The stock market has enjoyed a healthy rally since March because of rising unemployment. The horror of high unemployment has bolstered equities because of its impact on corporate profits. The US corporate sector has slashed costs during the past year by eliminating more than 8m jobs and trimming the working week to a record low. During the past 18 months the US economy has lost a third more jobs than predicted by econometric models on the basis of the decline in real gross domestic product.

The result of this slashing in the workforce has been a 4 per cent growth of productivity during the past year, and 8.1 per cent during the third quarter. Such gains are unique during a severe recession – and make US companies far more competitive, priming them for an export boom. In the mild recession of 2000-01, there was also an uptick of productivity, but the economy lost jobs for two years after the recession formally ended, in a jobless recovery.

There has been only modest growth in wages since the downturn began, with unit labour costs falling 2.5 per cent during the third quarter of the year. In the severe downturns of 1973-75 and 1981-82 pay grew steadily, despite plunging output. Inflation was much higher in those periods, so firms found it more difficult to restrain costs.