• Tag Archives Unemployment
  • Fading Further and Further Back Toward 2016

    Earlier this month, the BEA estimated that Disposable Personal Income in the US was $14.4 trillion (SAAR) for April 2017. If the unemployment rate were truly 4.3% as the BLS says, there is no way DPI would be anywhere near to that low level. It would instead total closer to the pre-crisis baseline which in April would have been $19.0 trillion. Even if we factor retiring Baby Boomers in a realistic manner, say $18 trillion instead, what does the world look like with that additional $3.6 trillion of American income?
    It is the one that is currently being described, that which earlier this year was supposed to set up the bond market for a 1994-style ‘massacre.’ Reflation was not just some nebulous idea, though it arose out of nothing but faith, rather it was the belief in a realistic trajectory back to $19 or even $18 trillion in income (maybe $17 trillion). At that level of future income, a lot of deficiency about the current economy would quickly vanish.
    That would apply, of course, to far more than domestic circumstances. The rest of the world would be awash in US demand in terms of actual spending (the strong consumer in fact rather than just constant description). The feedback and spillover effects would restart what are now painfully broken foreign economies (not just in Brazil).

    This post was published at Wall Street Examiner on June 20, 2017.

  • The Fed’s Policy and Its Balance Sheet

    At its June meeting, the FOMC again raised the target range for the federal funds rate by 25 basis points, to 1 – 1 percent. They did so despite evidence that inflation had moderated and that the second estimate of first quarter GDP growth was clearly subpar at 1.2%. Furthermore, despite the fact that 7 of the 12 Federal Reserve district banks had characterized growth in the 2nd quarter as ‘modest,’ as compared with only 4 banks that described it at ‘moderate’ (the NY bank simply said that growth had flattened), the FOMC in its statement described growth as ‘moderate’ (here one needs to know that in Fed-speak ‘modest’ is less than ‘moderate’). The overall discussion evidenced in the statement and subsequent explanations by Chair Yellen in her post-meeting press conference, together with the fact that the only significant change in June’s Summary of Economic Projections was a slight downward revision in the unemployment rate for 2017, failed to make a convincing argument to this writer that there was a compelling case for a rate move at this time. The principal conclusion we can draw is that the FOMC had already conditioned markets to expect an increase in June and that the FOMC’s main rationale was its desire to create more room for policy stimulus should the economy take a sudden turn to the downside.
    More significant than the rate move, however, was the detail the FOMC provided on its plan to normalize its balance sheet, which elaborated on the preliminary plan it put forward in March. Once the Committee decides to begin that process, it will employ a set of sequentially declining caps, or upper limits, on the amount of maturing assets that will be permitted to run off each month. The cap for Treasury securities will initially be $6 billion per month, and it would be raised in increments of $6 billion every three months until $30 billion is reached. Similarly, the cap for MBS will be $4 billion per month, which would also be raised by that amount every three months until $20 billion is reached. These terminal values would be maintained until the balance sheet size is normalized. Left unsaid was what the size of the normalized balance sheet would be.

    This post was published at FinancialSense on 06/19/2017.

  • Haunting Yellen

    I wouldn’t put it in the category of LBJ ‘losing Cronkite’, but it is at least a measure of amplified pressure (or just any pressure). This week has been utterly embarrassing for the Federal Reserve, a central bank that refuses to define clearly what it is attempting to do. It leaves questions even for who used to be highly sympathetic.
    Their aim is simple enough as a matter of pure economics. The economy didn’t recover and is never going to (so long as monetary matters remain truly unexamined). Having resisted this possibility for nearly a decade, officials who have now come around wish to avoid having to admit it. So they let the media define the economy by the unemployment rate which projects an image of conditions that simply don’t exist.
    The New York Times has typically been friendlier to the official stance on these matters. Credentials go a long way there, and who has better pedigree than Federal Reserve policymakers? But even they may have to call foul because it’s not like the unemployment rate just yesterday dropped so low. It’s been flirting with official levels of ‘full employment’ for three years, forcing the FOMC’s suspect models to redefine down their calculated central tendency (the theorized range where low unemployment is believed to spark serious wage acceleration and then consumer price inflation) time and again.
    At 4.3%, the unemployment rate doesn’t any longer leave much room for interpretation. It’s go time, now or never.

