Monday, March 7, 2011

february unemployment reports, et al

this was the first week of the month, so that means friday was the labor department unemployment report...you're all probably tired of hearing me complain about the inaccuracy of their methodology already, so i'll dispense with that and just tell you that according to the report, we added 192,000 jobs in february...if you recall last months dismal report on job creation, the total for the two months is still only about the number needed to keep up with additions to the population, without really reducing the 7.7 million who have become unemployed since the recession started (one problem is that many companies are now refusing to even interview those who are unemployed)…the labor force participation rate is lower than any time since the early 80s, before reagan busted the unions & forced the women out of their homes & into wage slavery…by not counting those who've dropped out, BLS skewers all the numbers the government reports...im getting so cynical that when i see someone reporting their unemployment numbers as factual, i think theyre just a shill for the administration…so im going to compare the numbers in the BLS household survey to those interviewed by gallup: BLS says that U3, the headline unemployment number, is 8.9%; gallup finds it to be 10.3%; BLS has U6, which is the total of those unemployed and involuntarily part time, at 15.9%, the gallup survey reported 19.9% in that category...john williams at shadow stats, who computes employment stats by the pre 1994 government methodology, has U6 at 22%...the gallup unemployment charts are included below, as well as others that ive embedded with the links below, as my attempts to include them in my text here have proven futile...

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some are also trying to read something positive into the fact that weekly jobless claims fell to 368,000, below 400,000 for the second week in a row, which is the first back to back at that level since the recession began...and the 4 week moving average did drop to the lowest level in 3 years...but that contrasts with a report from employment consultants at challenger that planned layoffs are now at the highest level in 11 months, and they dont even track the large number of public employees that will be losing their jobs at the state & local level...

the problem is still that we have 14 million unemployed, even by the official count, and 6.2 million of them have been unemployed for 6 months or more...about 4 million have left the labor force, another 8.4 million are working part time and want full time work, & there's also an estimated 2 1/2 million who dont count & who've exhausted their 99 weeks of unemployment rations, so they're without anything coming in...the role that government should be playing in this situation is to put those willing of these people to work; govt borrowing costs have been lower than they've ever been, so this is the time to be funding the infrastructure repairs this country needs....and once the multiplier effect of people working & spending plays thru in the economy, government revenues will rise and return to a normal level, facilitating the servicing of the debt incurred by that stimulus...unfortunately, much of the inadequate 2009 stimulus was misspent, and the political will to return to the correct fiscal path is absent...im sorry but this form of democracy and market capitalism has become totally dysfunctional, and i cant see a solution short of some kind of a revolution that would toss aside the old institutions & the ways of running things and install something rational in their place...

a number of other payroll and employment reports also became available this week; according to a new report by the National Employment Law Project, most of the new jobs created during this recession have been low paying, with those paying less than $13 hr accounting for 49% of job growth, on the other hand, while 40% of job losses were high paying, (identified as over $19/hr), only 14% of the new jobs were created in those industries...that ties into a gallup poll that showed the least educated were now the most likely to find jobs, with job conditions were worsening for those with some college, & the labor department report that the net increase in hourly wages over the recession was only 0.3%, with all the productivity gains during that period accruing to corporate profits...furthermore, a MIT Hamilton Project showed that median wages for men have dropped $15,000 or 32% since '69 when adjusted for inflation, which is something clear to anyone who grew up in the 50s, when there was a large middle class that could be supported well on the income of one male breadwinner...echoing that MIT project was a chris martenson interview of john williams of shadow stats, where he stated that by his measurements, US household income today is below where it was in 1973...in connection with the bloated government meme of the right, an old angry bear economist who's now blogging again showed that state & local employment declined from 65 per 1000 population to 62.5 per thousand since the recession started...

