• Tag Archives Unemployment
  • You Can’t Make This Up, But You Can Apparently Just Make Up the Data

    This is a syndicated repost courtesy of Alhambra Investments. To view original, click here. Reposted with permission.
    Back in 2014, the Federal Reserve was convinced that the labor market was better than it appeared to be in various data accounts. Though it was called the ‘best jobs market in decades’, researchers at the central bank were keen on showing it. Primarily lacking in wages and incomes, the labor segment was suspected of missing the very elements of sustainable economic growth.
    They came up with the Labor Market Conditions Index (LMCI), a factor model purported to give less weight to any of the 19 data points embedded within it that might be outliers. I assume they really thought the weaker points would be those outliers, and therefore the LMCI would overall gravitate toward suggesting the very robust jobs market they were sure was there.
    The LMCI, of course, behaved in the opposite fashion. It suggested instead that the labor market was weak and getting weaker, not strong and getting stronger. Worse, after suggesting something like recession, which even GDP revisions have subsequently shown as the correct position, the LMCI failed to indicate a robust rebound befitting the by-then ultra-low unemployment rate.

    This post was published at Wall Street Examiner by Jeffrey P. Snider ‘ September 22, 2017.

  • What Happens When Inflation Walks In?

    If you watch and participate in markets long enough – and no, we’re not talking about, ‘On a long enough timeline…’ – you’ll appreciate or get bitten (as we certainly have from time to time) by the sardonic irony that often becomes exposed by a market’s cycle. Consider Mohamed El-Erian’s ‘New Normal’ market strategy, that aimed at the start of this decade to capture the anticipated outperformance of emerging over developed markets. Bear in mind that the phrase has stuck around since then, despite the fact that it was largely a narrative for a poor investment strategy.
    What happened? El-Erian and Gross were prescient in inventing the term ‘new normal’ to describe a very slow-growing global economy with heightened risks of recession, as befell much of Europe. But they were dead wrong in predicting that emerging markets would provide outsize stock returns, and they were wildly off base in their notion that developed-market stock returns would be deeply depressed. Emerging market stocks have stumbled since 2011, and emerging market bonds have lost ground this year. Meanwhile, developed-world stock markets have soared. The fund’s use of options and other techniques to hedge against ‘tail risk’ – which essentially means insuring against extremely bad markets – has also surely cost the fund a little in performance. – Kiplinger, November 14, 2013
    Not to overly pick on El-Erian here, who is typically a very thoughtful and creative macro thinker – not to mention many of his new normal predictions did prove prescient, with the very large exception of rising inflation that would have likely driven a successful investment strategy – not just a convenient catch phrase… but, ironically, it appears his timing earlier this year of calling for an end of the new normal, as selectively revisionist as they paint it, might provide a fitting bookend to the market’s wry sense of humor.
    Eight years later – and instead of just getting slow growth right in a developed economy like the US, as he initially suggested in May 2009, his other two major tenets of rising inflation and rising unemployment might eventually be realized domestically in the economy’s next chapter. In fact, from our perspective it seems more likely than not.

    This post was published at GoldSeek on 19 September 2017.


    ‘The principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.’ ‘ Thomas Jefferson

    Yesterday the government reported a ‘modest’ August budget deficit of $108 billion. That’s one month folks. This is another example of how the government and their mainstream media mouthpieces portray horrifically bad, extremely abnormal financial data as normal and expected. They pretend everything that has happened since 2008 is just standard operating procedure. They follow the Big Lie theory to the extreme. The masses have been so dumbed down, desensitized, and taught to believe delusions, they can’t distinguish the abnormal from the normal.
    Those in power pretend near zero interest rates eight years after the recession was supposedly over is normal. They pretend $500 billion to $1.4 trillion annual deficits are normal. They pretend 20% unemployment is really 4.4%. They pretend the stock market is at all-time highs due to an improving economy rather than central bank easy money and corporate stock buybacks. They pretend $20 trillion of debt and $200 trillion of unfunded welfare promises is no problem. We are living in the grand delusion.

