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Is the UK bear market already here?

Posted January 17, 2008

"It takes quite a while for unemployment figures to tick up, even when an economy is clearly in trouble. In the US, jobless data only started to look worrying towards the end of last year, despite the clear trouble in the housing market and some early forecasts of recession." — John Stepek.

John Stepek of Money Week wrote an inciteful story on the possible coming bear market in the United Kingdom. And with the UK and U.S. economies so intertwined, a bear market in one can only mean coming trouble in the other. You can find the article here or read on for more.

by John Stepek

Baltimore and London (TFN): Amid all the gloom – and there was plenty of it, with stock markets tanking around the world again yesterday – employment figures from the UK were a rare ray of sunshine.

Apparently, unemployment hit a 32-year low in the three months to November, while pay rises remained under control, growing at an annual rate of around 4%.

Gordon Brown of course, cheered the news. But I wouldn’t get too excited. As we’ve already seen from America, and has been mentioned a few times here, employment is a lagging indicator – it only starts to turn down after everything else has gone wrong.

So not long now then…

Record employment data for the UK was shrugged off by John Philpott of the Chartered Institute of Personnel and Development. He told The Telegraph that the “figures tell us what we already know – that the economy was growing strongly for much of last year and this had a beneficial lagged impact on employment. Unfortunately, the economic outlook is not so good and for employment the scene will start to look a lot weaker by the spring.”

As I’ve pointed out before, it takes quite a while for unemployment figures to tick up, even when an economy is clearly in trouble. In the US, jobless data only started to look worrying towards the end of last year, despite the clear trouble in the housing market and some early forecasts of recession.

UK Bear Market: Woolworths disappoints – as usual

But they won’t hold out for much longer. Credit rating agency Experian has been a direct victim of the credit crunch. It said yesterday it will cut hundreds of jobs in Britain and outsource them overseas, in a move to cut costs as banks rein in their credit and mortgage lending.

And there was more bad news from the high street – though not from an unexpected source. Shares in the perennially disappointing Woolworths fell to an all-time low of 8p yesterday after it refused to report like-for-like sales data for the Christmas period. The group only released data for the 49 weeks to January 12th, which were bad enough, showing a 3.2% like-for-like fall in retail sales.

Chief executive Trevor Bish-Jones said that the six-week figure “would be meaningless. Christmas was about optimising profit, not driving sales.” But why not let the market decide that for itself? In any case, as The Telegraph’s Tom Stevenson pointed out, “you didn’t have to be a genius” to work out, given that like-for-like sales were only down 0.4% in the 38 weeks to October, that Woolies must have had “a dismal festive season.”

UK Bear Market: Can the FTSE 100 stay out of the bears’ clutches?

Incidentally, the FTSE 250 – widely seen as a better barometer of the UK economy’s fortunes – is now officially in bear market territory, having fallen 21% from last May’s 12-month peak (a 20% fall or more is widely seen as a bear market). Read on to learn if the FTSE 100 will follow the 250 down the drain and whether the metals market can prop up the British economy through a possible coming crash.

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Posted by John Stepek · Filed Under International Investing 

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