you may recall that my mentioning in previous weeks that we were heading for a march 4th showdown, wherein house republicans who insisted on budget cuts were threatening to shut the government down if they didnt get the cuts they wanted; after weeks of bickering, that was averted with a two week continuing resolution including $4 billion in cuts that obama agreed to, so the government will now continue to operate until march 18th...for reasons i dont understand, the federal government starts its fiscal year on october 1; this year, with the election looming, they were unable to agree to a budget, so they passed a continuing resolution to fund everything at the same level as previously until Dec 3rd; again unable to agree then, they extended that to year end, then again till march 4th...we have now deteriorated to the point that government agencies can hardly plan two weeks in advance; unsurprisingly, the pentagon is complaining they cant function that way...

this week also marked the release of 266 page pdf called USA Inc. authored by George Shultz, Paul Volcker, Michael Bloomberg, Richard Ravitch and John Doerr...its a compilation of graphs and financial statements for various segments of our economy & government...i find pdfs difficult to read, but the charts & graphs are worth a look...a few selected images are reproduced on websites here and here...i'm going to include here another graph i found this week and link you to the blog post i found it on: Too Big to Fail? Wall Street and Main Street: How Big Are They? this is something that been dogging me since i first read about it over two years ago; the nominal amount of financial transactions conducted by wall street is 43 times the country's GDP, 57 times the size of the main street economy...add the derivative operations of the european banks, we're talking an unfathomable quadrillion dollars, or $190,000 per person on the planet...clearly there is systemic risk here, a one tenth of a percent fluctuation here could crash the entire facade, but i still dont have an adequate grip on the implications or dangers...

the banks' electronic mortgage swapping shell corporation, MERS, is now going to be the subject of a federal investigation, and another county, guilford in n.carolina, is going after them for recording fees they skirted while in operation...but unless someone can get at the banks who ran that scam, a lot of counties may be left holding the bag... according to the research firm Trepp, the delinquency rate for CMBS (commercial mortgage-backed securities) hit a new record in February at 9.39%, as commercial real-estate is suffering the same price declines as seen in housing...for the most part, it's these deals that have been causing the large number of small & medium sized bank failures over the past couple of years

in another one of my themes, february YoY retail sales continued the same trend set in january and over the holidays, with the improvement in buying over recession levels all concentrated in the upscale chains…Saks was up 15%, Neiman’s up 13%, Limited 12%, Nordstrom 7.3%, Macys 5.9%….on the other hand, Costco was up only 4%, BJ’s up 3.9%, Ross 3%, TJX 3%, Target only up 1.8%, & the Gap was down 3%.…an earlier report had walmart same stores sales down for the 7th consecutive quarter, as walmart is losing market share to dollar stores...

i know the rising gas & oil prices are on everyone's mind except for the handful of economists who are being driven around by chauffeurs, but food prices hit a new high in february for the 8th consecutive month as well, according to the UN's FAO...the Economist had a special report on the world food situation this week, with a set of 9 articles; IMF economists warned that despite this years weather related spike, prices are unlikely to retreat in the future due to structual changes in demand...& with cotton again spiking to a new high and fuel costs high, theres also a likelihood that more food cropland will be diverted to cotton or ethanol...after a 19.4 cent jump in gas prices the previous week, we added another 11c/gal this week, and the national average now sits at $3.49, with many now seeing $4 gas at the pumps again, especially in california, where refineries are dependant on higher priced imports...(& even alaskan crude sells at a premium to brent)...diesel fuel has been running a few cents higher, prompting trucker protests of a surtax proposal in maryland...WTI closed the week at $104.42, and Brent closed near $116 bl...im gradually learning some of the nuances in oil pricing; for instance, bakken sweet from north dakota was still at $65/brl at the wellhead at the start of the week, because costs to transport it to a refinery were that much of a differential...and it takes refined diesel fuel to transport that crude by train or truck...


