Tuesday, February 8, 2011

notes on the week ended Feb 5th

oh boy. we had an unemployment report out this week, and the divergence between the employer survey & the household survey was so great i even hate to quote the senseless numbers, but ill try; total payroll jobs added were only 36,000, not nearly the 125K or so needed to keep up with new entries to the workforce...yet the unemployment rate, taken off the household survey, dropped from 9.4% to 9%, due to a 504,000 reduction in those who count...this was the second month in a row its diverged like that, so it cant even be written off to correcting statistical noise...it has taken me a while, but im now fully convinced that the government percentages of unemployed that i have been dutifully reporting and deconstructing are totally meaningless...they can get any percentage unemployment they want if they shrink the denominator enough…i'll just give you a bunch of links to various takes on the report, and not comment on it further...i do, however, want to call your attention to something that's almost been totally glossed over in the reports...Percent Job Losses
 During Recessions

before the report came out, there were a few mentions that there would be an annual benchmark revision to the establishment survey to correct for errors that accumulated in the monthly reports over a years time...this correction relates to the "birth-death" model they uses in that survey, where the BLS estimates job creation or destruction based on the filings of new incorporations...companies which are too new or too small don't get counted in the monthly surveys, so they correct once a year to cover for the accumulated errors in their reports from the previous march to march period...so the total employment reported for last march was revised downward by 378,000, and the year end number down by 452,000...bill mcbride at calculated risk had produced the adjacent chart showing an estimate in a discussion of this a week before the report here: BLS Employment Revisions on Feb 4th, but if you click on that chart for an enlargement now you'll see the benchmark revision has been totally whitewashed out, not just on his chart but virtually by everyone else who's discussing longer term changes... everyone else is quoting friday's report as if the revision never occurred... when this revision was announced last year, it was big news; even bloomberg produced interactive charts to show how many jobs disappeared in the revision here: Birth Death Model Insights...but this year you do a google news search on it and all you get are articles such as birth & death certificates in india... the bottom line is that we've actually had less employed than we thought we had, that we have not even been adding enough jobs month to month to keep up with the increased number of young people entering the work force, and as a result the % of americans of working age who are working continues to shrink, & the hole is getting deeper...

the census bureau reported the 4th qtr home ownership rate this week, and after a 2nd record year for for foreclosures, it should be no surprise that home ownership is at a 12 year low....of course, since we had a massive home construction boom going before the crisis, that rate means 18.4 million homes are sitting empty, or about one in every nine homes in the US...ever wonder what's wrong with a country where there are multiple families crowded into a house together or homeless are living in tents near a row of vacant houses, or why so many people are still jobless while the infrastructure continues to crumble?

i found & saved the adjacent chart a week ago, & i dont even recall where i got it; but it’s relevant to a situation i’ve been covering for over a year & mentioning more recently as the federal stimulus to the states has run out…almost every state is facing some kind of budget hole, as are most of your cities and counties...how these will be addressed in each case is different, & there have been links to various national & local articles ongoing in these packages almost every week; the cuts to police & fire, state medicaid, education, etc. all fall under this...this coming year states & municipalities will now have to cover for the expiring stimulus amounts: state fiscal relief $79 billion; school district aid $41 billion; state and local law enforcement $4 billion; & infrastructure $31 billion...to put those amounts in perspective, pay on wall street was announced this week, and it broke a record last year, hitting $135 billion...

accompanying the talk of layoffs is a continued talk of how to allow the states to go into bankruptcy and still bailout the banks & other investors in municipal debt...what they want to achieve is a way to break the pension contracts with teachers, police, fire, garbage collectors, snowplow drivers & what have you without the investors taking a hit...the reason the pension plans are in trouble is because the financial planners have been overly optimistic about returns; the median expected investment return for the top 100 U.S. public pension plans remains 8%, and noone wants to bite the bullet... so you're going to hear a lot of politicians threatening tax increases & bashing public employee unions and siting extreme examples of administrators retiring on 6 figure incomes in order to sway public opinion to allow for the workers to be cut off...dont be fooled; this is all part of the larger plan to pit the little people against each other so the banks & wealthy investors can keep getting a increasingly bigger piece of the remaining pie...

