There is also progress in Italy which is getting necessary reforms approved. On Friday, the Senate approved reforms to cut the budget deficit and liberalize the economy. It is expected that the Chamber of Deputies, or lower house of Parliament, will pass the measures over the weekend.

This sets the stage for the expected resignation of Silvio Berlusconi as prime minister and his replacement by an interim government. Italy’s president, Giorgio Napolitano is expected to name former EU commissioner Mario Monti to head an interim government, though last-minute changes remain a possibility in Italy’s volatile political landscape. If Mr. Monti is tapped, he will come under immediate pressure from investors and European regulators to take steps, such as a wealth tax, to lower Italy’s €1.9 trillion debt. Italy has also faced repeated calls to free up its restrictive labor market and make further cuts to red tape.

Global Stock Market Recap

With Friday’s boost from Italy’s Senate approving an austerity package, most equities managed to turn a negative week into a positive one. The approval elevated optimism that the country will contain its debt crisis. Investors were optimistic that the vote will be followed by a new government led by former European Union Competition Commissioner Mario Monti as soon as Monday. The FTSE was up 0.3 percent, the CAC gained 0.8 percent while the DAX was 1.5 percent higher. Although Swiss stocks rallied on Friday, they could not recoup earlier losses, slipping 0.2 percent on the week. Italian equities jumped 2.8 percent.

Friday’s exuberance was a far cry from Wednesday’s plunge as signs of political progress in Italy and Greece — for the moment at least — put worries about both countries’ debt burdens aside. On Friday, former European Central Bank Vice President Lucas Papademos was sworn in as Greece’s interim prime minister. And there are signs that Italy is heading closer to a national unity government, most likely headed up by Mario Monti.

As expected the Bank of England’s monetary policy committee left its key interest rate at 0.5 percent and maintained the size of its asset purchase program at £275 billion. The BoE had increased its QE target by £75 billion to £275 billion in October. Britain’s economic recovery is tightly linked to developments in Europe. The Eurozone is Britain’s biggest export market. The Bank will be releasing its quarterly Inflation Report on Wednesday which will give Bank watchers a window on the MPC’s thinking. At that time, the BoE is expected to lower growth projections. The Bank will also publish new inflation forecasts at that time. Consumer prices jumped 5.2 percent on the year in September — more than twice the Bank’s 2 percent target. However, forecasts say that inflation will be dropping sharply in 2012.

EU downgrades growth forecast

In its semiannual forecast, European Commission said that the economy is struggling against weak confidence, financial turmoil, government austerity packages and a slowdown in Europe’s main trading partners. The EU expects 2012 gross domestic product to grow just 0.6 percent, sharply down from its forecast six months ago of 1.9 percent. The commission’s forecast for the Eurozone is 0.5 percent in 2012, also falling short of the May outlook of 1.8 percent growth. Unemployment is expected to increase slightly next year, to 10.1 percent from 10 percent in 2011. The EU’s spring forecast predicted unemployment would fall to 9.7 percent in 2012.

The commission expects the already broad economic disparities between member countries to grow next year. The German economy should expand 2.9 percent this year and 0.8 percent in 2012, with an unemployment rate falling to just 5.9 percent next year. At the other end of the spectrum, the Portuguese economy is expected to contract 3.0 percent next year, with an unemployment rate of nearly 14 percent. Greece is expected to shrink 5.5 percent this year and 2.8 percent next year. The country’s unemployment rate is seen jumping next year to 18.4 percent, significantly above the commission’s previous forecast of 15.3 percent. Italy’s problems are expected to continue, with growth expected to be only 0.1 percent, down sharply from the spring forecast of 1.3 percent. France is expected to grow 0.6 percent next year with unemployment inching up to 10 percent.