    This post was published at The Burning Platform on Sept 14, 2017.

  • UMich Consumer Confidence Slides On Loss Of ‘Hope’

    University of Michigan’s headline consumer confidence index slipped lower in Septemeber (prelim) from 96.8 to 95.3 driven by a tumble in ‘expectations’ that offset a burst in ‘current conditions’ to its highest since Nov 2000!
    As Bloomberg reports, the figures are the first to broadly capture the effects of Harvey and Irma, which caused more than $100 billion in damage and sparked a jump in claims for unemployment benefits. According to the survey, 9 percent of respondents spontaneously said the storms would hurt the economy. The sentiment index was unchanged among consumers who didn’t mention the storms.
    Across all interviews in early September, 9% spontaneously mentioned concerns that Harvey, Irma, or both, would have a negative impact on the overall economy.

    This post was published at Zero Hedge on Sep 15, 2017.

  • Technical Scoop – Weekend Update Sep 10

    Weekly Update
    This is the way the world ends
    Not with a bang but with a whimper.
    – T. S. Eliot

    We are not sure if there are words that can describe what is going on right now. Houston is a mess because of Hurricane Harvey. Now that the storm has subsided and the waters begin to recede, the recovery and clean-up are barely underway. Except we are reading that it can best be described as chaotic. But it is off the news as the focus shifts to Hurricane Irma.
    It was no surprise to see initial claims for unemployment benefits leaped this past week from 241,000 to 298,000. This should rise even more going forward. In the Houston area, an unknown number of people – most likely in the thousands – have lost their homes, possessions, and jobs. Thousands of homes will most likely need to be demolished, as they have become unlivable due to mould. Many parts of Houston and environs will need to be rebuilt. The question is, do you build it as it was? Or do you rebuild to restore prairies and bayous that were paved over and contributed considerably to the massive flooding, thus resulting in the re-location of potentially thousands of people.
    And we have not even begun to see what the impact of Hurricane Irma will be. Based on what we know to date numerous Caribbean islands have been devastated. Others such as Puerto Rico have seen at least a million people cut off from power and water, a situation that could last weeks and even longer. This has potentially left thousands even tens of thousands of people homeless and without jobs. The tourist industry, a mainstay of these islands, will most likely be ‘out of business’ for months if not years. Some smaller islands may become uninhabitable, requiring the re-location of thousands. Going forward, disease and other issues in the aftermath of the hurricane could claim more lives than the hurricane did.
    Then there is Florida, a state of 20 million. While the epicenter of the storm appears to be shifting west putting cities like Tampa in its sights, the potential impact on Miami and Dade County with a population of upwards of three million could still be considerable. The high impact window carries up into Broward and Palm Beach counties, however, it appears the counties that could now be hit the hardest will be on the west side of Florida where the population is not as large. Taking into consideration all of southern Florida and up into South Carolina and Georgia the impact is expected to be high. In all 40 million could be in the path of Irma, 12% of the US population. Add in Houston and Texas impacted by Harvey and one could be talking about 50 million people or 15% of the US population exposed to severe flooding and hurricanes. And let’s not forget the tens of thousands impacted by wildfires on the west coast.

    This post was published at GoldSeek on 10 September 2017.

  • Morgan Stanley Asks “If Employment So Good,” Why Is This Happening To Credit Card Delinquencies…

    In a new downgrade of subprime lenders Capital One and Synchrony, Morgan Stanley sought to answer the nagging question of why subprime credit card losses are suddenly soaring, per the chart below, “if employment is so good.”