    This post was published at Wall Street Examiner on June 16, 2017.

  • Bill Blain: “It’s Tough Being A Central Banker”

    By Bill Blain of Mint Partners
    Blain’s Morning Porridge
    ‘Sometimes I’ve believed as many as six impossible things before breakfast.. ‘ * * *
    It’s tough being a Central Banker. The expectation they are doing the right thing lies heavy upon them. We’d like to believe Central Bankers are omnificent celestial beings (because we like the idea of an ordered universe), but the truth is they are as much hostage to the fickle winds of economic destiny as the rest of us. Just when they are guiding us to believe the economy is about to explode, it contracts. Just as they sort out the banks, the economy then votes for collective economic suicide. Just as they think they’ve licked inflation, commodity prices go chaotic.
    The official line on Wednesday’s Federal Reserve meeting is: more hawkish than expected – 3rd hike in 6 months and talking about they will normalise the balance sheet by rolling off assets and capping reinvestment. They expect unemployment to continue improving and remain robust. They are happy with the outlook for consumption and capex.

    This post was published at Zero Hedge on Jun 16, 2017.

  • Is the Fed Repeating ‘The Mistake of 1937’?

    The esteemed brothers and sisters of the Federal Reserve raised interest rates 0.25% yesterday.
    It was the fourth rate hike since December 2015… and the third in six months.
    Janet Yellen has officially taken to the warpath.
    Phoenix Capital:
    … the Fed is embarked on a serious tightening cycle. One rate hike can be a fluke. Two rate hikes could even be just policy error. But three rate hikes means the Fed is determined.
    But is the Fed repeating ‘the mistake of 1937’?
    Stricken by the Crash of ’29, the American economy was climbing out of its sickbed by 1936.
    Annual GDP growth – real GDP growth – was rising steadily.
    Unemployment was falling, from its 25% high to 14%.
    But by 1936 the Federal Reserve grew anxious, anxious that it was incubating inflation… that its previous loose monetary policy had healed enough.
    It feared any more could start a fever.

    This post was published at Wall Street Examiner on June 15, 2017.

  • 14/6/17: The Fed: Bravely Going Somewhere Amidst Rising Uncertainty

    Predictably (in line with the median investors’ outlook) the Fed raised its base rate and provided more guidance on their plans to deleverage the Fed’s balance sheet (more on the latter in a subsequent post). The moves came against a revision of short term forecast for inflation (inflationary expectations moved down) and medium turn sustainable (or neutral) rate of unemployment (unemployment target moved down); both targets suggesting the Fed could have paused rate increase.
    Rate hike was modest: the Federal Open Market Committee (FOMC) increased its benchmark target by a quarter point, so the new rate range will be 1 percent to 1.25 percent, against the previous 0.91 percent. This marks the third rate hike in 6 months and the Fed signalled that it is on track to hike rates again before the end of the year (with likely date for the next hike in September). The forecast for 2018 is for another 75 basis points rise in rates, unchanged on March forecast.

    This post was published at True Economics on June 14, 2017.

  • The Next Massive Wave of Unemployment

    ‘There’s no question that self-driving cars are coming,’ Business Insider declares. ‘The real debate at this point is who will get there first.’
    We understand up to 19 companies are competing to field self-driving cars by 2021 – less than four years from now.
    We’d trust a driverless car about as much as we’d trust Mr. Madoff with our money.
    But its drummers insist the computerized driver will vastly outperform the human pilot.
    The silicon captain will go the speed limit… stop at stop signs… and yield to pedestrians.
    It won’t be plowing into your bumper because it’s texting its boyfriend or necking its girlfriend.
    We’ve been assured its blood alcohol content will never exceed the legal limit.
    The consulting firm McKinsey & Co. estimates the computerized driver could actually reduce U. S. road accidents by 90%.
    Just so.