Most equity indexes were down last week, with the steepest declines occurring on Thursday in midst of a rush to safety. While most rebounded on Friday, it was too little and too late to save the week’s results. Losses ranged from 3.6 percent (Hang Seng), 3.4 percent (Kospi) and 3.3 percent (Nikkei) to 0.1 percent (Jakarta Composite). However, the SET, PSEi and All Ordinaries advanced 1.4 percent, 1.0 percent and 0.4 percent respectively. Equity indexes here tended to follow leads from U.S. and European trading. The root cause of the volatility not surprisingly is found in the uncertainty surrounding the European sovereign debt crisis. Thursday’s plunge stemmed from fears regarding Italy’s debt crisis and a deadlock in talks on forming a new Greek government. Weaker than expected data on Japanese core machinery orders and Chinese merchandise trade also curbed appetite for risk.

At its meeting Friday, the Bank of Korea kept its interest rate unchanged at 3.25 percent for the fourth straight month after unexpectedly increasing it by 25 basis points at its June meeting. Analysts had widely expected no change after October consumer prices were up 3.9 percent on the year, putting overall inflation within the central bank’s target range of 2 percent to 4 percent for the first time this year.

The dollar was mixed against its major counterparts last week. The euro, despite its volatility during the week, managed to regain virtually most of its losses on renewed optimism that European leaders are taking steps to contain the region’s sovereign debt crisis. The euro steadied and advanced as former European Central Bank Vice President Lucas Papademos was sworn in as prime minster of Greece and as Italy’s Senate approved a debt-cutting bill on Friday.

The yen reached its highest level against the dollar since Japan intervened on October 31^st to weaken it. Japan’s Finance Minister Jun Azumi said that he is on guard against speculative yen trades while declining to comment on whether the nation has been selling the currency this month. Japan sold the yen after it reached a post-World War II high of ¥75.35 per dollar. It is estimated that Japan sold ¥8 trillion that day, based on changes in the Bank of Japan’s balance sheet.

Thats a fancy way of saying forex!

Forex brokers at the retail level did not exist because these institutions monopolized the foreign exchange due to their abilities to have access to information and data that allowed them to hedge their interests and profit from the monetary policy that the average investor could not get to very easily. This, combined with government regulations and the huge volume required in trades to maintain adequate liquidity,  prohibited the small speculator from participating.

Access to the currency markets changed however, first with the invention of the internet… this new and exciting information super highway opened the doors to allow anyone virtually instant access to the same macro-economic events, news and data that the large world banking institutions had previously dominated. Combine this new fangled world wide web with legislation by the CFTC and we soon found ourselves with a retail market for individual traders to have the same abilities to trade currencies as the big boys.

What Are The Differences Between Brokers?

In order to access the forex as a retail trader, we need brokers to provide us with a platform to trade from, liquidity and reliable execution of our trades. Much like a stock broker, the forex broker acts as  an intermediary for these ( relatively speaking) small trades, and they also can assist in advice, recommendations etc. Each brokerage house can have different commission rates, minimum balances and account requirements that make it essential for any forex trader to research and become familiar with before opening an account.

Before selecting a brokerage firm, it’s important to understand the basic differences from one to the other, and also to have a good understanding of what your choices are. Forex brokers, for the most part, fall into one of two categories. There are Market Makers, also referred to as “Dealing Desks” and there are Straight Through Processing Brokers (STP), also referred to as “Non Dealing Desks”.

Market makers provide the liquidity for a given currency market themselves, and they make their money off of the spreads, (the difference between the bid and the ask) and by placing hedges, or bets against their customers. In other words, when you place a trade with a Market Maker, more then likely, they will be taking the other side of that trade in the expectation that you will lose. So…. the market maker earns money through both the spread and by hedging your bet. It seems a bit counterintuitive doesn’t it? But this is how it works… your trades are commission free, but the spreads tend to be a little wider.

Straight through processing brokers, or non dealing desks, do not create their own markets… meaning that they do not take the other side of your trade. Your order is sent straight to the recipient on the other side of your position. These brokers however, do charge commissions for each trade you place with the advantage to you being a tighter spread.

Do Your Research First

Which type of broker you choose is dependent on what type of trading you do. If you are a day trader and a scalper, then it will probably be better for you to enjoy tighter spreads and just pay the transaction fee because you are attempting to make a profit with a smaller expected move by virtue of the very short time frame with this style of trading.

Conversely, if you are a swing or a position trader, holding onto a position for days, weeks or maybe even months, then the spread is of less consequence to you because your expected move will easily overcome this.

