Facing a reality check
It has been a week of positive news for the leaders of our largest economies. But beneath the surface sheen things appear to be getting worse
Some good news at last. It’s official, summer has arrived. So no one paid much attention on Friday to those UK and US jobless figures,
London’s G20 Summit dominated the headlines - and why not. Everyone has had enough of bad news.
The leaders of the 20 richest nations in the world arrived in London, confirmed they faced the greatest challenge to the world economy in modern times and then agreed to treble IMF resources to $750 billion, to support a new SDR allocation of $250 billion, to support at least $100 billion of additional lending by the multilateral development banks, to ensure $250 billion of support for trade finance, and to use the additional resources from agreed IMF gold sales for concessional finance for the poorest countries. That little package added up to a $1.1 trillion programme of support to restore credit, growth and jobs in the world economy.
Gordon Brown clearly went home a happy man on Thursday night.
What he didn’t mention was that the UK economy was still among the weakest in Europe as Britain had just shed another 4,000 jobs in a week.
The insurance industry was one of the worst hit after two large firms announced 2,250 job cuts.
Aviva will lose 1,100 jobs in Britain,while reinsurance group Swiss Re, with its main UK office at London’s famous "Gherkin" tower, said it planned to cut more than 1,000 jobs.
The Zurich-based company, which has, did not disclose where the jobs would go or how many staff were employed in the UK. Swiss Re also has an office at Folkestone, Kent. The company has been hit by write-downs and losses on its investment portfolio and is trying to reduce costs by 400 million Swiss francs (£240m) by the end of next year.
British Airways, jet maker Bombardier and Filtrona Filters, in Bedesway, Jarrow, slashed several thousand between them.
Meanwhile protests continued their campaign at Visteon after the Ford car parts supplier announced 560 jobs were lost.
Former workers remain on roofs and the outskirts of their factories in Enfield, Belfast and Basildon until their demands for redundancy are met.
Nortel Networks UK, based in Maidenhead, Berkshire, shed another 228 jobs.
Figures released on Friday revealed America is faring somewhat worse. The US unemployment rate has risen to a 26-year high of 8.5 percent, bringing the number of jobs lost since the downturn began to 5 million.
The US labour department figures showed 663,000 jobs were lost in March.
Employment is falling in all sectors other than healthcare and education, while 161,000 posts were lost in manufacturing, 133,000 in professional and business services and 126,000 in construction.
Despite the gloomy outlook, markets have responded favourably to the pre- and post Summitt rhetoric.
The Dow Jones Industrial Average recorded its best four-week stretch since 1933 risingt 39 points to 8017.
Obama’s $787bn (£530bn) stimulus package combined with the US treasury's latest plan to clean up banks' toxic assets has seen the blue-chip Dow Jones index rally by 21 percent since 9 March. Not all bad then.
I predict a false dawn. Expect a reality check over the next few months as mass redundancies take their toll on the much over inflated housing market.
