by ilene - February 6th, 2010 11:09 am
Courtesy of Peter Schiff writing at Clusterstock
(This post previously appeared at Peter Schiff’s website - More Government Equals Fewer Jobs)
With today’s unexpected decline in December payrolls, the cry for more job-related stimulus will grow even louder. But the sad truth is that any new stimulus or jobs bills will ultimately swell the ranks of the unemployed, thereby raising calls for an even bigger federal effort. If we are not careful, government regulations, subsidies, and spending, all designed to fight unemployment, could push the labor market into a death spiral.
Regulation acts like a tax on job creation. By subjecting employers to all sorts of extra expenses when they hire people, regulations increase the cost of employment far beyond the wages employers actually pay their workers. In fact, some regulations are specifically tied to the number of workers employed. This provides some employers with a strong incentive to stay small and not hire.
The minimum wage law, which is really just a very visible workplace regulation, actually makes it illegal for employers to hire certain individuals and destroys entire categories of jobs. For instance, faced with high labor costs, some restaurants will avoid hiring dishwashers by switching to plastic utensils and paper plates. On a larger scale, factories may decide to switch to robotic assembly lines if human labor gets too expensive.
Other types of regulations, such as those that prohibit discrimination, create incentives for employers not to hire individuals that fall within the protected class. This is the result of potential litigation costs that may result from wrongful termination lawsuits. In other words, the more expensive government makes it to fire workers, the less likely they are to hire them in the first place.
Subsidies produce the opposite effect of regulation, but sometimes the results can be just as harmful. Government subsidies divert resources towards politically favored activities, resulting in more jobs in areas such as health care and education, but fewer jobs in other sectors such as manufacturing. The net effect of this transfer is to diminish the productive capacity and efficiency of the economy, which lowers real economic growth and diminishes employment opportunities.
Although not as visible as regulations and subsidies, government spending also plays a large role in job destruction. The more money government spends, the more resources it drains from the private sector. The fiscal…
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by ilene - February 5th, 2010 12:32 pm
Here’s Mish’s detailed breakdown of the confusing unemployment numbers. - Ilene
Courtesy of Mish
In the continuing theater of BLS absurdities, the unemployment rate fell to 9.7% in spite of a 25th consecutive month of job losses. Some stopped counting at 22 months in November. However, I find November questionable.
This month professional services contributed 44,00 jobs to the plus side, but 52,000 of them were part-time jobs. Amazingly a table below shows the number of part-time workers decreased by 849,000 from last month. Go figure.
Moreover, the so-called 64,000 rise in November can be attributed to the seasonally adjusted hiring of 94,000 temporary workers. Here is a look at revisions ….
BLS Revisions
[click on charts to enlarge]
Household Revisions
The above table does not affect the unemployment rate. Revisions to the Household Survey do. Here are the household revisions.
Bingo. Just like that the population shrank as did the civilian labor force.
For some reason the BLS does this in pieces. The following chart shows the result.
There are now a whopping 2.5 million people without a job but want one, yet are not counted as unemployed.
So yes, the "official unemployment rate" can hold its own or even drop with this kind of nonsense.
Now for a closer look at the report ….
This morning, the Bureau of Labor Statistics (BLS) released the January 2010 Employment Report.
The unemployment rate fell from 10.0 to 9.7 percent in January, and nonfarm payroll employment was essentially unchanged (-20,000), the U.S. Bureau of Labor Statistics reported today. Employment fell in construction and in transportation and warehousing, while temporary help services and retail trade added jobs..
Establishment Data
click on chart for sharper image
Highlights
Look at that last line again.
November added 94,000 temporary jobs seasonally adjusted. Even if true it is hardly anything to crow about but it does explain the positive job growth in…
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by ilene - February 3rd, 2010 11:07 am
Courtesy of Edward Harrison at Credit Writedowns
If you have been watching the news flow in the last month, you would certainly have the impression that there are an increasing number of large layoffs – Sam’s Club being a notable one. Before January, the jobless
Challenger Grey, which tracks this data, confirms this news.
Planned layoff announcements at major U.S. corporations increased 59% in January, reaching 71,482 from a nine-year low of 45,094 seen in December, according to the latest job-cut tally by Challenger Gray & Christmas.
