• Tag Archives Unemployment
  • Mark Hanson Reveals “The Next Housing Bubble”

    The striking Case-Shiller regional charts shown below, courtesy of MHanson.com, make Mark Hanson angry: “so, 2006/2007 was the largest house price bubble ever, but there is nothing to see here in 2017?” and sarcastically points out that “if this isn’t a house price bubble, I would hate to see one.”
    His bottom line:
    If 2006/07 was the peak of the largest housing bubble in history with affordability never better vis a’ vis exotic loans; easy availability of credit; unemployment in the 4%’s; the total workforce at record highs; and growing wages, then what do you call ‘now’ with house prices at or above 2006 levels; worse affordability; tighter credit; higher unemployment; a weakening total workforce; and shrinking wages? Whatever you call it, it’s a greater thing than the Bubble 1.0 peak.
    And visually:

    This post was published at Zero Hedge on Jul 27, 2017.

  • Outside the Box Hoisington Quarterly Review and Outlook, Second Quarter 2017

    I have often written about the Fed’s abysmal track record in managing the economy. In today’s Outside the Box, Lacy Hunt and Van Hoisington of Hoisington Investment Management give us an in-depth tutorial on the reasons for the Fed’s consistently poor record.
    They start by considering the Fed’s ‘dual mandate,’ which sets ‘the goals of maximum employment, stable prices and moderate long-term interest rates.’ (And yes, that is actually three goals, not two.) But a problem arises, the authors note, ‘because considerable time elapses between the implementation of the monetary actions designed to follow the mandate and when the impact of those actions take effect on broader business conditions.’ The time lag can easily be three years or longer, with the result that policy changes often end up being pro- rather than countercyclical. To make matters even worse, ‘the economic risks from adherence to this dual mandate are now much greater than historically due to the economy’s extreme over-indebtedness, poor demographics and a fragile global economy.’
    In the real world, the dual mandate can break down. Now, the Fed is tightening over concerns about wage pressure from a low level of unemployment, yet inflation has run consistently below the Fed’s 2% target for the past year or more. Enter the Phillips curve.

    This post was published at Mauldin Economics on JULY 26, 2017.

  • Seattle’s Minimum Wage Supporters Ignore the Facts

    In what has become a running joke amongst those skeptical of the claim that minimum wage increases have no effect on unemployment, a recent report by the Employment Policies Institute showed that 174 of the 184 co-sponsors of a bill to raise the federal minimum wage to $15 an hour hired unpaid interns.
    My personal favorite example of this type of this is when the Freedom Socialist Party, which was pushing for an even more ridiculous $20 minimum wage, posted ads for new employees offering $13 an hour.
    The party’s national secretary doused himself in irony to defend his organization by saying ‘We’re practicing what we’re preaching in terms of continuing to fight for the minimum wage… But we can’t pay a lot more than $13.’
    Hmmm, perhaps some of the unemployment a higher minimum wage would bring might actually be beneficial. Maybe we’ve gotten this whole debate wrong…
    At the federal level Nancy Pelosi promised to pass a $15 an hour minimum wage if the Democrats take control of the House in 2018. Increasing the federal minimum wage across the nation is far more vulgar than increasing a state or city minimum wage. Having spent some time in New York recently, I can definitely understand the desire to increase wages. When a 350 sq. ft. studio that lacks enough space for anything more than a mini fridge rents for $2500 a month, taxes are through the roof and a pack of cigarettes costs $13, it can be hard to get by. Artificially raising the minimum wage isn’t going to fix that, but the desire to is understandable.

    This post was published at Ludwig von Mises Institute on July 25, 2017.

  • Mark Cuban: Artificial Intelligence ‘Will Cause a Lot of Unemployment’

    Billionaire Mark Cuban said this weekend that AI will cause mass unemployment.
    And soon.
    The ‘Shark Tank’ star took to the stage at multimedia celeb festival OZY yesterday to warn that ‘however much change you saw over the past 10 years with the Apple (Nasdaq: AAPL) iPhone, that’s nothing. There’s going to be a lot of unemployed people replaced with technology and if we don’t start dealing with that now, we’re going to have some real problems.’
    Indeed, in September 2016, business trends think tank Forrester Research released an exhaustive report anticipating that robots will eliminate 6% of all U. S. jobs by 2021 – 10% of which will occur in the retail industry alone.
    And this is where Money Morning Capital Wave Strategist Shah Gilani takes Cuban’s cautionary statement a step further…

    This post was published at Wall Street Examiner on July 24, 2017.