    After reportedly spending the entire month of August analyzing that question, Morgan Stanley came to many of the same conclusions that we note a regular, recurring basis. Apparently, those soaring delinquencies have something to do with stagnant wages in the face of soaring healthcare costs, rising rents and a pullback in consumer credit extension…who could have guessed that?
    Investors ask, “Why are card losses rising if employment is so good?” Our deep dive & quant work shows subprime is stretched from higher rent, healthcare costs & low wage growth, with lower credit availability a coming drag.
    A Tale of Two Consumers, with the subprime consumer increasingly at risk, driving up net charge-offs (NCO) and lowering EPS: The economy is solid and unemployment is very low, but credit card delinquencies have been increasing… so we spent the month of August delving into what is really going on with the US consumer. We found that the average consumer is in good shape but the financial pressures on subprime consumers are high and, critically, rising

    This post was published at Zero Hedge on Sep 8, 2017.

  • Will Low Unemployment Cause Accelerating Inflation?

    In August the US unemployment rate closed at 4.4% against 4.3% in the month before. The relatively low unemployment rate seen by some commentators as implying that the US is almost at the so-called natural rate, which believed to be at around 4.5%.
    It is held that once the unemployment rate falls below an “optimal” rate -called the Non-Accelerating Inflation Rate of Unemployment (NAIRU) -it sets off an inflationary spiral. This acceleration in the rate of inflation takes place through increases in the demand for goods and services.
    It also lifts the demand for workers and puts pressure on wages, reinforcing the growth in the rate of inflation.
    The NAIRU is an arbitrary measure, derived from a statistical correlation between changes in the consumer price index and the unemployment rate.
    What matters in the NAIRU framework is whether the theory “works”, i.e., whether a decline in the unemployment rate below the NAIRU results in the acceleration in the rate of inflation.
    Using statistical correlation as the basis of a theory means that “anything goes.” For example, let us assume that a high correlation has been found between the income of Mr. Jones and the rate of growth in the consumer price index. The higher the rate of increase of Mr. Jones’ income, the higher the rate of increase in the consumer price index.

    This post was published at Ludwig von Mises Institute on Sept 8, 2017.

  • Slow Wage Growth Could Be Thanks to ‘Sticky Wages’

    The economic outlook in the United States right now is remarkably positive according to many indicators; unemployment is at it’s lowest since the dot-com bubble, the stock market is at record highs, and inflation is relatively mild. Wages, however, seem to be bucking the trend. Growth in nominal wage rates has remained modest despite a tight labor market, puzzling many commentators. The blame has been spread widely; China, robots, and Baby Boomers are the target of one recent article. However, the answer for this puzzling phenomenon could perhaps be found in the work of John Maynard Keynes.
    One of the central tenets of Keynesian economics is the concept of ‘sticky wages;’ the belief that wages, more so than other prices, are inherently inflexible and rigid, particularly in the downward direction. This key plank of Keynes’ theory has often been used as an argument against deflation and as an impetus for monetary expansion in a recession. Although, these policy prescriptions have been dealt with countless times, what of the underlying claim?
    It turns out that praxeology per se has very little to say about the existence, or non-existence, of sticky wages. Assuming that by ‘sticky’ all that is meant is that it takes a long time for wages to adjust to market pressures, the only judgment being made is a quantitative one. Mises constantly stressed throughout his work that the only judgments praxeology can make are strictly qualitative. For example, if there is a increase in the demand for labour, we know qualitatively that the wage for labor must rise, ceteris paribus. However, in the exact same sense that we cannot predict the magnitude of this increase in wage rate, we can never predict the time it will take for wages to increase.

    This post was published at Ludwig von Mises Institute on September 8, 2017.

  • Unit Labor Costs Decline YoY To -0.2% As U-3 Unemployment Hits 4.4% (Phillip’s Milk of Magnesia Curve)

    Today, US Unit Labor Costs Nonfarm Business Sector QoQ % SAAR was reported for Q2 FINAL. It declined 0.2% from 0.6% in Q1.
    Aren’t we in a supposed tight labor market when wages (and labor costs) should be rising? That is the prediction of The Phillips Curve. But somehow it isn’t happening.
    Unit labor costs YoY fell to -0.20% while U-3 unemployment is at 4.4%. This is the ‘Phillips Milk of Magnesia Curve’ because it is giving Fed Chair Janet Yellen and my friend Raphael Bostic (Fed of Atlanta President and CEO) acid indigestion.

