Unemployment Static-stistics

You know the old saw: lies, damned lies, and statistics. It is rarely more true than describing employment data.

Despite Jobs Added, Unemployment Rate Stuck

The October jobs report was the best in a long time. The unemployment rate remains painfully high, but employers are starting to add jobs. The Labor Department says the private sector added 159,000 last month -- much more than expected.

A Few Thoughts on the Employment Numbers By Dr. Lacy Hunt, Hoisington Investment Mgt. Co from John Mauldin's Thoughts From the Frontline:

The October employment situation was dramatically weaker than the headline 159k increase in the payroll employment measure. The broader household employment fell 330k. The only reason that the unemployment rate held steady is that 254k dropped out of the labor force. The civilian labor force participation rate fell to a new low of 64.5%, indicating that people do not believe that jobs are available, but this serves to hold the unemployment rate down. In addition, the employment-to-population ratio fell to 58.3%, the lowest level in nearly 30 years.

The most distressing aspect of this report is that the US economy lost another 124K full-time jobs, thus bringing the five-month loss to 1.1 million in this most critical of all employment categories. In an even more significant sign, the level of full-time employment in October was at the same level that was reached originally in December 1999, almost 11 years ago (see attached chart). An economy cannot generate income growth by continuing to substitute part-time work for full-time employment.

The weakness in real income is probably lost in an environment in which the Fed is touting the gain in stock prices and consumer wealth resulting from the latest quantitative easing (QE), but QE has unintended negative consequences for real household income. Due to higher prices of energy and food commodities, QE may result in less funds for discretionary spending for consumers whose incomes are stagnant. Also, with five-year yields falling below 1%, rates on CDs and other types of short-term bank deposits will decline, also cutting into household income. At the end of the day these effects will be more powerful than any stock-price boost in consumer spending, which, as always, will be very small and slow to materialize.

Unemployment payouts push California deeper into debt

With one in every eight workers out of a job, the state is borrowing billions of dollars from the federal government to pay benefits at the rate of $40 million a day.

The debt, now at $8.6 billion, is expected to reach $10.3 billion for the year, two-thirds greater than last year. Worse, the deficit is projected to hit $13.4 billion by the end of next year and $16 billion in 2012, according to the California Employment Development Department, which runs the program.

Interest on that debt will soon start piling up, forcing the state to come up with a $362-million payment to Washington by the end of next September.

That's money that otherwise would go into the state's general fund, where it could be spent to hire new teachers, provide healthcare to children and beef up law enforcement.

Continued borrowing, meanwhile, means that employers face an automatic hike in their federal unemployment insurance taxes, pushing up annual payroll costs $21 a year for each worker.

Those costs are expected to more than double over the next five years if California continues to borrow from the federal government.

Economist: RI recovery will lag behind US

An economist says Rhode Island will lag behind the country as it recovers from the economic downturn. Moody's Analytics senior economist Andres Carbacho-Burgos told the state's top budget officials Friday that the target date is 2015 for the United States to make a "full recovery" and return to a "normal" unemployment rate of 5.5 percent.

He said the target date for a full recovery in Rhode Island is 2015 or 2016.

Carbacho-Burgos said his analysis is based on the last three months of unemployment data in Rhode Island, where the unemployment rate is 11.5 percent, according to the most recent numbers.

State of Indiana prepares to reduce unemployment benefits

The state of Indiana is preparing to curb unemployment benefits in what may become a more common occurrence as states wrestle with growing debt related to providing jobless benefits to its citizens.

Indiana owes nearly $1.9 billion to the federal government which it borrowed to pay jobless benefits.

At a news conference Thursday morning, Indiana Gov. Mitch Daniels said that cutting unemployment benefits will be a primary push in the months to come.

Daniels told reporters that he wants to raise the premiums on businesses and cut benefits for recipients, contending that it's the only way to bring the unemployment deficit under control.

Unemployment benefits, which pay a maximum of $415 a week in Indiana, could be cut by up to half, which gives rise to speculation as to the reason why Indiana has announced it will be adding armed guards to its unemployment centers.

Michigan currently owes the federal government $3.8 billion for funds it borrowed to pay unemployment benefits. The state will have to begin paying the interest on that debt — $151 million worth — next year. It's unclear how the state will afford to pay it without either raising taxes on business or cutting benefits as they are proposing in Indiana.

Wall Street mocks unemployed Main Street

Following on from the last two posts, Equal opportunity destroyer and Bernanke: Rising stockmarket = economic growth are a couple of data points on the day:

US weekly jobless claims rise more than expected

U.S. initial jobless claims rose more than expected for the the week ended Oct. 30, matching the levels reached at the end of 2009.

And,

Jobless claims rise, but equities, metals shrug off losses

Commodities futures traders and brokers managed to shrug off a less-than-stellar jobless claims report on Wednesday morning, and both stock index futures and precious metals futures were looking bubbly.

For the week ending October 30, the advance seasonally adjusted unemployment claims figure rose 20,000 to 457,000, up from the previous week's revised figure of 437,000. That breaks a recent positive trend in the job market, where unemployment claims appeared to be falling - but with the Federal Reserve set to inject $600 billion into circulation by buying Treasury bonds, markets didn't appear to be bothered.