  • Universal Basic Income: Can It Work?

    With the increase of workplace automation and robotics, the fear of rising unemployment has many economists and policymakers worried how a displaced labor force will survive. The response to this potential economic dilemma has been the proposal of providing income to everyone via universal basic income.
    The growing use of robotics, machine learning, and automation in service and manufacturing jobs means the shrinking of the human labor force. In response to this rising concern, economists, business leaders, and policymakers have started embracing an old idealistic concept providing continuous stable income to those rendered unemployed by the latest technological phenomenon: universal basic income (UBI). However, along with the pros and cons of this idea, supporters and detractors wonder: Where will the money come from to provide financial income for everyone?
    What Is Universal Basic Income?
    In its simplest form, UBI is a fixed, monthly cash payment given to each adult citizen regardless of income or work status, unconditionally, to provide for basic living expenses. The funds would come from either a government or public organization regardless of other income sources individuals may have and distribute on either a weekly, monthly or yearly basis.
    Some UBI proposals call for even children to receive a cash payment, while others call only for recipients over 18 years old. UBI is excluded from means testing, no requirement for anything to be performed in return, and would be a fundamental citizen’s right. Groups such as Basic Income Earth Network (BIEN) support UBI but also ‘oppose the replacement of social services or entitlements, if that replacement worsens the situation of relatively disadvantaged, vulnerable, or lower-income people.’

    This post was published at FinancialSense on 07/24/2017.

  • Gradually… And Then Suddenly

    What do socialism and modern monetary policy have in common? Magical thinking. For both, it’s true on the giddy years up, and it’s true on the sad years down.
    If you’ve been reading my notes immediately before and after the June Fed meeting (‘Tell My Horse’ and ‘Post-Fed Follow-up’), you know that I think we now have a sea change in what the Fed is focused on and what their default course of action is going to be. Rather than looking for reasons to ease up on monetary policy and be more accommodative, the Fed and the ECB (and even the BOJ in their own weird way) are now looking for reasons to tighten up on monetary policy and be more restrictive. As Jamie Dimon said the other day, the tide that’s been coming in for eight years is now starting to go out. Caveat emptor.
    The question, then, isn’t whether the barge of monetary policy has turned around and embarked on a tightening course – it has – the question is how fast that barge is going to move AND whether or not the market pays more attention to the actual barge movements than what the barge captain says. I promise you that the barge captains of both the Fed and the ECB believe they can tighten and taper without killing the market so long as they jawbone this constantly. This is the Common Knowledge Game in action, this is the Missionary Effect, this is Communication Policy … this is everything that I’ve been writing about in Epsilon Theory over the past four years! And as we saw with the market’s euphoric reaction to Yellen’s prepared remarks for her Humphrey-Hawkins testimony last Wednesday, which were presented as oh-so dovish when they really weren’t, this jawboning strategy could absolutely work. It WILL absolutely work unless and until we get undeniably ‘hot’ inflation numbers – particularly wage inflation numbers – from the real world.
    So what’s up with that? How can we have wage inflation running at a fairly puny 2.5% (Chart 1 below) when the unemployment rate is a crazy low 4.3% (Chart 2 below) and other indicators, like the NFIB’s survey of ‘Small Business Job Openings Hard to Fill’ (Chart 3 below) are similarly screaming for higher wages?

    This post was published at Zero Hedge on Jul 19, 2017.

  • Don’t Be Fooled – The Federal Reserve Will Continue Rate Hikes Despite Crisis

    Though stock markets in general are meaningless and indicate nothing in terms of the health of the economy they still function as a form of hypnosis, or a kind of Pavlovian mechanism; a tool that central bankers can use to keep a population servile and salivating at the ring of a bell. As I have mentioned in the past, the only two elements of the economy that the average person pays attention to in the slightest are the unemployment rate and the Dow. As long as the first is down and the second is up, they aren’t going to take a second look at the health of our financial system.
    Historians and economists often wonder after the fact how it was possible for so many “experts” and others to miss the flashing red lights leading into market implosions like that which occurred in 2008. Well, this is exactly how; within any casino there is an inherent bias towards false hope. Meaning, many people will invariably ignore all negative factors and past experience because positivism is more pleasant. Central bankers are keen to take advantage of this condition.
    When observing from the outside-in, this attitude rings of desperation. Investors, with no positive fundamental data to turn to in the economy, have now been relegated to scouring press releases and speeches for ANY indication that the central bank might not take the punch bowl away as they have been doing slowly over the past few years. In fact, in most cases negative data has actually triggered spikes in equities because the assumption on the part of investors is that bad data will cause the Fed to second-guess its stimulus reduction policies. In this way, central bankers can, at least for now, fake-out investors with a simple word or phrase released in a strategic manner.

