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The October estimate
of non-farm payrolls saw firms reduce payrolls by -240K for the month and the
rate of unemployment jump sharply to 6.5%. Revisions made by Labor Department
subtract an additional -179K over the past two months. The decline in
October's payroll tally has reduced employment by 1.2mln during the first 10
months of 2008, with over half of that total occurring over the past 90 days.
The household survey saw a decline of -297K, which is above its three-month
average of -287K. The number of unemployed individuals increased by 603K to
10.1mln in October.
Inside the data,
total private employment declined by -263K on the back of a drop of -132K in
the goods producing sector, -49K in the construction sector and -90K in the
manufacturing sector. The service sector saw a decline of -108K, with
declines in trade, retail, and financial and business services leading the
way. The only sectors of the economy that saw an increase in hiring during
the month was the education and health sector which added 21K jobs and the
government sector that added 23k.
 
The decline in the
rate of unemployment jumped to 6.5%, which is higher than the peak following
the most recent recession signaling that the current economic contraction
will see a far higher rate of destruction in the labor sector than has been
seen since the early 1980's. Since March 2007 the rate of unemployment has
increased 2.1% and is up 1.6% since February of this year. A quick
observation of the duration of unemployment indicates that individuals are
experiencing a much more difficult time finding jobs that correspond with
their skill sets. The number of people unemployed for 15 weeks or longer is
up to 40K and those experiencing unemployment for 27 weeks or longer
increased to 23.6k. This data supports the weekly increase in the weekly
continuing claims series that implies that individuals in the manufacturing,
real estate and financial communities may be on the cusp of experiencing a
type of structural unemployment of the kind that has not been seen since the
breakdown of the steel and coal industries over three decades ago.
The slow burn that
has typified the labor sector over the past year has proceeded at a red hot
pace over the past 90 days, as the headline saw its tenth straight month of
declines. The layoffs that the market is observing are directly attributable
to the dislocation in economy associated with the ongoing credit crunch. The
market should assume that massive layoffs are in the pipeline as firms react
to the searing decline in real personal consumption and the coming
retrenchment in demand from the external sector. We have updated our baseline
forecast of unemployment to 8.0% one year out with considerable room to run
to the downside even after the economy stabilizes.
Joseph Brusuelas
Chief Economist
VP Global Strategy
Merk Investments LLC
Merk Investments LLC is the manager
of Merk Mutual Funds, including the Merk Asian Currency Fund and the Merk
Hard Currency Fund. The Merk Asian Currency Fund invests in a basket of Asian
currencies. Asian currencies the Fund may invest in include, but are not
limited to, the currencies of China, Hong Kong, Japan, India, Indonesia,
Malaysia, the Philippines, Singapore, South Korea, Taiwan and Thailand.
The Merk Hard Currency Fund invests
in a basket of hard currencies. Hard currencies are currencies backed by
sound monetary policy; sound monetary policy focuses on price stability.
The Funds may be appropriate for you
if you are pursuing a long-term goal with a hard or Asian currency component
to your portfolio; are willing to tolerate the risks associated with
investments in foreign currencies; or are looking for a way to potentially
mitigate downside risk in or profit from a secular bear market. For more
information on the Funds and to download a prospectus, please visit www.merkfund.com.
Investors should consider the
investment objectives, risks and charges and expenses of the Merk Funds carefully
before investing. This and other information is in the prospectus, a copy of
which may be obtained by visiting the Funds' website at www.merkfund.com or calling 866-MERK
FUND. Please read the prospectus carefully before you invest.
The Funds primarily invest in
foreign currencies and as such, changes in currency exchange rates will
affect the value of what the Funds own and the price of the Funds' shares.
Investing in foreign instruments bears a greater risk than investing in
domestic instruments for reasons such as volatility of currency exchange
rates and, in some cases, limited geographic focus, political and economic
instability, and relatively illiquid markets. The Funds are subject to
interest rate risk which is the risk that debt securities in the Funds'
portfolio will decline in value because of increases in market interest
rates. The Funds may also invest in derivative securities which can be
volatile and involve various types and degrees of risk. As a non-diversified
fund, the Merk Hard Currency Fund will be subject to more investment risk and
potential for volatility than a diversified fund because its portfolio may,
at times, focus on a limited number of issuers. For a more complete
discussion of these and other Fund risks please refer to the Funds'
prospectuses.
This report was prepared by Merk
Investments LLC, and reflects the current opinion of the authors. It is based
upon sources and data believed to be accurate and reliable. Opinions and
forward-looking statements expressed are subject to change without notice.
This information does not constitute investment advise nor a solicitation or
an offer to buy or sell any products or services. Foreside Fund Services,
LLC, distributor.
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