Knowing what type of trading you will be doing is a big part of choosing which type of brokerage house is best for you, but it’s most certainly not the only research you need to do when looking at different forex brokers. You also need to be aware of fraudulent enterprises know as “bucket shops”. Bucket shops are essentially fake brokers that work out of boiler rooms acting as legitimate forex brokers. They man the phones… take your orders and then promptly drop it in a bucket, hence the name. Simply being aware that these types of scams exist should be enough to insure that you do proper research and due diligence before transferring funds to anyone.

]]> http://www.forexyellowpages.com/why-do-forex-traders-need-forex-brokers/feed 0 http://www.forexyellowpages.com/choosing-a-good-forex-broker http://www.forexyellowpages.com/choosing-a-good-forex-broker#comments Wed, 02 Nov 2011 02:56:18 +0000 admin http://www.forexyellowpages.com/?p=818 Forex broker is an intermediary between a trader and a currency market. Retail trading isn’t possible with Forex brokerage. Finding the right Forex broker among hundreds of the online firms isn’t an easy task. That’s why you need to inform yourself on the specific broker that you will want to work with and collect important information on certain aspects.

The first question you have to ask yourself is: is the broker I want to use regulated? There must be no doubt about this first point. All regulated brokers must submit financial reports to regulatory authorities, and when they fail to do it, authorities have the right to fine them or terminate their membership. This enforces Forex brokers to keep transparent financial reports.

The brokers must be regulated by their local regulatory authorities, for instance, for brokers based in the US, they must be regulated by the NFA (National Futures Association) and CFTC (Commodity Futures Trading Commission), Swiss based brokers must be regulated by the FDF (Swiss Federal Department of Finance) and so on.

Also when a Forex broker is regulated allows investors to dispute any resolution, increasing the investor protection.

Trading conditions are very important also. This refers to the features of the trading platform and the trading conditions with the chosen broker. Amongst the most important factors are:

Spread – Obviously the smaller the spread on currency pairs the better the conditions are for investors and traders.

Platform execution – Trading execution refers to how fast and consistent are the execution of trades. Some brokers guarantee fast and transparent executions during normal market conditions.

Fractional trading – Some brokers allow investors and traders to trade on a fractional basis, instead of trading full lots “100,000 units” or “300,000 units”, they allow you to trade “163,345 units” or “325,911 units”. This is very helpful for trades risking certain percentage of their balance on each trade.

Safety of funds – We need to make sure our trading funds are kept in a segregated account or at least insured.

Customer support is very important! You need a broker with a LIVE CHAT feature so you can get in touch with a representative anytime you need for different kind of problems, like withdrawals, deposits etc.

Also you need to check the promo offers that the broker is offering you. Some brokers offer 10% BONUS on the first deposit.

MF Financial is offering up to 20% BONUS on first deposit plus an outstanding trading experience with an outstanding customer support.

MF Financial Ltd. is one of the world leading online currency trading broker offering low pips and commission-free online forex trading. Founded by Wall Street veterans, MFFX’s vision is to service individual and corporate investors such as money managers, banks, and financial institutions in easing the complexity in dealing with forex trading. Their dealing software which specialized in forex dealing is rated second to none for it user friendly environment. Lightning speed and efficient execution is one of its many benefits.

Any new investor should think twice or 10 times before choosing the right broker. I am personally a MFFX client for 1 year and I must say that I have no reason to change it. I will keep it as my trusted partner in forex trading for a long time! For any interested investor I invite you to check MF Financial`s website www.mffx.com

These  CFTC regulations led to the limitation of the number of forex brokers that accept US traders and most of the brokers available on the US market have low leverages and unfavorable trading conditions. Under these circumstances more and more US traders look for offshore forex brokers with higher leverages and better trading conditions.

Unfortunately neither the foreign brokers are allowed to accept US traders so the only option available at this moment is the binary option trading. All major binary option traders such as Ikko Trader,Anyoption, EZ Trader and Option Fire accept US traders.