Is this something seasonal – a one-off post Holiday retrenchment? Let’s see going forward. At a minimum, we should take some comfort that we are coming off near decade low layoff announcements.
Meanwhile ADP has come out with data which confirms that the private
Nonfarm private employment decreased 22,000 from December 2009 to January 2010 on a seasonally adjusted basis, according to the ADP National Employment Report®. The estimated change of employment from November to December 2009 was revised by 23,000, from a decline of 84,000 to a decline of 61,000.
The January employment decline was the smallest since employment began falling in February of 2008.
Let’s not forget that looming state budget difficulties means cutbacks in state government payrolls too. So it is unclear where the jobs growth is going to come from. But, this much is clear: if you think the federal government should create incentives for hiring, then the proposals coming out the White House are not going to put a dent in the unemployment problem. Harold Myerson of the Washington
The Democrats have shifted their focus, they tell us relentlessly, to jobs, jobs, jobs.
Would that they had.
In fact, the job proposals coming from the Obama administration and the Democratic Congress are far too small to seriously reduce the massive unemployment created when the financial and housing bubbles popped. Many Democratic leaders know that, and some want to do more.
The current proposals, I was told this past weekend by George Miller, chairman of the House Education and Labor Committee and probably Speaker Nancy Pelosi’s most trusted counselor, "are not adequate to the scope of the problem. You still…
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by Phil - January 21st, 2010 8:26 am
After what looked like a good recovery, there are signs that Northeast Manufacturing is in shap decline.
Jobless numbers are on the upswing as temporary holiday hiring is being trimmed faster than census jobs can pick up the slack. We had a big build in inventories in Q4 as clearly manufacturers were overly optimistic and a sharp rise in commodity prices during the quarter didn’t help much either. We get the official report at 10am today and the most optimistic expectations have us down about 10% from last month’s 20.4 reading so we can expect today’s report to move the market one way or the other.
Not to worry though because, as Jonathan Weil points out in Bloomberg today, "the fix is in" on Wall Street as the 10-member Financial Crisis Inquiry Commission has been given 11 months and $8M to examine the causes of the financial crisis, including Fannie Mae’s 2008 meltdown and the near-deaths of at least 10 other major financial institutions, including Lehman Brothers Holdings Inc., American International Group Inc. and Citigroup. The statute that created the commission says its report specifically must tackle the role of regulators, monetary policy, accounting practices, tax policy, fraud, capital requirements, credit raters, executive pay, derivatives and short selling — plus a dozen other required areas of study.
Wow, that’s a lot of ground to cover! To put in perspective what a joke this is, Weil points out that when Fannie Mae hired former U.S. Senator Warren Rudman in 2004 to investigate how its accounting practices had gone awry, his law firm’s final report took 17 months to complete and cost the company more than $60 Million. $60M in 2004 to investigate ONE firm over 17 months and Congress has allocated $8M over 11 months to investigate a DOZEN firms as well as get an overview of the entire financial system. What are the odds the commission can conduct all these investigations by mid-December and do a thorough job? About zero, which clearly was Congress’s intent all along. If this is a joke, it’s a bad one and it’s on US!
This is why we’re bullish on the markets (or the market manipulators, at least) - fundamentals don’t matter! The banksters have taken control of government and are flat out laughing at us, the citizens of the US (and the world) as we cry "foul" and try to reign in the madness. This is not just a US problem, it’s a global problem but you…
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by ilene - January 14th, 2010 7:58 am
Courtesy of Mish
Inquiring minds are reading the "Good News" from the Fed’s Beige Book today.
Reports from the twelve Federal Reserve Districts indicated that while economic activity remains at a low level, conditions have improved modestly further, and those improvements are broader geographically than in the last report.
Highlights
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by ilene - January 10th, 2010 7:53 pm
Courtesy of George of Washington’s Blog
Everyone knows that the too big to fails and their dishonest and footsy-playing regulators and politicians are largely responsible for trashing the economy.
But the military-industrial complex shares much of the blame.
Nobel prize winning economist Joseph Stiglitz says that the Iraq war will cost $3-5 trillion dollars.