    This post was published at Wall Street Examiner on September 7, 2017.

  • A Look Inside The “Basket” Holding The “Market’s Big Puzzle”

    In a front page article, the WSJ takes aim at the “biggest market puzzle” of our times: the bizarre disconnect between growth and inflation, where on one hand government reports of strong, coordinated, global economic growth and tumbling unemployment (at least in the US and Japan) are offset by the complete lack of concurrent reflation. Some examples:
    The U. S. economy grew 3% in Q2, but in July CPI was up only 1.7% from the prior year; Eurozone inflation, similarly, remains stuck at 1.5% despite the bloc’s accelerated recovery. Japan’s economy grew 4% in the same quarter – its longest expansion streak since 2006 – yet inflation has failed to move above zero, where it has been stuck for the past two decades. Aside from the now widely accepted reality that the Phillips curve is now broken…
    … and the all too real possibility that either growth or inflation is being measured – and reported – incorrectly, whether accidentally or for political or market manipulation purposes, this disconnect suggests that something is very wrong with conventional economic theory: after all “when growth is strong, people demand more products and companies need to offer better pay to hire more workers, and so prices go up.” And, as the WSJ points out, if this relationship is indeed broken, “the consequences are vast for economic policy-making and financial markets.”

    This post was published at Zero Hedge on Sep 6, 2017.

  • Macron wants a Federal Budget for All of the Eurozone

    French Prime Minister Emmanuel Macron is coming out arguing for the total federalization of Europe proposing that there should be a budget for the Eurozone of hundreds of billions of euros. Macron’s position is that this budget should represent several points of the gross domestic product (GDP) of the Eurozone. It should be possible, Macron said, to collect money together in the markets and ‘allocate it with sufficient force’ for all.
    He also has made it clear that the GDP of all euro area countries was 10.7 trillion in 2016 according to Eurostat. He makes it clear that the Eurozone is far too restrictive in its budget policy when compared with the policies of China, Russia or the United States. He has made it clear that this is the cause of the high unemployment in Europe among the youth.

    This post was published at Armstrong Economics on Sep 3, 2017.

  • Winter Is Coming: August Jobs Report Weak, Average Annual Earnings Growth Remains at 2.5% YoY (U-3 Unemployment Rate BELOW Natural Rate of Unemployment)

    This is a syndicated repost courtesy of Snake Hole Lounge. To view original, click here. Reposted with permission.
    August jobs reports are always a little odd. And August 2017 is no different. Only 156K jobs were added in August and the U-3 unemployment rate rose slightly to 4.4%.

    This post was published at Wall Street Examiner by Anthony B Sanders ‘ September 1, 2017.

  • Trump at His Most Brazen

    The media has taken President Trump to task for all manner of false or exaggerated claims, but surprisingly little has been said about Trump’s most glaring forays into abject hypocrisy. Recently, on the Joe Rogan podcast, economist Peter Schiff outlined how Candidate Trump rightly questioned the reliability of unemployment data and stock market performance, but reversed himself completely on those fundamental views after the election.

    This post was published at Euro Pac on Friday, September 1, 2017.

  • August Employment: Crap

    Oh boy the screamers are all over themselves saying this is a “good report.”
    Of course they didn’t read anything except the headline establishment survey.
    I did.
    Total nonfarm payroll employment increased by 156,000 in August, and the unemployment rate was little changed at 4.4 percent, the U. S. Bureau of Labor Statistics reported today. Job gains occurred in manufacturing, construction, professional and technical services, health care, and mining.
    Suuuuureeeee we did. With so-called “adjustment”, that is.