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

  • More Solar Jobs Is a Curse, Not a Blessing

    Citing U. S. Department of Energy data, the New York Times recently reported that the solar industry employs far more Americans than wind or coal: 374,000 in solar versus 100,000 in wind and 160,000 in coal mining and coal-fired power generation. Only the natural gas sector employs more people: 398,000 workers in gas production, electricity generation, home heating and petrochemicals.
    This is supposed to be a good thing, according to the Times. It shows how important solar power has become in taking people out of unemployment lines and giving them productive jobs, the paper suggests.
    Indeed, the article notes, California had the highest rate of solar power jobs per capita in 2016, thanks to its ‘robust renewable energy standards and installation incentives’ (ie, mandates and subsidies).
    In reality, it’s not a good thing at all, and certainly not a positive trend. In fact, as Climate Depot and the Washington Examiner point out – citing an American Enterprise Institute study – the job numbers actually underscore how wasteful, inefficient and unproductive solar power actually is.

    This post was published at Ludwig von Mises Institute on May 6, 2017.

  • A Puzzling Inflation Picture

    With the release of the May Employment Situation Report, we learned that the U-3 unemployment rate fell to a 16-year low of 4.3%. We also learned that there was no wage growth. Average hourly earnings were up 2.5% year-over-year, unchanged from the 12-month period ending in April.
    This lack of wage growth has been perplexing against the backdrop of a labor market that some economists say is running at full employment.
    Tight labor markets and rising wage growth are supposed to go hand-in-hand as competition for labor intensifies. Since the end of the Great Recession in June 2009, however, there hasn’t been much hand holding.
    Wage growth has been pretty elusive and it certainly hasn’t lived up to the economic standard expected of it given the sharp drop in the unemployment rate in the interim.

    This post was published at FinancialSense on 06/05/2017.

  • The US Jobs Market Is Much Worse Than The Official Data Suggest: The Full Story

    Following Friday’s disappointing payrolls report, yesterday we showed another even more troubling fact about the state of the US labor market: since 2008, over 93% of the total 6.7 million net jobs “created” in the past decade, have been statistical, existing simply inside an excel model somewhere in the US Department of Labor, as a result of the BLS’ favorite fudge factor, the Birth/Death adjustment.
    Unfortunately, that’s just the tip of the iceberg for why the US labor market “recovery” is perhaps the biggest ‘fake news’ of the US economic narrative, and as a comprehensive recent analysis issued by Morningside Hill reveals, the state of the US jobs market is far worse than the official data suggest.
    Here is the real story.
    The US jobs market has been described as the backbone of the recovery – 80 months of continuous jobs growth with unemployment hitting 4.3% – the lowest since 2001. However the perceived strength in jobs creation is at odds with other economic indicators. President Trump ran on a campaign that repeatedly touted ‘jobs, jobs, jobs.’ His emphasis on jobs creation and bringing employment back to America struck a chord with voters. Trump’s election in itself contradicts the popular narrative that the US jobs market is tight and robust. Wages, disposable income and real earnings growth along with low productivity and overall slow economic growth all challenge the BLS’s jobs numbers and thus Wall Street’s perception that the jobs market is tight.
    Since the monthly jobs report is eagerly awaited as the most important piece of economic data for financial markets, it warrants a deep dive in order to understand what is going on under the hood. Before we delve into the data, here are some highlights of our findings.

    This post was published at Zero Hedge on Jun 4, 2017.

  • When Central Bankers Tell You There Is No Need To Panic, It’s Time To Take Action – Episode 1297a

    The following video was published by X22Report on Jun 4, 2017
    The US unemployment is now below the average recession numbers. Virtually every time the unemployment numbers reach the lowest point the US went into a recession or depression. 93% of the jobs that were created since 2008 was done so through the birth/death rate model . More retailers are going bankrupt. Hiring is beginning to decline in San Francisco. Sales of luxury homes are declining. The central banks are now holding a 3rd of the global assets. When the central bankers say do not panic it is time to take action.

