By Hideki Sagiike and Masaki Kondo
April 27 (Bloomberg) -- The Standard & Poor’s 500 Index is poised to fall as chronic unemployment rises to a record among jobless Americans, according to Mitsubishi UFJ Securities Co. the brokerage unit of Japan’s biggest bank by market value.
The CHART OF THE DAY shows the S&P 500 and ratio of Americans jobless for more than 27 weeks relative to the total number of unemployed. The equities gauge has jumped 80 percent from a more than 12-year low on March 9, 2009, even as long-term joblessness surged to 44.1 percent in March, almost double the level a year earlier and highest since records began in 1948. The lower panel tracks overall unemployment, which has declined 0.4 percentage point since reaching a 26-year peak in October.
“The government’s stimulus measures have driven up stock prices” and helped disguise the unemployment problem, said Seiki Orimi, a senior investment strategist at Tokyo-based Mitsubishi UFJ. “Stocks will fall, at some point. For now, people in the market are tricking themselves” into believing in a U.S. jobs recovery.
Consumer spending accounted for about 70 percent of the world’s largest economy in the fourth quarter, when gross domestic product expanded at a 5.6 percent annual rate, the fastest pace in more than six years. Output in the three months to March probably expanded 3 percent, based on the median forecast of 60 economists surveyed by Bloomberg. The S&P 500 may fall as much as 5 percent in an “overdue” decline, according to a technical analysis this month by Thomas Schroeder, managing director at Chart Partners Group Ltd.
Jobless Benefits
The U.S. posted a budget deficit for a record 18th straight month in March, reflecting gains in government spending to boost the economy. President Barack Obama signed a bill on April 15 extending jobless benefits for hundreds of thousands of Americans to June 2, and urged Congress to pass another measure offering them for the rest of the year.
“Historically, people unemployed for more than six months experience a significant deterioration of vocational skills and face severe difficulties in finding their next job,” Richard Koo, chief economist at Tokyo-based Nomura Research Institute Ltd., wrote in a report on April 20.
(To save a copy of the chart, click here.)
To contact the reporter for this story: Hideki Sagiike in Tokyo at hsagiike@bloomberg.net; Masaki Kondo in Tokyo at mkondo3@bloomberg.net
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