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Economy

Economic Statistics for 18 Jan 12

Today’s economic statistical releases:

Industrial production rose by 0.4% last month, with manufacturing increasing 0.9%. Capacity utilization rose to 78.1%.

The overall Producer Price Index fell -0.1% last month, but is up 4.8% on a year-over-year basis. The Core PPI, minus food and energy—rose 0.3%, and is up 3% for the year.

The Housing Market Index rose from a depressed 21 to a slightly less depressed 25 last month.

The Mortgage Bankers Association is reporting a huge jump in mortgage applications, with purchase apps up 10.3% and re-finance apps up 26.4%, bringing the composite up 23.1% for the week.

In weekly retail sales, Redbook reports a second slow weeks of retail sales, with a year-over-year sales increase of only 2.8%. ICSC-Goldman Store Sales are also soft, with chain store sales up only 0.1% for the week, and 3% over last year.

Overall, we’re continuing to see mildly good news overall, in terms of production and housing, but retail spending and employment remains relatively weak, and inflation threats still hover over what remains a somewhat recessionary economy.

~
Dale Franks
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One more time: The unemployment numbers in context

Context is one of those tricky words for some.  Because, when applied, it tends to trip up their attempts to shade news a certain way.  Without it, they’re much more able to do their shading than when context is added to their formulation.

Take the unemployment numbers – the “official” unemployment numbers.  We’re supposed to believe that everything is getting better because that number has come down from 10% to its current “official” level of 8.5%.  

But when one digs into that number, it becomes apparent that one can only get to 8.5% if one is willing to write off over a million American workers who’ve somehow “vanished” from the labor force.

Or in other words, in context, with those workers being added back in as they should be, our unemployment rate is much higher than 8.5%.  Dale has explained this many times.  I’ve pointed it out a few times.  Investors Business Daily does it this time:

In the 30 months since the recession officially ended, nearly 1 million people have dropped out of the labor force — they aren’t working, and they aren’t looking — according to data from Labor’s Bureau of Labor Statistics. In the past two months, the labor force shrank by 170,000.

This is virtually unprecedented in past economic recoveries, at least since the BLS has kept detailed records. In the past nine recoveries, the labor force had climbed an average 3.5 million by this point, according to an IBD analysis of the BLS data.

"Given weak job prospects, many would-be workers dropped out of (or never entered) the labor force," noted Heidi Shierholz of the Economic Policy Institute in her analysis of the BLS jobs report issued last Friday. "That reduces the measured unemployment rate but does not represent real improvement."

According to the BLS, the "labor force participation rate" — the ratio of the number of people either working or looking for work compared with the entire working-age population — is now 64%, down from 65.7% when the recession ended in June 2009. That’s the lowest level since women began entering the workforce in far greater numbers several decades ago.

That “labor force participation rate” hasn’t changed significantly.  In fact, given our expanding population, it has probably remained at least the same.  What the “official” number does is ignore the missing million plus workers and thereby misrepresent the true level of unemployment in this country.   That official number also hides the real problem that IBD’s chart shows us – something unprecedented in past recoveries:

 

WEBa1jobs0113.gif

 

Labor force growth, as you might imagine, is one of the indicators of a recovering economy.  Instead we seem to be in the middle of fooling ourselves that such a recovery is happening by viewing a falling “official” unemployment number as an indictor of progress in that area.  I’m not sure how one can make that argument – in context, as provided by this chart.

IBD goes on to outline what this all means in the long run:

Not only does the shrunken labor force mask the real size of the unemployment problem in the country — since only those actively looking for work are counted as unemployed — it likely means that economic growth will be subpar going forward.

[…]

The weak job market has also helped depress wages. Real median annual household income has dropped 5.1% since the recession ended, more than the 3.2% decline during the recession itself — according to a new Sentier Research report.

The smaller labor force is just one of the problems with the current unemployment number. The other is that the jobs being created aren’t keeping pace with population growth. Since June 2009, the economy has added 1.4 million jobs, which is below the more than 2 million needed to keep up with population growth and far below the gains experienced at the same point in the previous 10 recoveries — which saw job gains average more than 4 million.

So, what has happened?  Well there are all sorts of explanations being bandied about – Baby Boomers choosing retirement instead of seeking work, etc.  But the fact remains, as IBD points out, “the labor force had been climbing until Obama took office. In fact, it peaked in May 2009, the month before the recession officially ended.”

That sort of dampens the “Baby Boomer retirement” explanation and leaves us again searching for an answer.

The whole point of this post, however, isn’t so much wrapped up in the answer, but the context of the problem.  Or said another way, you’re being led down the primrose path with the “official” unemployment number and here’s why. 

Context.   A dirty word to those who would prefer to feed you false sunshine via their “official” numbers.  But when you look at their numbers remember that you’re mostly looking at contextless nonsense. 