Sure, experts say that the Iraq war has increased the threat of terrorism. See this, this, this, this, this, this and this. And we launched the Iraq war based on the false linkage of Saddam and 9/11, and knowingly false claims that Saddam had WMDs. And top British officials, former CIA director George Tenet, former Treasury Secretary Paul O’Neill and many others say that the Iraq war was planned before 9/11. But this essay is about dollars and cents.
America is also spending a pretty penny in Afghanistan. The U.S. admits there are only a small handful of Al Qaeda in Afghanistan. As ABC notes:
U.S. intelligence officials have concluded there are only about 100 al Qaeda fighters in the entire country.
With 100,000 troops in Afghanistan at an estimated yearly cost of $30 billion, it means that for every one al Qaeda fighter, the U.S. will commit 1,000 troops and $300 million a year.
Sure, the government apparently planned the Afghanistan war before 9/11 (see this and this). And the Taliban offered to turn over Bin Laden (see this and this). And we could have easily killed Bin Laden in 2001 and again in 2007, but chose not to, even though that would have saved the U.S. hundreds of billions of dollars in costs in prosecuting the Afghanistan war. But this essay is about dollars and cents.
Increasing the Debt Burden of a Nation Sinking In Debt
All of the spending on unnecessary wars adds up.
The U.S. is adding trillions to its debt burden to finance its multiple wars in Iraq, Afghanistan, Yemen, etc.
Two top American economists - Carmen Reinhart and Kenneth Rogoff - show that the more indebted a country is, with a government debt/GDP ratio of 0.9, and external debt/GDP of 0.6 being critical thresholds, the more GDP growth drops materially.
Specifically, Reinhart and Rogoff write:
The relationship between government debt and real GDP growth is weak for debt/GDP ratios below a threshold of 90 percent of GDP. Above 90 percent, median growth rates fall by one percent, and average growth falls considerably more. We find that the threshold for public debt is similar in advanced…
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by Zero Hedge - January 9th, 2010 12:58 pm
Courtesy of Tyler Durden
By now everyone knows about the Rip Van Winkle effect in stocks: the "noughties" were a snoozer, with the stock market lower on December 31, 2009 than on January 1, 2000. Yet what may have escaped most people is that the decade was also a scratch in terms of employment: the country now has essentially the same number of employed people as it did 10 years ago.
The problem, of course, is that both the total population, and the size of the workforce have not stayed flat over the past 10 years. The charts below demonstrate the Employment-To-Population ratio for all time, and, more disturbingly, for the past 3 years. This ratio is now the lowest it has been in almost 30 years.
David Rosenberg, who made the observation, had this to say about this very troubling trend:
We started the decade with a national payroll level of 130.8 million. We finished the decade practically unchanged at 130.9 million. Meanwhile, the total pool of available labour rose from 146 million to 159 million. In other words, we have the same number of jobs today as we did a decade ago, and yet we also have 13 million more people competing for them. It was more than just a lost decade for the equity market. It was a lost decade for the labour market. Today’s report validated the Fed’s concern over the outlook for employment, which dominated the FOMC minutes released earlier in the week. Those pundits calling for an early exit from the central bank’s accommodative stance may have some reconsidering to do.
An even better way to visualize this, is the difference between the total number of civilians employed and the total US population (308.3 million). The number in December is a record 170.5 million. Keep in mind only 137.8 million are currently employed according to the BLS.
There isn’t much spinability here. The employment picture in America is horrendous and getting worse. In the worlds of Rosenberg again:
The so-called ‘employment rate’ — the ratio of employment to population — fell 58.2% from 58.5% in November and the cycle peak of 63.4% in 2007. This is extremely significant because what it means is that it would take an expansion in employment of 20 million over the next five years just to get back to those old cycle highs. But here’s the problem — the country has never before managed to come close…
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by ilene - January 8th, 2010 4:24 pm
Courtesy of Joe Weisenthal of Clusterstock
David Rosenberg has A LOT to say about this morning’s miserable jobs report. Actually, in his latest note he unloads a whole bunch of charts to show that the unemployment rate is even worse than you think it is.
Here they are in all their glory. The most striking one, we think, is the last one, that shows that the employment rate is just 58.2% . For every 100 people, 41.8 aren’t working, a brand new low.
Quick, where’s Malcolm Gladwell to explain the dependency!