The binary option brokers are licensed and regulated by trustfully boards and commissions. For example Option Fire is regulated by the Financial Services Authority (FSA), which  is the regulator of the financial services industry in the UK. So Option Fier is as secure and trustable as any English forex broker on operating the forex retail market.

All binary options brokers have high profit rates, most of them offering up to 85% profit for options expiring in the money and up to 15% refund for options expiring out of the money.

The binary options trading has many advantages compared to the traditional forex trading, the higher returns on investment and the shorter option expiration times being just the most attractive ones.

Best Offshore Forex Broker – www.MFFX.com

Recently, YB Teresa Kok asked me “Why are Malaysians so keen to leave this country? Life overseas is not necessarily easier!” I agree that life overseas is not necessarily. In fact my cousins living in Hong Kong, Singapore and London tell me regularly that they miss the food and that things are much cheaper at home. They complain about the weather, high cost of living and their long working hours. Despite this, when the possibility of coming back home is raised, they give me a smile and a shake of their heads.

Is living in Malaysia really so bad? What is it that other countries have that we don’t? Lim Kit Siang posted on his blog in December 2009 that more than 630 Malaysians are migrating overseas everyday, and that number is increasing year on year.

This is a worrying statistic and the brain drain issue is one that the current government acknowledges that it is a problem. However, the best they can come up with to make them come back are tax breaks, and tax free vehicles. From day one, it has become apparent these ‘perks’ would simply not work.

This government has a habit of tackling problems in this country by providing quick fixes. The 2012 Budget should really be called the ‘quick-fix’ budget as RM232 billion is mindlessly spent, with unrealistic economic growth forecasts to back it up.

Yes, 60% of households would receive a RM500 relief and we thank the government for it. What then? RM500 does not combat rising costs, or inflation. How far can RM500 bring us nowadays? Not very far.  In no time at all, that RM500 has become a distant memory and we are back to square one.

The Kedai 1Malaysia initiative was put in place by the government to sell cheap products subsidised by the government, and more are to be opened across the nation. Shop owners are now screaming in displeasure as they cannot possibly compete. If the government is intent on handing out subsidies, subsidise the shops which are already operating! Another poorly planned quick fix that provides no long term solution.

Where is the long term economic plan? Where is the investment in our children’s future? Fixing school buildings is an excellent initiative, but the real problem lies in the fabric of the education system.

Our children are taught to be robots, to regurgitate material and not to question their teacher. Many scoff at the lowering of standards in the ongoing PMR exams, and an Additional Mathematics SPM paper was allegedly leaked out to tuition centres. Is all this in the name of grades, just to make the Education Ministry look good? How can this system prepare our children to be competent, effective members of society? The biggest losers in all of this are our nation’s children.

A friend over dinner told me earnestly that he was preparing to leave the country for the sake of his children. As disheartening as it was to hear, he proceeded to tell me why.

His vision for his children was for them to grow up in a society in which they would not be discriminated against. Although racism is also prevalent in other countries, in Malaysia racism is institutionalised and sanctioned by the Barisan Nasional government.

Furthermore, corruption is rampant throughout all levels of government. The payment of corruption money in cases of obtaining building or business licenses is so prevalent, that many businesses have included such a payment in their expense budgets. How can this continue be the case?

These issues are all correlated, and opportunities continue to be stifled. Talented people leave because Malaysia appears to have no appreciation for their abilities. Nepotism and favouritism are practised on the basis of the “Lu tolong gua, Gua tolong lu” principle rather than getting the best person for the job.

Our English standards have been lowered in order to record more exam passes, but quality is sacrificed as a result. If even masters degree holders from local universities are unable to speak proper English, how can we then become a globally competitive nation?

After this budget, more and more people are convinced that this BN government cares only about staying in power and not for the long term development of the nation. The exodus of talented individuals will continue unless necessary reforms are put in place.

On a recent trip to the United States, on our stopover in Hong Kong, a fellow passenger remarked that they could finally talk about issues of Malaysia as they dared not voice out their displeasure at home. Recalling so many holding up their fingers to their lips to shush their friends from bringing up national issues, it is obvious that many feel that we are living under oppression.

