US heads into recession!

Article 7 in the book featured the US Employment release which comes out on the first Friday of each month....

"In terms of economic releases the absolute highlight is the employment data from the United States. It is always published at 1.30pm London time on the first Friday of each new month. This release often sets the tone for the later releases and it can cause major shifts in market expectations".

The latest release for February 2008 perfectly illustrated these points. In a few lines on news wires across Wall Street all the market's worst fears were confirmed. Although the official data might take a few weeks to confirm it the US Economy is already in recession. The employment data showed a 63000 fall in non-farm payrolls (see key terms bottom of page 38) which is particularly worrying as it was the biggest monthly decline for five years. The Fed is clearly concerned about the vulnerability of the US Banking system as it announced plans to increase two key injections of liquidity in the money markets. The 28-day Term Auction facility was raised to $100bn and the normal repo operations raised to a further $100bn. If there are some major casualties among the US banks in the months to come nobody can blame the Fed for a lack of intervention. They are doing all they can to save the financial institutions and mitigate the worst effects of the recession.