Jobless Claims up, Productivity Caps Inflation

New U.S. claims for jobless aid rose last week and a strong rebound in productivity in the third quarter showed employers wringing more output from current workers rather than hiring.

"The big picture is that firms are trying to squeeze every ounce out of the workers they have and this is one reason they feel no need to hire," said Cary Leahey, an economist at Decision Economics in New York.

Jobless Claims Cut Through the Noise

Lack of jobs is retarding consumer spending, helping to jeep housing the doldrums and creating great skepticism about the supposed recovery and the stock market.

The economy is in very weak shape; housing inventory equals eleven years of sales at their current pace and nine million mortgages are in default or in the process of foreclosure, about 28 years worth of inventory at the current pace of sales; the coming austerity in Europe and budget pull backs in the US guarantee a recession by mid year next year; corporate profits are going to hit a wall in 2011.

Traders, of course, are following a new mantra on Wall Street:

If economic data is bad, go long, the market will go up because Bernanke will keep the printing presses on. If economic data is strong, go long, the market will go up because corporate profits will be great in 2011.

Fed sparks world stocks buying binge

"What you achieve with quantitative easing is that you signal to investors not to buy U.S. government securities, take the money elsewhere, which in turn will weaken the dollar and spur economic growth," said Axel Merk, president and portfolio manager at Merk Investments in Palo Alto, California.

"The Fed in my view is trying to debase the dollar because printing all that money is not going to spur growth on its own. The risk is that the money doesn't stick and it doesn't go to where it's supposed to go," said Merk, who runs the company's $500 million currency mutual fund.

See, The Fed’s Big Gamble

The rich get richer, the rest hunker in the bunker

Consumer Spending and Incomes in U.S. Unexpectedly Stagnate

Incomes didn’t increase for the first time since September and the savings rate increased to the highest level in a year.

The savings rate increased to 6.4 percent last month, the highest level since June 2009, to $725.9 billion.

The government’s income revisions solely reflected better dividend payments, which only affect wealthier households, said Harm Bandholz, chief U.S. economist at UniCredit Group in New York.

“The entire increase in the savings rate is attributable to the wealthier part of the population,” Bandholz said in a note to clients yesterday. “It is, therefore, a measure for the rising inequality of income and wealth in the U.S.”

Demand may take time to improve as the unemployment rate hovers near a 26-year high, shaking confidence in the economic recovery.

“Consumers are still hunkered down,” Ryan Sweet, a senior economist at Moody’s Economy.com Inc. in West Chester, Pennsylvania, said before the report.

SuperValu Inc., the operator of the Albertson’s grocery-store chain, said last week that fiscal first-quarter food sales fell compared with a year earlier and consumers purchased fewer items per basket.

“We see huge increases in coupon usage across our enterprise,” Chief Executive Officer Craig Herkert said on a conference call July 27.

“We continue to see as you all know, massive unemployment but also underemployment and particularly in some of the big markets where we are, it’s certainly more challenged than in the country as a whole.”

Nice to be liked

In one of my more nasty moments, I referred to the American consumers as "Like so many cows in a paddock ...." http://guambatstew.blogspot.com/2005/08/to-market-to-market-to-sell-to-fat-pig.html

Alan Kohler makes a similar but more bucolic assessment: "...American consumers are like sheep being kept healthy by their Asian shepherds and regularly shorn." http://www.smh.com.au/news/business/asian-shepherds-to-blame-for-bond-rates/2005/09/13/1126377312741.html

To market, to market, to sell to a fat pig

Like so many cows in a paddock enjoying what appears to be a free lunch, the whole world feeds and feeds on the American (and to some extent Australian and European) consumer as "the engine" of world economic growth.

Not being anyone to complain about all the consumption and attention, the good consumers are fattening themselves obligingly for the slaughter. "Americans are getting fatter at a rate never seen before, a report shows." (http://news.bbc.co.uk/2/hi/health/4183086.stm)

The great American marketing machine for the consumer goods industry ( http://www.marketwatch.com/tools/industry/componentlist.asp?siteid=mktw&bcind_ind=fob&bcind_period=3mo ) presses on from one fad to another, and you can just sense that the next "big thing" will be a huge government funded program (probably with corporate or faith based sponsors) to sell some organised event to take our minds and bodies off the other major issues of the day. Quite unlike, I am sure, President Kennedy's admonition in the early '60's to just put on a t-shirt and go walking "50 miles or bust" in any direction.



And in the tradition of trying to make a buck out of every malady, even to the point of creating the malady or simply creating the perception of a malady, American business has been quick to jump on the "affluenza" condition (http://www.affluenza.org/) with all the charity of a snake oil salesman. You can order the book (http://www.affluenza.com/) and you can watch the show (http://www.pbs.org/kcts/affluenza/). And you can buy a pig in a poke.

Now, I'm a glutton as good as any other, and I'm not making any claim to some sanctimonious high ground. You'd better believe that this little piggy has gone to market. But it does seem to me that we ought to consider if there is any economic model that can offer us wellbeing and happiness without having to consume ourselves in the process.