Job Losses Accelerate Yen Falls on Stocks Rally

12-06-2008 11:13

Job losses accelerated in November at the fastest pace in 34 years, Labor Department reported on Friday. Businesses in the U.S. continue to fire workers trying to cut expenses in the worst economic downturn in decades. Monthly Employment Report showed 533,000 jobs have lost in the last month bringing total job losses to 1.91 millions this year.

Unemployment rate rose to 6.7 percent, the highest since 1993. While analysts expected the rate to jump to 6.8 percent, the difference would not be interpreted as a good sign. A tight job market makes it difficult for applicants to get a job, forcing more jobseekers to disappointedly give up their attempts; the latter could reduce the headline rate.

Recession Determination

Economists usually define recession as two consecutive quarters of negative growth, but in the U.S. other factors also affect the official determination. National Bureau of Economic Research announced this week that the economy entered into recession in December 2007. The agency adds the unemployment data to its calculations to determine the American economic cycles.

Yen Turnaround

Japanese yen pared its earlier gains against the dollar as the rally in stock markets reduced demand for low-yielding assets. U.S. major equity indexes fell early on Friday in response to the unemployment report but a better profit forecast by the Hartford, a financial service company, improved sentiment in financial sectors.

Unconventional Measures

There were also optimisms that such weak data could increase the possibility of a larger economic stimulus package by the new government. Also this week, representatives from the struggling auto industry made their request again to get a rescue loan. A bankruptcy by major automakers could costs 2.5 millions jobs and it might be now more difficult for the Congress to ignore the consequences.

With interest rate close to zero, investors can’t expect more from monetary policies. Fed Chairman Ben S. Bernanke has already announced that he may use unconventional measures, such as buying treasuries directly on the open market, to spur growth and fight deflation.