    This post was published at Market-Ticker on 2017-09-01.

  • Living paycheck to paycheck is the way of life: New Harris poll finds that 78 percent of US workers live paycheck to paycheck.

    For most Americans, living for payday is the way of life. And many use debt to bridge the gap between money hitting their bank account and the bills that need to be paid. We know since many banks make billions of dollars on people over drafting accounts. A new Harris Poll found that 78 percent of US workers live paycheck to paycheck. Now this news may be shocking to some but in reality, it is no surprise at all. How can this be if the stock market is near a record high, real estate is at record levels, and the headline unemployment rate is near record lows? Well first, most Americans don’t own stocks. Second, the homeownership rate has dropped to near generational lows. You also have nearly 95 million adults that are not part of the labor force so don’t count for employment figures. So this is why the survey results may not be all that surprising. But let us dig into the numbers a bit more.
    Living paycheck to paycheck
    Beyond the reality that most Americans are just getting by there are many other data points in the survey that are somewhat startling.

    This post was published at MyBudget360 on August 30, 2017.

  • Why Every European Country Has A Trump Or Sanders Candidate

    Authored by Richard Drake via TheAmericanConservative.com,
    The suicide in the Friuli region of northern Italy earlier this year of a 30-year-old man, identified in the newspapers only as Michele, has become a symbol of the country’s unemployment tragedy, particularly as it affects young people.
    Though much worse in the South, the country’s economic crisis also has had a blighting effect on the North. The national unemployment rate now stands at nearly 12 percent. A 40 percent youth unemployment rate nationwide, however, has people speaking of a generational apartheid in Italy. There is no work to be found for young people. In the workplace, comparatively speaking, they have been walled off from the rest of the population.
    Friuli is a region of plain and mountain in the northeastern part of Italy, flush against borders to the north with Austria and the east with Slovenia. The annals of Friuli antedate by many centuries the arrival of the ancient Romans, who founded the colony of Aquileia there nearly two hundred years before Christ. The barbarian invasions swept over Friuli in the general wreckage of the Roman Empire. An Aquileian state arose in the Middle Ages, but was absorbed in the 15th century by the expanding Venetian empire. Then Friuli passed through French and Austrian phases of occupation and control before becoming part the newly founded Kingdom of Italy, in 1866.
    The Friulani, a highly energetic and resourceful people steeped in the work ethic common to the peasant and artisanal cultures of traditional Europe, tilled the land and also gained a well-deserved reputation for their skill in specialty crafts and the building trades. Typically in such cultures, the work that a man did defined him. The modern world has changed those old ways of life, but the culture they generated persists. More recently, Friuli became renowned for its small businesses and factories, which played a vital role in the national economy. There was still hard work for the Friulani to do.

    This post was published at Zero Hedge on Aug 30, 2017.

  • Home Prices In 80% Of US Cities Grow Twice Faster Than Wages… And Then There’s Seattle

    According to the latest BLS data, average hourly wages for all US workers rose 2.5% relative to the previous year, well below the Fed’s “target” of 3.5-4.5%, as countless economists are unable to explain how 4.3% unemployment, and “no slack” in the economy fails to boost wage growth. Another problem with tepid wage growth, in addition to crush the Fed’s credibility, is that it keeps a lid on how much general price levels can rise by. With record debt, it has been the Fed’s imperative to boost inflation at any cost (or rather at a cost of $4.5 trillion) to inflate away the debt overhang, however weak wages have made this impossible.
    Well, not really. Because a quick look at US housing shows that while wages may be growing at roughly 2.5%, according to the latest Case Shiller data, every single metro area in the US saw home prices grow at a higher rate, while 16 of 20 major U. S. cities experienced home price growth of 5% or higher: double the average wage growth, and something which even the NAR has been complaining about with its chief economist Larry Yun warning that as the disconnect between prices and wages become wider, homes become increasingly unaffordable.
    And while this should not come as a surprise, one look at the chart below suggests that something strange is taking place in Seattle, which has either become “Vancouver South” when it comes to Chinese hot money laundering, or there is an unprecedented mini housing bubble in the hipster capital of the world.

