Unemployment looks set to double... at least: Pete Wargent
Pete WargentDecember 8, 2020
EXPERT OBSERVER
3.283 million was the print for US initial jobless claims.
Terrible stuff.
All previous crises are a tiny blip on the radar by comparison.
It’s hard to compare with previous recessions...as there is simply no modern comparison.
The US unemployment rate could exceed 30 per cent by the end of next quarter, and Canada faces a similar mess.
Consumer-driven economies without consumers will lie in ruins for as long as the shutdowns continue.
Australia’s Coronavirus figures look somewhat promising, but in America they’re spreading widely.
There are now more cases in the US than in China, or indeed any other country.
Co-ordinated stimulus
More so than in any previous crises this will result in co-ordinated stimulus packages on an Olympic and unprecedented scale.
So far rates have been cut to zero, and we’re looking at an initial $2.2 trillion US government stimulus package, and more is likely to follow.
The Federal Reserve also dropped an initial salvo of US$700 billion in quantitative easing, and since it’s promising ‘QE infinity’ for as long as it takes, it’s impossible to know how much printing will follow (answer: a lot).
Small businesses and households, as in Australia, will need access to loans or other funds to tide them through to the other side.
It won't just be America going down this route.
All around the world government debt is set to soar and central banks are pushing interest rates down to zero.
A number of markets have been crushed, but US stocks are still expensive, with only really the energy sector looking interesting.
Overall the expected returns on US and Aussie stocks are not yet of much interest at these levels and the bargains lie elsewhere.
Overall the expected returns on US and Aussie stocks are not yet of much interest at these levels and the bargains lie elsewhere.
One step at a time, Australia needs to bring down cases of the Coronavirus first and foremost.
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Some more old data.
Australian household wealth increased by +3.3 per cent in the December 2019 quarter, to hit a record high of $11.31 trillion.
The main driver in Q4 was a +3.9 per cent increase in residential property prices.
Aussie total household wealth increased by +10 per cent in 2019.
Aussie total household wealth increased by +10 per cent in 2019.
Australia's average net worth per capita hit a record high of A$443,000 by the end of calendar year 2019.
And the average or mean wealth per household had soared to well over A$1 million.
CoreLogic will report next week that housing prices increased in Q1 2020, including in the month of March 2020 itself.
However, property activity will now stall, and equities crashed in the first quarter of 2020 which will bring down superannuation balances.
Meanwhile, unemployment looks set to double...at least.
Meanwhile, unemployment looks set to double...at least.
PETE WARGENT is the co-founder of AllenWargent property buyers (London, Sydney) and a best-selling author and blogger.
Pete Wargent
Pete Wargent is the co-founder of BuyersBuyers.com.au, offering affordable homebuying assistance to all Australians, and a best-selling author and blogger.