Finally, one of my old schoolmates residing in Australia told me that he wanted to come home to take care of his parents. “But the biggest thing stopping me from coming home now is the government”. A change in government may not automatically bring Malaysians home, but what it would do is provide hope for the future of our nation, and hope for our future generations.

Change is needed, and change has to happen now.

Incoming search terms:

• do i pay tax on offshore forex trading
• gains on offshore currency trades

The Dow Jones industrial average rose about 390 points. The Dow and broader stock indexes rose more than 3 percent. Markets also barreled higher in Europe.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.55 percent from 3.43 percent late Friday.

“The market is breathing a huge sigh of relief that the EU has taken aggressive steps to contain the EU crisis in the weaker states,” said Alan Gayle, senior investment strategist at RidgeWorth Investments.

The 16 countries that use the euro and the International Monetary Fund have agreed to create a nearly $1 trillion rescue fund to support European nations burdened by heavy debt. Markets around the world plummeted last week as fears escalated that Greece’s debt problems would spread throughout Europe and upend a global economic recovery.

The U.S. Federal Reserve said it would also provide loans overseas.

Investors also feared that if Greece didn’t get a bailout, the fate of the euro, which is used by 16 countries, could be in trouble. The euro rose Monday against the dollar.

“Europe has unequivocally said, ‘We will defend the euro’s integrity,’” said Oliver Pursche, executive vice president at Gary Goldberg Financial Services in Suffern, N.Y.

Pursche noted the actions taken don’t mean European leaders will ensure its current value, but that they will do what is necessary to ensure its existence.

The U.S. Federal Reserve and other central banks also stepped up with financial support to help head off what some analysts believe could have been a broader financial crisis.

The Fed reopened a program launched in 2008 during the credit crisis under which dollars are shipped overseas through the foreign central banks. Those central banks can then lend the dollars out to banks in their home countries.

Aside from the Fed, other central banks, including the Bank of Canada, the Bank of England, the European Central Bank, the Swiss National Bank and the Bank of Japan are also involved in the dollar swap effort.

In midmorning trading, the Dow rose 390.50, or 3.8 percent, to 10,770.93. The Standard & Poor’s 500 index rose 45.40, or 4.1 percent, to 1,156.28. The Nasdaq composite index rose 98.46, or 4.4 percent, to 2,364.10.

Stocks were highly volatile at the end of last week as investors shrugged off signs of an improving U.S. economy and focused on Europe’s sovereign debt problems. The Dow fell 5.7 percent last week to erase its gains for the year, while broader indexes fell even further. On Thursday alone, the Dow was down nearly 1,000 points late in the day before recovering much of its losses.

Stocks have dropped four straight days as triple-digit Dow moves have again become the norm. Big swings were also common as the credit crisis grew in late 2008 and the market bottomed in early 2009. In recent months, however, the Dow had been climbing slowly and steadily on repeated signs the economy was recovering.

Pursche said investors should expect more swings in the market. He said that the lack of turbulence in recent months was abnormal and that problems remain. Some European countries still need to enact austerity measures and unemployment remains high in the U.S., Pursche said.

“A 1 percent to 2 percent market move … in either direction is something investors should be prepared to cope with,” Pursche said.

As investors jump back into riskier assets like stocks on Monday, U.S. bond prices tumbled. Gold also fell. Both surged late last week as investors sought safe-haven investments.

Gold fell $14.90 to $1,195.50 an ounce. Crude oil rose $2.47 to $77.58 per barrel on the New York Mercantile Exchange.

At the New York Stock Exchange, 2,973 shares rose while only 91 fell. Trading volume came to 455 million shares compared with 443 million traded at the same point Friday.

In afternoon trading, Britain’s FTSE 100 rose 4.4 percent, Germany’s DAX index surged 4.9 percent, andFrance‘s CAC-40 rallied 8.6 percent. Earlier, Japan’s Nikkei stock average rose 1.6 percent.

Despite this market’s overwhelming size, when it comes to trading currencies, the concepts are simple. Let’s take a look at some of the basic concepts that all forex investors need to understand.