  • 93% Of All Jobs “Created” Since 2008 Were Added Through The Birth/Death Model

    According to the prevailing narrative, job growth in the US, where GDP over the past decade has been on par with that in the 1930s, is one of the otherwise brighter economic indicators in a time when much of the economic data such as capital spending, productivity and especially wage growth (so critical for the Fed’s future plans) has been a chronic disappointment. Today, for example, headlines blast that the US has enjoyed 80 months of continuous jobs growth with unemployment hitting 4.3% – the lowest since 2001. However, there is more to this “strong” number than meets the untrained eye.
    As our friends at Morningside Hill calculate, a full 93% of the new jobs reported since 2008 – 6.3 million out of 6.7 million – and 40% of the jobs in 2016 alone were added through the business birth and death model – a highly controversial model which is not supported by the data. On the contrary, all data on establishment births and deaths point to an ongoing decrease in entrepreneurship.

    Here are the details of how over 90% of the jobs created in the past decade were nothing more than a “statistical” adjustment in some BLS model.

    This post was published at Zero Hedge on Jun 3, 2017.

  • The US Unemployment Rate Is Now Below The Average Recession “Entry Point”

    Submitted by Eric Hickman of Kessler Companies
    We have begun to see the ‘event-horizon’ (Lance Roberts) of an economic slowdown in several indicators. Adding to that, and counter-intuitively perhaps, an unemployment rate this low (4.29%) is a signal to run-away from Stocks and run-to Treasuries.
    Historically, unemployment rate lows have occurred at, or very near-to, market inflection points preceding recessions (see green and red hash marks in chart below). The unemployment rate just released on 6/2/2017 at 4.29% is now just below the average unemployment “entry prior” to recessions over the last 67 years, at 4.4%.

    This post was published at Zero Hedge on Jun 3, 2017.

  • One Step Forward, Two Steps Back

    This is a syndicated repost courtesy of The Daily Reckoning. To view original, click here. Reposted with permission.
    The nation appears trapped in a one-step-forward, two-steps-back economy… an economy of false starts… and false dawns.
    We were told last month the economy added 211,000 jobs in April, crushing all expectations.
    Unemployment fell to its lowest level since May 2007.
    One step forward.
    But May’s unemployment numbers came out today.
    Economists expected 185,000 new additions to the national payrolls. The lowest estimate was 140,000.

    This post was published at Wall Street Examiner by Brian Maher ‘ June 2, 2017.

  • The Anti-Perfect Jobs Condition

    This is a syndicated repost courtesy of Alhambra Investments. To view original, click here. Reposted with permission.
    The irony of the unemployment rate for the Federal Reserve is that the lower it gets now the bigger the problem it is for officials. It has been up to this year their sole source of economic comfort. Throughout 2015, the Establishment Survey improperly contributed much the same sympathy, but even it no longer resides on the plus side of the official ledger.
    So many people may have exited the labor force in May that the unemployment rate dropped to just 4.3% even though headline payroll gains were once again lackluster. The last time the ratio was this low George W. Bush was just a year into his first term, no one had yet much idea of the housing bubble because at that moment in May 2001 of greater concern was the dot-com bubble and its related recession that had yet to be realized in effect. It was then the last hurrah of the nineties economy.

    This post was published at Wall Street Examiner by Jeffrey P. Snider ‘ June 2, 2017.

  • May Jobs Report: 138K New Jobs Added, Disappoints Forecast

    This morning’s employment report for May showed a 138K increase in total nonfarm payrolls, disappointing forecasts. The unemployment rate ticked downward from 4.4% to 4.3%. TheInvesting.com consensus was for 185K new jobs and the unemployment rate to remain at 4.4%. March and April nonfarm payrolls were revised for a total loss of 66K.
    Here is an excerpt from the Employment Situation Summary released this morning by the Bureau of Labor Statistics:
    Total nonfarm payroll employment increased by 138,000 in May, and the unemployment rate was little changed at 4.3 percent, the US Bureau of Labor Statistics reported today. Job gains occurred in health care and mining.
    You may also like Are We in for Below-Average Returns Over the Next Decade?
    Here is a snapshot of the monthly percent change in Nonfarm Employment since 2000. We’ve added a 12-month moving average to highlight the long-term trend.