    This post was published at Zero Hedge on Aug 29, 2017.

  • Greeks Rejoice – Government Scraps Controversial Wine Consumption Tax

    While austerity still reigns supreme over Greek society, amid resurgent refugee arrivals, still near-record high youth unemployment, record-high suicide rates, and a constant brain-drain exodus of young talent, this weekend saw a brief silver lining as the government decided to scrap the controversial special consumption tax on wine.
    The measure, which not only did not meet revenue targets, but actually boosted illegal trade in wine and grapes, will be halted by the end of the year.
    As KeepTalkingGreece reports, inaugurating the Wine Days of Nemea 2017 in one of wine producing regions of Greece, Minister for Rural Development, Vaggelis Apostolou said that the ministry is working on the legislation to scrap the special consumption tax on wine and it is expected to be ready before the end of the year.’It is a commitment by prime minister Alexis Tsipras that the tax will not exist in the new year,’ Apostolou stressed.
    Finance Ministry sources told daily Efimerida Ton Syntakton that the special consumption tax on wine caused more damage to the sector of wine producers than it brought revenues to the state.

    This post was published at Zero Hedge on Aug 28, 2017.

  • Macron Spent $30,000 On Makeup In Three Months

    One year ago, when he was still president, Francois Hollande scandalized the establishment when it emerged that amid record unemployment, painful labor reforms, a sliding economy and the most serious social unrest in decades, the French president’s personal hairdressed was getting paid a gross salary by the state of ~$11,000 per month (more than a European parliament member). As the media reported at the time, “the hairdresser, who the leaked contract names only as Oliver B, is set to earn half a million pounds over the course of Hollande’s current premiership, in exchange for being available at every waking moment and signing a contract promising not to speak about his position.”
    The fact that this was probably not the best way to spend French taxpayers’ money was confirmed this past summer, when Hollande’s approval rating was so low, the socialist president did not even run for re-election: a first in French history. Sadly, this was lost on Hollande’s former Minister of Economy – and current president – Emmanuel Macron who failed to learn from the mistakes of his former boss.
    According to French magazine Le Point, French President Emmanuel Macron spent 26,000 – over $30,000 – on makeup in his first three months as leader of the country.
    As Politico adds, “Macron’s personal makeup artist put in two claims for payment, one for 10,000 and another for 16,000, for doing his makeup during his travels and ahead of press conferences.” When asked about this abuse of taxpayer funds, The Elysee Palace said in response: ‘We called in a contractor as a matter of urgency.’ Still, aides said that spending on makeup would be ‘significantly reduced’ in future, Le Point reported.

    This post was published at Zero Hedge on Aug 25, 2017.

  • El-Erian Warns Vexed Central Bankers “The Lowflation Demon Is Real”

    Persistently low inflation, or “lowflation,” is vexing lots of people. According to the recent minutes of policy meetings of the Federal Reserve and the European Central Bank, central banks on both sides of the Atlantic have been trying to identify the causes — but with limited success so far. This complicates monetary policy decisions and undermines the range of institutional solutions that have been proposed by academics. Until this changes, central banks may need to think more holistically about the objectives of monetary policy, including the unintended consequences for future financial stability and growth of being too loose for too long.
    Four facts stand out in reviewing recent inflation data:
    Inflation rates have been unusually and persistently low. This is primarily an advanced-country phenomenon. Inflation has not responded to the prolonged pursuit of ultra-low interest rates and huge injections of liquidity by central banks through quantitative easing. This has coincided with a period of notable job creation, especially in the U. S., thereby flattening the “Phillips curve” that plots unemployment and inflation rates.

    This post was published at Zero Hedge on Aug 23, 2017.