Eight Majors
Unlike the stock market, where investors have thousands of stocks to choose from, in the currency market, you only need to follow eight major economies and then determine which will provide the best undervalued or overvalued opportunities. These following eight countries make up the majority of trade in the currency market:

1. United States 
2. Eurozone (the ones to watch are Germany, France, Italy and Spain) 
3. Japan 
4. United Kingdom 
5. Switzerland 
6. Canada 
7. Australia 
8. New Zealand

These economies have the largest and most sophisticated financial markets in the world. By strictly focusing on these eight countries, we can take advantage of earning interest income on the most credit worthy and liquid instruments in the financial markets.

Economic data is released from these countries on an almost daily basis, allowing investors to stay on top of the game when it comes to assessing the health of each country and its economy.)

Yield and Return
When it comes to trading currencies, the key to remember is that yield drives return.

When you trade in the foreign exchange spot market, you are actually buying and selling two underlying currencies. All currencies are quoted in pairs, because each currency is valued in relation to another. For example, if the EUR/USD pair is quoted as 1.3500 that means it takes $1.35 to purchase one euro.

In every foreign exchange transaction, you are simultaneously buying one currency and selling another. In effect, you are using the proceeds from the currency you sold to purchase the currency you are buying. Furthermore, every currency in the world comes attached with an interest rate set by the central bank of that currency’s country. You are obligated to pay the interest on the currency that you have sold, but you also have the privilege of earning interest on the currency that you have bought.

As an example, let’s look at the New Zealand dollar/Japanese yen pair (NZD/JPY). Let’s assume that New Zealand has an interest rate of 8% and that Japan has an interest rate of 0.5% In the currency market, interest rates are calculated in basis points. A basis point is simply 1/100th of 1%. So, New Zealand rates are 800 basis points and Japanese rates are 50 basis points. If you decide to go long NZD/JPY you will earn 8% in annualized interest, but have to pay 0.50% for a net return of 7.5%, or 750 basis points.

Leveraging Returns
The forex market also offers tremendous leverage – often as high as 100:1 – which means that you can control $10,000 worth of assets with as little as $100 of capital. However, leverage can be a double-edged sword; it can create massive profits when you are correct, but may also generate huge losses when you are wrong.

Clearly, leverage should be used judiciously, but even with relatively conservative 10:1 leverage, the 7.5% yield on NZD/JPY pair would translate into a 75% return on an annual basis. So, if you were to hold a 100,000 unit position in NZD/JPY using $5,000 worth of equity, you would earn $9.40 in interest every day. That’s $94 dollars in interest after only 10 days, $940 worth of interest after three months, or $3,760 annually. Not too shabby given the fact that the same amount of money would only earn you $250 in a bank savings account (with a rate of 5% interest) after a whole year. The only positive over having the bank account earn you interest is that the return would be risk-free.

The use of leverage basically exacerbates any sort of market movements. As easily as it increases profits, it can just as quickly cause large losses. However, these losses can be capped through the use of stops. Furthermore, almost all forex brokers offer the protection of a margin watcher – a piece of software that watches your position 24 hours a day, five days per week and automatically liquidates it once margin requirements are breached. This process insures that your account will never post a negative balance and your risk will be limited to the amount of money in your account.

Carry Trade Success
The key to creating a successful carry trade strategy is not simply to pair up the currency with the highest interest rate against a currency with the lowest rate. Rather, far more important than the absolute spread itself is the direction of the spread. In order for carry trades to work best, you need to be long a currency with an interest rate that is in the processes of expanding against a currency with a stationary or contracting interest rate. This dynamic can be true if the central bank of the country that you are long is looking to raise interest rates or if the central bank of the country that you are short is looking to lower interest rates.

In the previous USD/JPY example, between 2005 and 2006, the U.S. Federal Reserve was aggressively raising interest rates from 2.25% in January to 4.25%, an increase of 200 basis points. During that same time, the Bank of Japan sat on its hands and left interest rates at zero. Therefore, the spread between U.S. and Japanese interest rates grew from 2.25% (2.25% – 0%) to 4.25% (4.25% – 0%). This is what we call an expanding interest rate spread. 
The bottom line is that you want to pick carry trades that benefit not only from a positive and growing yield, but that also have the potential to appreciate in value. This is important because just as easily as currency appreciation can increase the value of your carry trade earnings, currency depreciation could erase all of your carry trade gains and then some.