Gallup Reports Underemployment Surges To 19.9%, February "Jobs Situation Deteriorates": As Bad As 2010 - On one hand we have the Department of Truth about to tell tomorrow that NFP based on various seasonal and birth death adjustments increased by 250,000. On the other hand, we have Gallup which actually does real time polling without a procyclical propaganda bias. And Gallup does't have any good news: "Unemployment, as measured by Gallup without seasonal adjustment, hit 10.3% in February -- up from 9.8% at the end of January. The U.S. unemployment rate is now essentially the same as the 10.4% at the end of February 2010." And the one indicator that nobody in the mainstream media will touch with a ten foot pole: "Underemployment, a measure that combines part-time workers wanting full-time work with those who are unemployed, surged in February to 19.9%. This resulted from the combination of a sharp 0.5-point increase since the end of January in the percentage unemployed and a 0.5-point increase in the percentage working part time but wanting full-time work. Underemployment is now higher than it was at this point a year ago (19.7%)."

Charts of the Day: U.S. Unemployment above 10%, Underemployment near 20% - With the jobs numbers coming out tomorrow, it bears noting that the official U.S. data have been marred by low labour participation rates. The reality is that while the jobs picture is improved, many of the long-time unemployed have dropped out of the labour force and are not being counted as unemployed as a result. This has led to the unemployment rate declining at a rate which is not consistent with the fundamental picture in the labour market. The data from polling firm Gallup do not have this problem.  Below is their chart of the unemployment rate for 2010-2011.

Gallup's U.S. Unemployment Rate, 2010-2011 Trend

U.S. Underemployment, 2010-2011 Trend

 

<<<< The Wage Struggles of Men - The Hamilton Project has produced a fairly stunning chart, suggesting that median real wages for men have dropped significantly more than is commonly understood: Here’s Michael Greenstone, an M.I.T. economist and the director of the Hamilton Project, explaining: The red line is the usual picture of median earnings for full-time men. The problem with this line is that the percentage of men working over time has been declining over time. This attrition or dropping out of the labor force is not random, though, as the decline in full-time work it is disproportionately concentrated among low-skill men. This means that the red line is being propped up by the fact that it is increasingly comprised of higher skilled men. One sensible correction for this is to calculate the median wage for all men (not just the full-time workers). This is the blue line in the below graph. Why is this important? The full-time sample (red line) suggests that median wages have been stagnant since 1969. The blue line or full sample of men (which accounts for reduced labor force participation) suggests that median wages have declined by 32% or $15,000 (in constant dollars).

 

U.S. Economy Trades High-Paying Jobs For Low-Paying Positions, Report Finds - In the last 12 months, the U.S. economy has largely traded high-quality jobs for poorly-paid positions, according to a new report by the National Employment Law Project.  Though the economy has added more than a million jobs over the last year, new positions have skewed towards relatively low-wage industries, the New York-based non-profit finds in "A Year of Unbalanced Growth: Industries, Wages, and the First 12 Months of Job Growth After the Great Recession." The report finds a "striking imbalance" between the jobs being added and those lost over the last year:

  • Lower-wage industries constituted 23 percent of job loss, but fully 49 percent of recent growth
  • Mid-wage industries constituted 36 percent of job loss, and 37 percent of recent growth
  • Higher-wage industries constituted 40 percent of job loss, but only 14 percent of recent growth

<<<< A Look at State and Local Gov't Employment - The struggle by state and local goverments to reduce spending continues. Yesterday Ben Bernanke gave a speech on the subject. As Bernanke points out, there are really two problems caused by this wave of budget-cutting. The first is the sharp reduction in the actual services that S&L governments are expected to provide to their residents. Voters do not like electing politicians who raise taxes, of course; but will they reward politicians that have substantially reduced government services? I'm not sure, but I am quite sure that these cutbacks by state and local governments will become even more noticeable to voters over the coming year than they already are, particularly since the vast majority of S&L spending is on quite visible things like roads, police and fire departments, and of course the biggest single element, education. The following chart shows the number of state and government employees per 1,000 people in the US since January 2003 (which is when the US economy was at a roughly similar point in the business cycle, emerging from recession but not yet enjoying a strong recovery). The blue line is all S&L employees, while the red line (measured on the right axis) shows only educators.

<<<<The picture speaks for itself.

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...

1 comment:

  1. A heartbreaking graph, which acts as a mirror to our Government and it's policies.

    ReplyDelete