head” is a favourite.
This belief that regulation must focus on banks’ head offices can be seen in China’s zeal to enforce the Basel III rules. While there is talk in the United States and Europe of easing the liquidity rules, the China Banking Regulatory Commission has been pushing ahead with a set of rules that is stricter in definitions than what has been agreed internationally.
Basel III’s minimum tier one common equity requirement is 4.5 per cent
China has set its bar at 5 per cent.
For the leverage ratio, a safety net if risk-weightings fail, Basel III requires at least 3 per cent of total assets
China has opted for 4 per cent.
Even more striking is the pace Beijing has set for implementation. It has ordered its biggest banks to meet the capital requirements by 2013, whereas banks in developed markets have until 2015.
Chinese bankers have been quick to fall in line with the new regulations. The difference with Europe and the US is easy to explain. Top bank executives are appointed by the Communist Party and answer to the government.
China’s banking sector had a capital ratio of 12.2 per cent at the end of June, well beyond Basel III standards. Banks around Asia are in a similar position, although the region has treated capital requirements as a mainly Western issue.
Japan has stood out, however, as its regulators worked hard to protect their banks from having to move too quickly to increase their capital stocks.
But the absence of complaints from Chinese bankers does not mean that the new regulations will be painless. Mr Wu Xiaoling, a former Central Bank vice-governor, has been unusually candid, warning that banks deemed systemically important could face a large funding gap in the next five years. Concern that they will have to tap equity markets to meet capital rules is one reason for their lacklustre share performance in the past year.
The tough rules are undoubtedly prudent, but they also obscure the main risk for Chinese banks:
Too much, not too little, government.
With all major lenders owned by the state, their commercial decisions are heavily dictated by Beijing.
A case in point was their surge in lending during the global financial crisis, when the government used the banks to fund its stimulus spending.
The damage in bad loans is just beginning to emerge and analysts say it will cast a shadow over the Chinese banking sector for years to come.
The future of banking in a quandary
Despite a series of reforms, the industry remains deeply troubled three years after the fall of Lehman Brothers
Patrick Jenkins, Brooke Masters and Tom Braithwaite
A still bigger concern is the distorting effect the clampdown on Western banks might have on the few remaining growth markets — most strikingly Asia.
The continent has steered clear of much of the West’s regulatory reform, so US and European banks are diverting an artificially high volume of investment into the region — helping to inflate existing bubbles.
Will diversifying your investments help you now?
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| By Bob Stokes Tue, 06 Sep 2011 15:15:00 ET |
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How do we see the " correlation scenario" unfolding in stocks, gold, silver, oil and other markets in the weeks and months ahead? The new Elliott Wave Financial Forecast updates you on our " all-the-same-market" analysis.The Flat Earth (Employment) Society
Unless you were completely out of touch this weekend, you know the jobs report came in flat, as in zero, nada, " 0" . The economy was in neutral, at least as far as employment was concerned. But flat is actually down, as we need 125,000 jobs a month (at least) just to stay up with population growth. And, as we will see in a few pages, it may well take more than that.
Yes, there was the caveat that 46,000 Verizon workers were on strike, so the number should have been a positive 46,000. But then there were 20,000 returning Minnesota state workers who were " added" back in, so maybe the number should be negative. As it turns out, workers on strike are counted as unemployed when they go on strike (thus subtracting from the jobs number) and are added as newly employed when they go back to work. So sometime in the next month or so, when those Verizon workers settle, the employment report will show a magic increase of 46,000.
The rules for this are arcane. If you go do the BLS (Bureau of Labor Statistics) website - assuming you have no real social life and nothing else better to do - you find that:
Employed persons are " persons 16 years and over in the civilian non-institutional population who, during the reference week, (a) did any work at all (at least 1 hour) as paid employees worked in their own business, profession, or on their own farm, or worked 15 hours or more as unpaid workers in an enterprise operated by a member of the family and (b) all those who were not working but who had jobs or businesses from which they were temporarily absent because of vacation, illness, bad weather, childcare problems, maternity or paternity leave, labor-management dispute, job training, or other family or personal reasons, whether or not they were paid for the time off or were seeking other jobs." (Hat tip, Joan McCullough)
Somehow, strikes don't count as labor-management disputes. Or personal problems. Go figure. But that is a distortion of the monthly numbers, which is why it is better to look at rolling three-month averages to get a clearer picture. And speaking of three months, the last three months' job reports were revised down by a total of 58,000 jobs, making the net over the last three months a very small number.
However you look at this report, it was just ugly. Yet it goes along with regional reports that show a contracting economy and the national ISM (which came out Thursday), which is barely above a contractionary number, at 50.6. The ugly part of the ISM number is that this was the third straight month in which inventories rose more than new orders. Historically, as this chart from Rich Yamarone shows, that suggests we are either in or close to a recession. (Note, there are some other negative points, but they were not three months in a row and were not followed by recession.)
The US has roughly the same number of jobs today as it had in 2000, but the population is well over 30,000,000 larger.
To get to a civilian employment-to-population ratio equal to that in 2000, we would have to gain some 18 MILLION jobs.
The graph below is from the FRED database at the St. Louis Fed. (Kudos to the guys in St. Louis for maintaining such a wonderful source of data for all of us! They have thousands of charts and data sets to maintain and do so with precision, keeping things up-to-the-minute!) Note the precipitous drop in the ratio in the last ten years, especially during the recession.
Wall Street tanks on European fears
Wall Street slumped in early trade yesterday on fears that the euro zone’s debt crisis was worsening and worries that the United States was sliding back into a recession after last Friday’s data showed the world’s largest economy created no net new jobs in August.
About 90 minutes after the opening bell, the Dow Jones Industrial Average was down 280 points, or 2.5 per cent, to 10,959, as trading resumed after the long US Labor Day weekend.
The broader Standard & Poor’s 500 Index lost 30.45 points, or 2.6 per cent, to 1,143.52.
“Europe’s problems are our problems … We have a euro zone that is an apoplectic frenzy of just trying to right the ship,” said Mr Peter Kenny, managing director at Knight Capital in New Jersey.
In Asia, China’s Shanghai Composite yesterday lost 0.3 per cent, extending recent steep losses to hit a 13-month closing low, while Japan’s Nikkei average slid 2.2 per cent to touch a 30-month closing low.
In Europe, the Euro Stoxx 50 Index slid 1.2 per cent in late trade to register a 8.6 per cent slide over the previous two days, the biggest drop since October 2008.