Oh, and if you’re not depressed enough:

The Economic Policy Institute calculates that when you add the number of jobs lost in the recession and the growth in the working age population over the past few years, the "jobs deficit," as EPI calls it, "remains well over 10 million."

There’s also the problem of people who want full-time work not being able to find it. The BLS offers a different unemployment measure that counts not only those currently looking for a job, but those who’ve given up looking, as well as those who are underemployed because of the soft job market.

That measure has unemployment at a whopping 15.2%.

But don’t look for this administration to ever tell you that.

~McQ

Twitter: @McQandO

Here come the Euro credit downgrades

The credit rating companies have had a number of European countries on a credit watch for a while.  And they made it pretty clear that what the leaders of the EU had cobbled together late last year didn’t answer the mail.  So really, this should come as no surprise:

Standard & Poor’s has downgraded France’s credit rating, French TV reported Friday, while several other euro zone countries face the same fate later in the day, according to reports.

On the more optimistic side:

"The consequence (if France is downgraded) is that the EFSF cannot keep its triple-A rating," said Commerzbank chief economist Joerg Kraemer.

"That may irritate markets in the short term but wouldn’t be a big problem in a world where the U.S. and Japan also don’t have a triple-A rating anymore. Triple-A is a dying species," he said.

Wow, that’s wonderful, no?  “Triple-A is a dying species?”  Oh well, moving on…

Triple-A is a dying species because of the obscene spending of welfare-state politicians.  We’re supposed to shrug and accept it per the Kraemer’s of the world.  This is just an “irritation”, you see.

In reality it is much more than that:

John Wraith, Fixed Income Strategist at Bank of America Merrill Lynch told CNBC the confirmation of a mass downgrade would be another serious step in the crisis and would lead to a serious worsening of sentiment.

"To a large degree it’s widely anticipated," Wraith said. "However, we think the reality of it is going to have a knock-on, ongoing impact on these markets."

“It clearly deteriorates still further the credit worthiness of a lot of the European banks and just keeps that negative feedback loop between struggling banks and the sovereigns that may have to support them if things go from bad to worse in full force,” Wraith added.

A downgrade could automatically require some investment funds to sell bonds of affected states, making those countries’ borrowing costs rise still further.

"It’s been priced in for several weeks, but the market had been lulled into complacency over the holidays, and the new year began with a bounce in risk appetite, thanks partly to a good Spanish auction," said Samarjit Shankar, Director Of Global Fx Strategy at BNY Mellon in Boston.

"But the Italian auction brought us back to earth and now we face the spectre of further downgrades."

Italy’s three-year debt costs fell below 5 percent on Friday but its first bond sale of the year failed to match the success of a Spanish auction the previous day, reflecting the heavy refinancing load Rome faces over the next three months.

As we’ve said for some time, the key to whether this works out or not lies in the bond markets.  And this will make the bond markets very uneasy.

Oh, and just to add fuel to the fire.  From Zero Hedge:

Last week, when we pointed out what was then a record $77 billion in Treasury sales from the Fed’s custody account, in addition to noting the patently obvious, namely that contrary to what one hears in the media, foreigners are offloading US paper hand over first, there was this little tidbit: "The question is what they are converting the USD into, and how much longer will the go on for: the last thing the US can afford is a wholesale dumping of its Treasurys. Because as the chart below vividly demonstrates, the traditional diagonal rise in foreign holdings of US paper has not only pleateaued, but it is in fact declining: a first in the history of the post-globalization world." Well as of today’s H.4.1 update, the outflow has increased by yet another $8 billion to a new all time record of $85 billion, in 6 consecutive weeks, which is also tied for the longest consecutive period of outflows from the Fed’s Custody account ever. This week’s sale brings the total notional of Treasurys in the Custody account to just $2.66 trillion (down from a record $2.75 trillion) and the same as April of last year. And since the sellers are countries who have traditionally constantly recycled their trade surplus into US paper, this is quite a distrubing development. So while the elephant in the room could have been ignored 4, 3 and 2 weeks ago, it is getting increasingly more difficult to do so at this point, especially with US bond auctions mysteriously pricing at record low yields month after month. But at least the mass dump in Treasurys explains the $100 swing higher in gold in the past month.

Click on over and check out the chart.  Lots of questions to be answered for which, apparently, only a few are chasing  answers.

While the media is dominated by political races and urinating Marines, this little drama is passing by almost unnoticed.  But trust me, it’s effect, should everything collapse as it may, will be profoundly noticed.

~McQ

Twitter: @McQandO

Economic Statistics for 13 Jan 12

Today’s economic statistical releases:

The US trade deficit widened sharply to $-47.8 billion on both rising oil imports and falling exports.

December export prices fell -0.5%, but were up 3.6% on a year-over-year basis. Import prices also fell -0.1% for the month, but were up 8.5% for the year.

Consumer sentiment continues to rise to 74.0 at mid-month January from 69.9 at the end of December.