    This post was published at Alt-Market on Wednesday, 19 July 2017.

  • Qualifying Shortage (Labor)

    There isn’t a day that goes by in 2017 where some study is released or anecdote is published purporting a sinister labor market development. There is a shortage of workers, we are told, often a very big one. The idea is simple enough; the media has been writing for years that the US economy was recovering, and they would very much like to either see one and be proven right (and that recent revived populism is illegitimate), or find an excuse why they weren’t really wrong (so that populism can be described as indirectly illegitimate).
    Today Bloomberg reports on a quarterly survey conducted and prepared by the National Association for Business Economics. Their results show, no surprise, the number of firms reporting trouble hiring workers has risen this year.
    Many economists expect the jobs market to start putting pressure on wages and inflation, though that phenomenon has yet to fully materialize.
    To make matters worse, for the study rather than the economy, basic economics (small ‘e’) is just ignored in favor of ‘the unemployment rate can’t be wrong.’
    ‘When you cannot bring in the workforce you need, it’s going to affect your sales and affect your profits,’ Jankowski said.

    This post was published at Wall Street Examiner on July 17, 2017.

  • The Economic System Has Failed,The Fed Will Hide It All By Pushing Markets Higher – Episode 1333a

    The following video was published by X22Report on Jul 16, 2017
    Many of the EU countries are at the point where more and more people are falling into poverty. The stats don’t add up, unemployment decreases and retail sales decreases and the restaurant industry declines rapidly. Visa is offering restaurants $500,000 not accept cash. Illinois pension system was created by manipulating the numbers. Ron Paul says when the central banks make the statement that everything is Ok, this is when the economy collapses.

  • French Riots Erupt in 20 cities

    The riots is France has been forming for the last two weeks and have now erupted violently with protesters carrying banners that read ‘Break Destroy Ravage’ that is similar to the destructive forces unleashed in Hamburg. The police report that the mob is composed of the youth. It is hard to see how these people can practice restraint when unemployment among the youth is so high because of taxes and regulation prevent small businesses from forming.

    This post was published at Armstrong Economics on Jul 16, 2017.

  • Watch Live: Yellen Testimony Day 2, And Three Questions She Should Answer

    Yesterday, Janet Yellen surprised markets again, when after weeks of a hawkish setup, she suggested that the Fed is not only uncertain “about when – and how much – inflation will respond to tightening resource utilization’, warning that the federal funds rate may “not have to rise all that much further to get to a neutral policy stance.” The market was delighted by this dovish turn, and sent the DJIA to new all time highs, while global stocks hit fresh record highs.
    Now it’s time for day two, with Yellen appearing before the Senate Banking Committee. While the prepared remarks will be identical, in her speech on Wednesday, Yellen said the U. S. economy should continue to expand over next few years and stressed a gradual approach to tightening as central bank monitors inflation. The attention will be on the Q&A.
    And, to help the Senate along, here are 3 questions that the Senate should ask Yellen, courtesy of Rafiki Capital’s Steven Englander.
    If GDP, unemployment, consumption etc were exactly the same but inflation was stable at 2%, would the US be better or worse off?
    Ask 100 people and 95 would say we are better off at 2% inflation, but being able too expand further without hitting output constraints is better than finding that you have topped out on the growth side. Imagine if we had hit 2% inflation when the unemployment rate was 6%, would we or the Fed be high fiving because we hit our targets? Below target inflation is a problem for the Fed in missing its dual mandates but it means that the economy has more room to grow, more jobs to create, more homes to build etc. However, having more room to expand is unambiguously a good thing from the economic viewpoint -with the caveat that if we are using the wrong tools and we generate asset market instability, there is a case to the contrary. But that is different than saying the new millennium would be here if there was 2% inflation rather than 1.5%, but everything else was the same.

