The June US job employment report suggests that the alleged ‘green shoots’ are mostly yellow weeds that may eventually turn into brown manure. The employment report shows that conditions in the labor market continue to be extremely weak, with job losses in June of over 460,000. With the current rate of job losses, it is very clear that the unemployment rate could reach 10 percent by later this summer, around August or September, and will be closer to 10.5 percent if not 11 percent by year-end. I expect the unemployment rate is going to peak at around 11 percent at some point in 2010, well above historical standards for even severe recessions.
This data indicates that US consumers are not going to their buying spree anytime soon. Someone has to convert to Consumerism sooner or later for globalization to rebound.
Nouriel Roubini: The retrenchment of the U.S. global consumer of last resort needs to be compensated by increased consumption in current account surplus countries if the world economy should grow on the same path as before the crisis. However, Japanese consumers are too weak to pick up the slack, the Germans don't want to and the Chinese are not yet wealthy enough to replace the U.S. consumer even if they manage to shift their export-led growth model. As of now, the Chinese current account surplus and savings overhang is not shrinking much.
Bill Gross (PIMCO): There is no global replacement for the American consumer who lost at least a$15 trillion in wealth since early 2007. "Short-term policy rates will be kept low for longer than cyclical norms, and the outlook for risk assets – stocks, high yield bonds, and commercial and residential real estate will involve just that – risk. Investors should stress secure income offered by bonds and stable dividend-paying equities
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