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Dale Franks
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Obama asks for another increase in the debt ceiling

If you wonder why there is this focus on the left on taxing the ‘rich’, part of it can be found here:

President Barack Obama asked Congress for another $1.2 trillion in government borrowing authority, the third and final request under an August deal with lawmakers that averted a U.S. default.

The president’s notification to congressional leaders yesterday starts a 15-day countdown for lawmakers to consider and vote on a joint resolution disapproving of the increase.

An “August” deal and we’re already on the “third and final request”?  August for heaven sake.  5 months.  Does that at all demonstrate how absolutely unconcerned this administration is with out-of-control spending?  Does it help explain the class-warfare, anti-Wall Street, shift-the-blame campaign in which the President has been engaged?

We’ve already exceeded the national yearly GDP with our debt under Obama and now he’s going for more.

Well, except at DoD.  There’s he’s slashing muscle and bone on the one hand while proposing a pay-hike for other federal employees on the other.

The debt ceiling increase is to meet commitments already made by the government. The Treasury Department has been relying on accounting maneuvers, similar to the ones employed during the year’s earlier dispute, to ensure that the previous $15.194 trillion limit wasn’t breached.

Since the budget law was approved, the debt limit has been raised twice, by a total of $900 billion. In the latest request, the limit would rise to $16.394 trillion, which the Treasury Department estimates will fund the government until late 2012.

We are so ill served by our current crop of politicians that it almost defies description.  We’re past the generational theft of our grandchildren’s money and are working on that of our great-grandchildren.

This is simply inexcusable, yet like an alcoholic or drug addict it seems our politicians can’t help but do whatever is necessary to obtain their next fix of borrowed money.  Meanwhile the credit rating for the country has been downgraded and is at risk for further downgrade.  And the economic drag on the economy in general this sort of a debt load carries continues to increase.

You want a national tragedy … here it is.  You want a national nightmare … its playing out right in front of you and there doesn’t seem like anyone is able to stop it.

But most rational people understand that at some point it has to stop … it has to come to an end.  And when it does, this recession will look like child’s play, all thanks to the selfish short-sightedness of our political class.  Oh, and yes,  the gutless votes who keep rewarding this sort of behavior because it benefits them.

At the risk of sounding like some sort of extremist fanatic, the end is near.   And it isn’t going to be a pretty end either.

~McQ

Twitter: @McQandO

Economic Statistics for 12 Jan 12

Today’s economic statistical releases:

Initial Jobless claims have been declining for several weeks, but last week jumped 24,000 to 399,000. The first week of the year is always bad like that, though. Often, it’s the worst week of the year. I think the seasonal variations really confound the government’s ability to factor in the loss of temporary holiday jobs.

December retail sales were worse than expected. Sales were up 0.1% over last month and, ex-autos, actually declined -0.2%. Ex-autos and Gas, sales were flat. Retail sales for October and November were also revised downwards. On a year-on-year basis, however, sales were up 6.5%, and up 6% ex-autos. So today’s report is a disappointment, but not a disaster.

The Bloomberg Consumer Comfort Index was -44.7 last week, up from -44.8 the prior week. That’s the highest reading since July.

Business inventories and sales both rose 0.3% in November, keeping the stock-to-sales ratio unchanged for a 5th straight month.

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Dale Franks
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Economic Statistics for 11 Jan 12

Today’s economic statistical releases:

The MBA reports Mortgage applications are on the rebound after 3 weeks of sharp declines. Purchase applications rose 8.1% and refinance applications rose 3.3% last week. The composite index rose 4.5%.

We’re waiting, at the moment, for the release of the Fed’s Beige Book report on the economy, due out at 2PM EST.

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Dale Franks
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Economic Statistics for 10 Jan 11

Today’s economic statistical releases:

The NFIB Small Business Optimism Index  rose for a 4th straight month by 1.8 points to 93.8.

Inventory build corrected sharply in November wholesale trade, increasing only 0.1% as businesses kept their inventories in check.

In weekly retail sales: ICSC-Goldman Store Sales plunged -5.4% in the Jan 7 week, with Year on year sales growth only 2.8%. Redbook also reports a strong sales decline, with the year-on-year rate falling from 4.9% to 3.3% last week.

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Dale Franks
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Economic Statistics for 6 Jan 12

Today’s economic statistical releases:

The Monster employment index fell 7 points in December to 140, as global economic uncertainty keeps hiring plans cautious.

But you don’t care about that. You care about the December Employment Situation. The BLS reports that 200,000 net new jobs were created last month, with the unemployment rate falling to 8.5%. Average hourly earnings increased by 0.2% while the average workweek rose 0.1 hours to 34.4 hours. The labor force shrunk by 50,000 but household employment rose 176,000 and the number of unemployed declined 226,000, according to the household survey. The labor force participation rate held steady at 64.0%. The U-6 unemployment rate, the broadest measure of unemployment, fell from 15.6% to 15.2%. Every indication is of a slowly and mildly improving labor market in December.

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Dale Franks
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