in a related manner, muni-bond prices continued to plummet for the 7th week running, & someone in congress is blaming this on Meredith Whitney, who went on 60 minutes in mid december & predicted municipal bankruptcies, so she's being called before a house committee to testify as to how she arrived at her call...its more political bullshit; mark zandi, chief economist of Moodys, was warning of the same over a year ago...

new high prices in commodities were back in the news this week, largely on the back of the unrest in africa & the middle east; corn & soybeans hit 30 month highs, rice buying as a replacement for low wheat stocks drove its price to a 27 month high, sugar hit a 30 year high as another storm of the century demolished the aussie cane crop, cotton had another run of new highs, copper hit $10,000 a ton for the first time ever, up 60% since june, and oil hit new cycle highs in new york & london...

of course, the revolution in egypt and other arab countries has been in the news all week; i dont cover the play by play, the politics, or the geopolitical consequences for my blog, & im sure even live news sites such as the al Jazeera English site are inadequate in a fast moving situation...those involved in a revolution do not have time to take notes or document what they're up to, it all moves too fast...the food-shortage articles  related to this situation are included on GGO as part of regular commodity & environmental coverage...

everyone wants to believe this is some affirmation of democracy and/or self rule by the arab underclass, some kind of reaching by the masses for a better life...but if it were only about trying to throw off the yoke of the aristocracy, it would be more likely to happen here, because Inequality in the US is worse than that in Egypt, Tunisia Or Yemen ...i think it much more basic than that...upheavals in both tunisia and eqypt started with individual self-immolations in protest of high food prices; food is half a household budget in those countries...the price of wheat is up over 80% since the summer, and egypt is the world's top importer of wheat...bread coupon distribution broke down in egypt before the demonstrations started...i've seen maybe 10 articles over the past couple weeks where a country name & food protests or food riots are mentioned together in the headline...kuwaiti authorities saw the threat and with their wealth, announced they would distribute free food for 14 months, and dole out $3572 to every citizen; the qatari citizens now want the same...there have been riots in algeria with chanting "give us sugar"...prices of onions in india have tripled recently, & the cabinet met in an emergency session...chili peppers had a 5 fold increase in indonesia, chilis being the staple there, & its price rise is being blamed on bernanke...bernanke had a rare press conference this week and was asked about that; he said it wasnt his fault & for once i agree with him...in my mind, i can see that this began with the fires & drought in russia this summer, that destroyed 1/3 of their wheat crop, followed by weather related damage to wheat in pakistan, canada & most recently australia...(there was a charge that european speculators squeezed russia into breaking contracts with egypt, but the crop shortfall remains nonetheless)...sure, mubarek is a thug, but mubarek could have been mother theresa and the the people would have still been in the street if they couldnt afford the basic foodstuffs... if the US holds any culpability, its because 170 million tons of our corn is being diverted to ethanol, which enough to feed 330 million people at what the UN considers a sustainable level...blame the congressmen who are collecting the big contributions from agribusiness to keep that uneconomical policy in place...

there was an unusual exchange between several of the top economists on kitchen improvements since the fifties this week, when Paul Krugman and Tyler Cowen started the debate with a couple of posts discussing the issue of technological progress; i didnt catch them all but here's a few more: The Kitchen Table & The Economics of Kitchens - this brought to mind some advertisements i saw when i was a kid, so i did a search and came up with a video from the fifties, wherein the kitchen of the future would run itself with no hands... 

Average (Mean) Duration of Unemployment (UEMPMEAN)

the above are my weekly comments that accompanied my sunday morning links mailing, which in turn was selected from my weekly blog post on the global glass onion…if you’d be interested in getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me...

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