Unemployment Climbs Sharply

Unemployment is at a 14 year high according to figures released by the Labor Department last Friday.

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The unemployment rate spiked to 6.5% in October from 6.1%. The country has lost about 1.2 million jobs so far this year, with more than half of those losses coming in just the past three months.

The post-World War II high water mark for unemployment of 10.8% was achieved in the 1982 recession that followed the Reagan administration’s ultimately successful war on inflation. The 1992 high point for unemployment was 7.8% following the 1990 – 91 recession and U.S. S&L crisis.

According to a report by the Wall Street Journal, many forecasters expect joblessness to top 8% by the end of 2009.

Spiking unemployment could actually be a positive sign for investors.  In 1991, the year before the 1992 peak, US stocks climbed 26%.

An ETF with broad exposure to US stocks is the Vanguard Total Stock Market ETF (VTI) which typically holds the largest 1,200–1,300 stocks in its target index (covering nearly 95% of the index’s total market capitalization) and a representative sample of the remaining stocks.

1991 was even better for Latin America.  Brazil stocks rose 1,569% that year.

The largest Brazil ETF is the MSCI Brazil Index Fund (EWZ).  Top holdings include Petrobras and Vale.

For more, see Investing in Brazil with Exchange Traded Funds.