Market Review: London March 2009 Commentary

The Next Shoe To Drop: Global Unemployment
Over recent weeks, as we have visited and reviewed a number of seemingly quite disparate economies around the globe, one of the features that has stood out most clearly has been the extent to which implied labour productivity rates have tumbled of late in many countries around the world.

Although in the US companies in the manufacturing sector have been relatively swift in attempting to protect productivity rates by adjusting their payrolls rapidly to the change in the production environment (hence the Atlanta Fed has reported that job losses are occurring at a proportionately faster rate than in previous recessions), companies in many other countries have not been so ‘cost conscious’ and aggressive in their labour shedding.

For example, in Brazil, we find that implied labour productivity had declined by a distressing 10% compared to a year ago and in Japan we can estimate that implied labour productivity has fallen by a massive 20% in the last six months alone.