Getting to Know Interest Rates
Knowing where interest rates are headed is important in forex trading and requires a good understanding of the underlying economics of the country in question. Generally speaking, countries that are performing very well, with strong growth rates and increasing inflation will probably raise interest rates to tame inflation and control growth. On the flip side, countries that are facing difficult economic conditions ranging from a broad slowdown in demand to a full recession will consider the possibility of reducing interest rates.

Conclusion
Thanks to the widespread availability of electronic trading networks, forex trading is now more accessible than ever. The largest financial market in the world offers a world of opportunity for investors who take the time to get to understand it and learn how to mitigate the risk of trading here.

]]> http://www.forexyellowpages.com/basic-concepts-for-the-currencies-market/feed 0 http://www.forexyellowpages.com/what-a-9-7-percent-unemployment-rate-means http://www.forexyellowpages.com/what-a-9-7-percent-unemployment-rate-means#comments Mon, 08 Feb 2010 13:48:04 +0000 Paul http://www.forexyellowpages.com/?p=757 Despite economists’ expectations that the unemployment rate would climb well into the economic recovery, the percentage of unemployed, job-seeking Americans fell 0.3 percentage point in January to 9.7 percent, its lowest point since August. The unemployment rate is calculated through a separate survey from the payroll count, which found the nation’s employers still reluctant to add new workers, as jobs fell by 20,000.

The report truly brought mixed news. While employers are still not beefing up their payrolls, the Labor Department’s survey of households found major employment gains. The results were altogether better than many were expecting. “All in all, we see encouraging signs of progress in labor market conditions and expect to see much better payroll performance … in coming months,” Morgan Stanley economists Ted Wieseman and David Greenlaw wrote in a morning note.

Where is the hiring? For one thing, the Labor Department reports that the number of people in part-time jobs who want full-time work but can’t find it or had their hours cut, fell from 9.2 million to 8.3 million. Not surprisingly, the average number of hours worked in a week rose 0.1 hour to 33.3 hours. These are good indications that demand is picking up and employers are responding by paying their employees to work more hours, which may be a first step, before they begin hiring new workers.

Perhaps the strongest indicator that employers are testing the hiring waters is the continuing increase in temporary help services jobs. In January, employers added 52,000 temp jobs, bringing the total number of temp jobs added since September to 247,000. Many economists consider temp services a leading indicator for permanent hires, but some are cautious. “Whether this is a harbinger of stronger gains in permanent employment or a reflection of many businesses still not being convinced that they need to pull the trigger on permanent hires remains to be seen,” says Joshua Shapiro, chief U.S. economist at MFR.

The retail sector also saw job growth, adding 42,000 jobs last month. The biggest gains were in food stores and clothing stores. Healthcare continued to expand its payrolls, and the federal government added 33,000 jobs, 9,000 of which are temporary positions for the census. State and local governments, wrestling with major budget woes thanks to a double whammy of higher recessionary expenses and lower tax revenues, continued to lose jobs.

Who’s seeing some benefit? This recession has been coined the “man-cession,” because of the massive job losses in the construction and manufacturing industries, which traditionally employ disproportionately high percentages of men. Indeed, last month, women made up an astounding 49.9 percent employed workers. When the recession began in 2007, 48.8 percent of nonfarm payroll employment was made up of women. Last month the unemployment rate for women fell to 7.9 percent, compared with a steady 10 percent unemployment rate among men.

A major bright spot in the report was the significant decline in the percentage of under-employed workers–the job-seeking unemployed plus those who are working part-time but want full time work; the unemployed who are not looking for work because they are in school or have other obligations; as well as those who have simply lost hope in finding work. In January, the under-employed made up 16.5 percent of the workforce, down 0.8 percentage point from December.