    This post was published at Zero Hedge on Jul 13, 2017.

  • JOLTS Disharmony Is More Than JOLTS, or Jobs

    Last month it was Job Openings that soared to a new record high of more than 6 million (for April 2017), while the pace of hiring slammed lower to just more than 5 million. This month (May 2017), the opposite. Hires surged to nearly 5.5 million, while Job Openings fell sharply (and were revised lower for April). The large variations and in opposing directions the past few months underscores what is lingering tension in the JOLTS data.
    As with the main payroll reports, whether you are an optimist or pessimist there is data for you. Economists and policymakers have emphasized Job Openings like they have the unemployment rate. Both suggest a blistering pace to the labor market.
    On the other side there is like the headline apathy in the labor force of the payroll reports in JOLTS a tepid recovery in hiring. It is made all the more deficient when properly scaling that activity by the level of population growth.

    This post was published at Wall Street Examiner on July 11, 2017.

  • The Bernanke-Yellen Bubble-Depression

    In a recent article I advocated for a new way of naming business cycles. The new approach emphasizes the cause rather than the effect. So instead of the ‘housing bubble’ and ‘financial crisis,’ we should refer to the Greenspan-Bernanke Crisis. Here we will turn our attention to the current situation.
    The current economy is a puzzle for mainstream economists. Some aspects of the economy seem to be very strong, such as the stock market, real estate, social media, and internet companies. Other aspects of the economy seem to be very weak, such as economic growth, wage increases, and the number of full time ‘breadwinner’ jobs.
    One major example of this puzzle is that unemployment is very low and inflation is also very low and yet the Fed and other central bankers appear to be afraid to allow interest rates to go back to their normal levels. They appear to be afraid to make any move, for fear that the economy collapses.
    You can understand why. They sat on a housing bubble of their own making and had no idea it existed and was so massive and how entangled it was with the financial sector. At the time, they thought that everything was fine and that they could just lower interest rates if some problem appeared out of the blue. Instead, they had to bring interest rates down to zero and engaged in years of unconventional and untried monetary policies, with very little in the way of positive results. So naturally they are worried. Most are no doubt hoping for the end of their terms as central bankers to come as quickly as possible.

    This post was published at Ludwig von Mises Institute on July 11, 2017.

  • June Employment Report Supports Further Fed Tightening

    A generally upbeat June 2017 employment report supports the Fed’s case for additional monetary tightening, most likely in the form of balance sheet action in September followed up by a 25bp rate hike in December. Moreover, the solid pace of job growth will encourage the Fed to maintain 2018 policy projections as well. Although the unemployment rate ticked up, ongoing job growth at this pace will eventually push it back down. Weak wage growth continues to restrain the Fed from accelerating the pace of easing; the tepid pace of wage gains suggests the Fed’s estimates of full employment remain too high.
    Read Jobless Claims and Economic Turning Points
    Nonfarm payrolls rose by 22sk in June, above expectations. Moreover, both April and May were revised higher. The three month and twelve-month paces are just below 200k. Job growth continues to slow, but the rate of decline is very shallow:

    This post was published at FinancialSense on 07/10/2017.

  • SocGen Asks: “Is It Groundhog Day, Or Goldilocks And The Three Bears?”

    In his overnight note, SocGen’s FX strategist Kit Juckes appropriates asks which is the right metaphor for the state of the US economy – Goldilocks or Groundhog Day? He points to employment growth of 1.55%, unemployment 4.4%, offset by weak wage growth of 2.46%. As Juckes summarizes the current economic situation, “weak productivity and weak real wage growth leave the economy in an endless winter of mediocrity, while solid employment growth without inflation is the ‘not to cold, not too warm’ mix that keeps the Fed normalising policy ever so slowly, equity indices marching ever higher and the economic cycle able to trundle on with no recession in sight.”

    This post was published at Zero Hedge on Jul 10, 2017.