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by ilene - January 8th, 2010 8:40 am
Courtesy of Joe Weisenthal at Clusterstock/Business Insider
.jpg)
The non-farm part of the economy whacked 85K jobs in December, which is worse than the no jobs lost economists had been expecting.
The unemployment rate came in at 10%, which is unchanged from last month.
But November was revised upward from its loss of 11K to a small gain, so that’s a positive.
Average hourly earnings were up .2%.
Here’s the full announcement from the BLS:
——
Nonfarm payroll employment edged down (-85,000) in December, and the unemployment rate was unchanged at 10.0 percent, the U.S. Bureau of Labor Statistics reported today. Employment fell in construction, manufacturing, and
wholesale trade, while temporary help services and health care added jobs.Household Survey Data
In December, both the number of unemployed persons, at 15.3 million, and the unemployment rate, at 10.0 percent, were unchanged. At the start of the recession in December 2007, the number of unemployed persons was 7.7 million, and the unemployment rate was 5.0 percent. (See table A-1.)
Revision of Seasonally Adjusted Household Survey Data
Seasonally adjusted household survey data have been revised using updated seasonal adjustment factors, a procedure done at the end of each calendar year. Seasonally adjusted estimates back to January 2005 were subject to revision. The unemployment rates for January 2009 through November 2009 (as originally published and as revised) appear in table B, along with additional information about the revisions
Unemployment rates for the major worker groups–adult men (10.2 percent), adult women (8.2 percent), teenagers (27.1 percent), whites (9.0 percent), blacks (16.2 percent), and Hispanics (12.9 percent)–showed little change in December. The unemployment rate for Asians was 8.4 percent, not seasonally adjusted. (See tables A-1, A-2, and A-3.)
Among the unemployed, the number of long-term unemployed (those jobless for 27 weeks and over) continued to trend up, reaching 6.1 million. In December, 4 in 10 unemployed workers were jobless for 27 weeks or longer. (See table A-9.)
The civilian labor force participation rate fell to 64.6 percent in December. The employment-population ratio declined to 58.2 percent. (See table A-1.)
The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was about unchanged at 9.2 million in December and has been relatively flat since March. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job. (See table A-5.)
About 2.5 million persons were marginally attached to the labor force in December, an increase of 578,000…
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by ilene - January 8th, 2010 12:19 am
Courtesy of Mish
I was intrigued by a post by Zero Hedge asking Is The Government Misrepresenting Unemployment By 32%?
"…government spent a record $14.7 billion on Unemployment Insurance Benefits as of December 30, a 24% jump sequentially from the $11.8 billion in November. Yet the DOL has disclosed a mere 1.7% increase in those to whom insurance benefits are paid: from 9.4 million to just under 9.6 million. To put the $14.7 billion number in perspective, in December the Federal Government paid a total of $14 billion ($700 million less) in Federal Salaries!
And some more perspective: in calendar 2009 the government has paid $140 billion in Unemployment Insurance Benefits. This is yet another economic stimulus that nobody in the administration discusses, yet which undoubtedly has the biggest impact on the economy, as all those millions unemployed can moderate their pain courtesy of a passable weekly check from the government which should just about cover the rent and beer.
Which is why more than anything, Obama is dead set on extending insurance benefit payments in perpetuity: because if the 10 million official and 14 million unofficial people who are on benefits (not to mention the tens of millions of unemployed unlucky enough to even get their weekly allowance from Uncle Sam) start thinking about their true predicament and their real "employability", then a landslide loss by this administration at the mid-term elections will actually be an upside surprise to what it can objectively expect.
I figured the explanation would show up in charts somewhere and I asked Chris Puplava at Financial Sense for a chart of Emergency Unemployment Compensation (EUC) Benefits as well as an update on other charts he has graciously provided on request.
Click on any chart below for a crisper image.