    This post was published at FinancialSense on 06/02/2017.

  • Gold Tests ‘Game Changing’ Trend Line Again After Weak US Jobs Data

    Gold prices jumped to 5-week highs against a weakening Dollar on Friday, rising to meet the metal’s 6-year downtrend – starting from the all-time peak of September 2011 – after new US data said the world’s largest economy added fewer jobs than expected in May.
    Instead of expanded by 185,000 as analysts forecast, non-farm payrolls expanded by 138,000 according to the Bureau of Labor Statistics, which also revised both March and April’s NFP figures sharply lower.
    Read Gold Is Unloved…and That’s a Good Thing for Metals Investors, Says Kathy Derbes
    Average earnings also grew less quickly than analysts predicted in May, while the unemployment rate only fell because the number of working-age people in or seeking work slipped from April’s near a 3-year high.
    The US trade deficit widened in April to $47.6 billion, separate figures showed.

    This post was published at FinancialSense on 06/02/2017.

  • “It’s Not Just Wages” – Workers Without College Degrees Face “More Instability”

    If you believe San Francisco Fed President John Williams, the US labor market has almost never been ore robust than it is today. Of course, middle- and working-class Americans who are struggling with levels of financial uncertainty that would be unfamiliar to their parents’ generation don’t necessarily care that the official unemployment rate is 4.4%. They’re too busy struggling to make ends meet when real wages have been stagnant for decades and economic growth is expected to slouch along at 2% for the foreseeable future.
    While researching their new book ‘The Financial Diaries,’ Jonathan Morduch and Rachel Schneider followed more than 200 working and middle-class families around for a year and tracked ‘every dollar of their financial lives.” They found that millions of workers without college degrees, especially those who are paid hourly, or who are paid by commission, experience what they call call income variability – when their pay fluctuates by 25% above or below their average. One of Murdoch and Schneider’s subjects, a truck mechanic named Jeremy, even quit his job to take a lower paying job with a steady salary.

    This post was published at Zero Hedge on Jun 2, 2017.

  • Big Miss in May Jobs Report: Only 138K Jobs Added, Wage Growth Stagnant (The Fed’s Famous Chili Recipe)

    This is a syndicated repost courtesy of Confounded Interest. To view original, click here. Reposted with permission.
    The Bureau of Labor Statistics (BLS) just released their May jobs report.
    In a nutshell, it looks like The Fed’s Famous Chili Recipe. A recipe handed down since Alan Greenspan and perfected by Janet Yellen. 138K jobs added, stagnant average hourly earnings growth. Labor force participation declined to 62.7%. At least the unemployment rate fell to 4.3%.

    This post was published at Wall Street Examiner by Anthony B Sanders ‘ June 2, 2017.

  • Goldman Pushes Back Rate Hike Forecast Citing Slowing Job Growth And Weak Inflation

    After last month’s “much stronger than expected” jobs report, Goldman was convinced that the Fed would hike in June and September, while disclosing its balance sheet tapering announcement in December. However, after today’s disappointing jobs report, Jan Hatzius has flipped the last two, and says that he “now expects the third hike of 2017 to occur at the December meeting (we previously expected a hike in September and a balance sheet in announcement in December).”
    The reason for the switch is that “the committee will prefer to wait for clarity on the outlook before implementing a third hike this year – particularly given signs of slowing job growth and the recent drop in core inflation.”
    Key excerpt:
    Given the drop in the U3 and U6 unemployment rates and the lack of additional catalysts between now and the June meeting, we are increasing our subjective probability of a hike at that meeting from 80% to 90%. We are also moving forward our forecast for balance sheet normalization. We now expect the committee to announce a tapering of maturity reinvestments in September, and we now expect the third hike of 2017 to occur at the December meeting (we previously expected a hike in September and a balance sheet in announcement in December). This change reflects recent detailed discussion of the balance sheet among committee members, as well as our view that the committee will prefer to wait for clarity on the outlook before implementing a third hike this year – particularly given signs of slowing job growth and the recent drop in core inflation.

    This post was published at Zero Hedge on Jun 2, 2017.