  • Tales from the FOMC Underground

    A Great Big Dud
    Many of today’s economic troubles are due to a fantastic guess. That the wealth effect of inflated asset prices would stimulate demand in the economy.
    The premise, as we understand it, was that as stock portfolios bubbled up investors would feel better about their lot in life. Some of them would feel so doggone good they’d go out and buy 72-inch flat screen televisions and brand-new electric cars with computerized dashboards on credit.
    Before you know it, gross domestic product would go up – along with wages – and unemployment would go down. A self-sustaining economic boom would follow.
    This fantastic guess, however, has proven to be a critical error in judgment. Asset prices bubbled up, flat screen televisions and new cars were bought in record numbers, and the unemployment rate – according to the government’s statistics – went down.
    On the flip side, real GDP growth only marginally lurched upward, never eclipsing 3 percent during a calendar year, and the great big economic boom that was supposed to save the economy from itself turned out to be a great big dud.
    At the same time, the general aura of the Federal Reserve Chair, once held up on high by Bob Woodward, has slipped into irreparable decline. No public relations exploit or press briefing can correct the damage. No policy adjustment or balance sheet modification can return the Fed to its former glory.

    This post was published at Acting-Man on July 8, 2017.

  • June Payrolls Preview: With The Fed On Autopilot, You Can Skip This One

    After a poor March jobs report, followed by an April scorcher, then another debacle in May, the June payrolls report due at 8:30am will be… very much irrelevant, because as Citi pointed out earlier, the Fed is now data-independent and will keep hiking until financial conditions finally tighten (read: stocks drop). In other words, with the Fed on autopilot, feel free to skip this one – it hardly matters. For what it’s worth, here are the consensus expectations for tomorrow’s report:
    June Nonfarm Payrolls Exp. 179K vs May 138K Unemployment Rate Exp. 4.3% vs May 4.3% Average Hourly Earnings M/M Exp. 0.3%, vs May 0.2%; Y/Y Exp. 2.60%, vs May 2.50% Courtesy of RanSquawk, here is a detailed breakdown of expectations:
    HEADLINE NFP: Analysts expect 179k nonfarm payrolls will be added to the US economy in June, against 138k added in May. Headline payroll growth has eased: The three-month rolling-average of the headline is running at a 121k clip, the slowest since July 2012, suggesting the pace of slack erosion is easing.
    Analysts at Barclays, who are more-or-less in line with the consensus view, write ‘factors influencing our forecast include initial claims, which continue to point to low rates of job separation, and the timing of the survey week in May.’ The bank says claims have been pointing toward stronger payroll growth for some time too, but add that ‘in the other direction are calendar-day effects that we believe held back reported employment last month.’

    This post was published at Zero Hedge on Jul 7, 2017.

  • Employment Report: Divergences

    Total nonfarm payroll employment increased by 222,000 in June, and the unemployment rate was little changed at 4.4 percent, the U. S. Bureau of Labor Statistics reported today. Employment increased in health care, social assistance, financial activities, and mining.
    So says the establishment survey.
    What does the household say, less all so-called “adjustments”?

    This post was published at Market-Ticker on 2017-07-07.

  • FOMC Minutes Show “Divided” Fed Fearful Of High Asset Prices, Low Inflation

    Having hiked in June amid gravely disappointing macro-economic data, all eyes are now on the minutes for inflation (weakness blamed on “idiosyncratic factors”), labor market (concerns about “sustained employment undershoot”), balance sheet normalization (Fed “divided” over when to start), and market valuation concerns (“equity market high on standard metrics”). Rate hike odds for Sept (22%) and Dec (56%) were rising into the release.
    Additional headlines…

    This post was published at Zero Hedge on Jul 5, 2017.

  • The Two Main Things To Look For In Today’s FOMC Minutes

    With less than two hours until the Fed releases the minutes to the June FOMC meeting which may shed some more light on how Fed officials view the simultaneous declines in unemployment and inflation, there are two key things markets will focus on:
    Concern on inflation – As several speakers have sounded less hawkish on prices than Yellen did, a more dovish language on CPI isn’t new news. Balance sheet timing – Consensus here is for a pause when balance sheet reinvestment policy changes. However, as Citi’s Fraser King writes, there is no specific reason why the Fed would tie themselves to such a schedule, and expects additional clarity from the minutes may clarify. Indeed, as Stifel’s chief economist LIndsay Piegza writes, “the $4.5 trillion question on everyone’s mind remains when will the Fed start shrinking its balance sheet? Recall, the June rate announcement included details of the expected caps and tiered reduction patterns Fed officials expect to implement, but the timeline for said reduction was not specified.”

    This post was published at Zero Hedge on Jul 5, 2017.