From Chris Puplava …
My answer would be a MASSIVE jump in the Emergency Unemployment Compensation (EUC) benefits, which jumped from 3,594,253 (11/07/09) to 5,143,410 (12/19/09), up 43% in just over a month! The increase in EUC more than offset the decline in continuing claims and we are now at a new record when combining all measures of unemployment benefits. Economists were pointing out that continuing claims and initial claims were falling as a bullish sign, however what was happening was that those benefits were exhausting for people who used up that benefit, leading to the decline in the numbers…
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February 9th, 2010 10:36 am
THE PROBLEM OF EXPONENTIAL DEBTCourtesy of The Pragmatic Capitalist
A Chinese proverb known by Americans as the “Chinese curse” says: “may you live in interesting times”. Boy do we live in interesting times. This is a veritable golden age in economic evolution. New theories are being crafted as we speak and old theories that have stood the test of (our short) economic time are being torn down. No theory has come under fire in recent years like Keynesianism. After decades of success, Keynesianism doesn’t appear to be having the same magical effect. Economic theorists are confused. To their dismay (and with all apologies to Sir John Templeton, to whom I promised I would never utter these words) – it&r...
February 9th, 2010 9:47 am
Courtesy of Tyler Durden
Yesterday we reported on "concerted hedge fund attacks" rumors involving Greece. Today, via Alphaville, it appears that the mysterious hedge fund cabal strikes again, this time in Spain, and, more relevantly, this time there are names associated. If indeed these are the actors set on setting the world ablaze, they are more than likely the same ones who are involved in Greece, Portugal, Dubai, and elsewhere. Presenting: Moore Capital, Brevan Howard and Paulson & Co... Oh and JP Morgan and, ahem, Goldman Sachs.
From Cotizalia (obviously this is a Google translation for the sake of...
February 8th, 2010 10:12 pm
THE MARKET IS FOLLOWING A SCRIPT YOU CAN PROFIT FROMCourtesy of David Grandey
Is The Market Following A Script? If you ask Elliott it is. From Our Recent Blog: "There is also a good possibility that the whole move down off the January highs traces out ABCDE (5 Waves down before all said and done). But we'll take it a step at a time." The S&P 500 chart below has more of a 3 waves (abc) look to it just like we talked about in advance to be on the lookout for. The only problem was it's prime entry took place in the form of a gap and within minutes traced out the bulk of Thursday's move. But still it's all about trends and it's locked in a downtrend channel. One look at last week's action in the OTC Composite below (remember this area of the...
more from Chart SchoolFebruary 9th, 2010 9:14am
"If the US were a corporation, it would have bonds that are junk rated."
That's the word from Marc Faber but, then again, his column is called the "Gloom, Boom, Doom Report" so he is very much talking his book. Faber makes the case that our unfunded liabilities make the US a toxic investment, much the way GM health and pension obligations. The US ended up bailing out GM but who can bail out the US? Faber argues that additional debt growth no longer has the ability to add to GDP growth, meaning we have passed a tipping point where we have no choice but to pay off existing debt (most likely through inflation) or default.
Pragmatic Capitalist has a great article discussing...
February 9th, 2010 9:22 am
Hello readers,
I apologize for missing the last few days. I have been really busy with some other projects. So, to make it up to you, I have three picks for today. ...
February 8th, 2010 4:14 pm
Today’s tickers: BAC, PBR, F, FXI, NXY, KFT, DELL & HPQ
BAC – Bank of America Corp. – Bearish option traders purchased put options on Bank of America today with shares of the firm trading 3% lower to $14.52. The number of put options purchased at the March $14 strike price surpassed existing open interest at that strike, suggesting many investors are bracing for continued near-term share price erosion. Approximately 33,000 puts were purchased for an average premium of $0.59 apiece at the March $14 strike. Investors picking up the put options perhaps anticipate B of A’s share price could slip beneath the effective breakeven point on the trade at $13.41 ahead of March expiration. The 12% increase in the reading of options implied volatility on Bank of America to 43.74% today points to increased fluctuation in the...
more from Andrew
February 8th, 2010 7:45 pm
INSIDER BUYING & SELLING REMAINS BEARISHCourtesy of The Pragmatic Capitalist
After a brief respite last week, insider buying and selling trends returned to their regularly scheduled bearishness. The recent market dip has not attracted many buyers to the market as total insider buying for the latest week totaled just $10.2MM. Total selling surged to $490MM from last week’s reading of $250.1MM.
The insider selling and buying trends continue to reflect the low level of confidence that insiders have in the future performance of their own shares. This has been best reflected in the continuing weak trends in the labor markets and the...
February 7th, 2010 11:43 pm
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