Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest.

What’s the most important statistic investors should be watching this autumn? Not GDP, inflation or retail sales. No, the key driver of the economy for the foreseeable future is the unemployment rate.

Many of us will have read The Grapes of Wrath at school, John Steinbeck’s classic tale of Depression-era joblessness. For some of us, unemployment came much closer to home in the 1980s when Margaret Thatcher reshaped the UK economy and the industrial heartlands of the Midlands and North paid for Britain’s new focus on services and finance.

The dispiriting search for a job has not been a major part of the economic narrative for more than 30 years now. But that may well change this autumn as governments rein in their employment protection schemes and employers take the hard decision that some of the positions they have held open on the back of government support are not viable when it ends.

The coronavirus has added millions to the official unemployment statistics. But many economists think that the real picture is much worse than the data are showing. That’s because the headline numbers don’t include those still protected by furlough schemes, or who have simply dropped out of the workforce or who are working fewer hours than they would choose to do in better times.

Each crisis is different. The financial crisis in 2008 was all about the banks and their inability or unwillingness to lend. Three years later, the Eurozone sovereign debt crisis was focused on over-leveraged governments. Like the Great Depression, however, it looks like this one will be remembered for the impact it has had on employment.

The way the data is collected in different countries makes comparisons difficult. In Europe, the official jobless rate is about 8%, not much higher than the 6.5% it stood at in February. But it is thought that the real rate is probably up to 4.5 percentage points worse than this. With schools back and many parents now testing the jobs market again, the real figure might quickly rise in the weeks ahead.

In America, things are different. The jobless rate spiked higher there because furloughed employees are classified as being out of work. The unemployment rate quickly rose to 14.7% and it has almost halved since the summer as the quick to fire, quick to rehire US jobs market painted a more accurate picture of what was really going on.

Even there, however, a decline in labour force participation means the real figure is probably closer to 10% than the 7.9% official rate.

So, what does this mean for the recovery? It probably means that hopes for a V-shaped economic recovery are finally put to bed. A more protracted U-shape, or a swoosh which starts as a V but then peters out, looks more realistic.

The danger is that fear of unemployment, as much as joblessness itself, leads to lower consumer confidence, less discretionary spending and more precautionary saving. That’s a bad combination for economic growth.

For investors, it means that the long-awaited rotation from growth stocks (which can deliver in all economic conditions) to value (which requires a buoyant economy) will be delayed yet again. Defensive, high-quality growth stocks look a safer bet for investors for the foreseeable future.

The outlook for employment is just one of the things we are watching closely as we move into the final quarter of 2020. Also on our radar will be the upcoming third-quarter earnings season, Brexit and, of course, the US Presidential election. For more on all of these, make sure you catch next week’s Investment Outlook webcast which will be published on Wednesday when I will take questions from investors. You can send me your questions in advance (by Monday 12 October please), and watch the Outlook, here.

Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.

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