Who’s still hurting? There’s no question that the workers struggling most now are those who have been out of work the longest. The number of unemployed who have been out of work for 27 weeks or more reached 6.3 million in January. The average duration of unemployment among the jobless reached 30.2 weeks. That means more than 40 percent of the unemployed have been looking for work for about seven months or more.

That may in part be because the recession continues to hammer specific sectors. Construction employment fell by another 75,000 in January. Most of the job losses were in non-residential specialty trade construction. The sector has now lost 1.9 million jobs since the start of the recession. Also last month, 19,000 transportation and warehousing jobs were cut, driven by a big loss in courier and messenger jobs.

This week the National Employment Law Project reported nearly 1.2 million unemployed will become ineligible for federal jobless benefits in March, and by June, 5 million would become ineligible. “The continued high rate of long term unemployment reflected in January’s jobs report underscores the urgent need for action from Congress to maintain the lifeline of jobless benefits for millions of unemployed workers caught in the undertow of this recession,” says Christine Owens, executive director of NELP.

Will the job market keep improving? No one knows what this recovery will look like, although most economists believe that jobs will take some time to recover. The Labor Department revised its earlier job loss and gain figures to show that 64,000 jobs were added in November, rather than the 4,000 originally reported. While that gain sounds pretty good, the figures for December were revised to show 150,000 jobs were slashed from payrolls, instead of the 85,000 job cuts first reported. Nobody expects a smooth trend, but these numbers make it very difficult to know what future months will hold.

Morgan Stanley’s Wieseman and Greenlaw said they are getting “closer to calling the peak in the unemployment rate.” Still, the unemployment rate could bounce higher again if workers who dropped out of the job hunt are encouraged enough to jump back in. In the meantime, expect the Senate to move forward with a jobs bill aimed at small businesses, infrastructure investment, and green energy. “While today’s report shows positive signs that the economy is moving in the right direction, the numbers underscore that we still have work to do to get Americans back to work,” Labor Secretary Hilda Solis said in a statement. “The president has made it clear that job creation is our number one focus in 2010.”

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Is This Rally Out of Sync with the Economy?

But the dollar isn’t an asset — it’s a vehicle through which investments are made. And the fact that investors around the world are buying more and more non-U.S. assets suggests that the dollar will keep falling.

There are, of course, plenty of reasons here at home that the dollar is faltering. Among them: rising deficits; low interest rates paid out by our bonds; and rising inflation fears.

But the dollar is also weaker because “investors think there are better places to put their money to work than in the U.S.,” says Jack Ablin, chief investment officer for Harris Private Bank.

Indeed, the 37% drop in the dollar’s value against a basket of other currencies since 2001 coincides with an unprecedented demand for the assets of other economies, especially shares of companies in fast-growing places such as China and Latin America.

A decade ago, U.S. stocks comprised 54% of the world’s stock market value; today they represent only a third. As investors shift out of the U.S. market, they exchange dollars for the currencies of countries where they’re doing their buying, reducing demand for the buck.

Safety isn’t enough

To be sure, the dollar is still the world’s “safe haven” currency, says Jeffrey Kleintop, chief market strategist for LPL Financial. The dollar’s value spiked after the 9/11 terrorist attacks and again last year during the global credit freeze.

In both instances investors rushed into Treasury bonds, which required the purchase of dollars. So there will be occasions when the buck bucks its long-term trend. But that’s not the same as holding back the tide.

Expand your horizons

This doesn’t mean that the U.S. economy is crumbling. The strength of a nation’s currency is never a pure reflection of economic might. The yen gained on the dollar this year even though Japan’s economy shrank twice as fast as this country’s did.

Nor does it mean you should be dumping U.S. stocks. Keep in mind that nearly half of all revenue for companies in the S&P 500 index comes from outside the U.S., up from 32% at the start of this decade. And the falling buck makes dollar-based goods look attractive to foreign buyers. A jump in U.S. exports is already starting to help, as third-quarter S&P 500 earnings are coming in ahead of analyst estimates.

But the dollar’s long-term decline does argue for keeping a sizable portion of your stock portfolio — at least 25% and up to 50% — in foreign shares. Their value will rise simply based on the currency exchange. Meanwhile, you’ll be taking advantage of the opportunities that await you overseas.