Posts Tagged ‘job losses’

Out of the long list of risks and challenges facing the economy, the stock market, and investors, employment still remains near the top of the list. There were rumors all over Wall Street that the unemployment numbers would be positive for December.   With a big surprise and another sign that things are not getting better, 85,000 jobs were lost in December according to the “Government Accounting.” 

Yes, and the Government added around 59,000 fictitious jobs to the mix.  The Department of Labor’s unemployment rate, which includes much more of the workforce than the Government accounting, is creeping up closer to 18%.  I also like to follow Shadow Stats which has the most complete tracking.  They are looking at around 22%. 

However, there were was some bright news.  The Government went back and revised up 15,000 jobs from a -11,000 to a +4,000 jobs.  The talking heads on CNBC kept up the talk of recovery by pointing to the positive job numbers in November,  The funny thing is that they looked past the fact that Government revised DOWNWARD the job losses for October from 111,000 to 127,000 which sort of wipes out that positive job gain. 

The interesting little piece of data comes in this next unemployment report when they adjust the birth/date formula.  Remember that this is the formula that allows the government to add fictitious job growth to the overall number.  January is the month where they revise that number.  Over the past 5 Januarys, the loss of jobs reported by the birth/death ratio has resulted in an average lob loss of 276,000 jobs.  Given that job losses have not stopped along with the addition of the birth/death revision for January, that has the makings of a horrible number.

Incidentally, in the decade that has just ended, we created less than 500,000 jobs.  In the previous 4 decades, the economy generated at least 18 million jobs. 

Still there is no game plan for job creation other than the minimal impact from the stimulus package.  At some point the effects of this problem manifest itself in the stock market.  Until then, this market probably marches higher.  However, the biggest risk that awaits investors is the day reality of Main Street and the greed of Wall Street meet.  The problem is knowing when that will happen.  If and when it does, the level of risk should be through the roof.

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Unemployment is mysteriously reporting only a loss of -11,000.  Poof, just like that we transition from 100,000 and 200,000 plus jobs losses each month to just 11,000 without even a transition.  The unemployment rate has come down from 10.2% to 10%.  So what do these numbers really tell us about the economy?

Really nothing…

The unemployment rate has fallen in November two-thirds of the time over the course of the last 15 years.  Most of it has to do with temporary hires for holiday shopping and nothing permanent.  Regarding the job loss reporting, can you really trust government agenda filled accounting?  If you look closer at the numbers you see a different picture.  It is about all of the other people not accounted for in the report. Clusterstock.com had this chart of the day which I think is telling.

The number of those unemployed for at least 27 weeks rose by 463,000 people to 5.9 million.

There were 861,000 in November who were considered discouraged workers.  These are workers who believe that there are no jobs available for them.  This was up over the prior year. 

People working part time for economic reasons stood at 9.2 million. 

If you look past the 10% unemployment number and look at a closer number of those unemployed in this country from the Department of Labor, the number stands at 17.2%.  Finally www.shadowstats.com has the unemployment problem in this country at 21.8%.

Then you have the number of jobs that the Government has estimated to have been created.

Thus far the Government estimates over the past three years that 2.875 million jobs have been created.  Out of that number 31% of those jobs came from the Leisure and Hospitality area – how much leisure and hospitality has been occurring in the last 3 years that requires all of those jobs?  If I were going to make up (did I just write that), I mean, estimate numbers I would add them elsewhere to legitimize the process. 

I was talking with someone last night about the pain this country is going through.  The economic numbers just don’t reflect the reality of what is occurring.  The biggest concern is the result of all of this Government manipulation.  There are dangerous imbalances that exist.  Unfortunately, the band aid approach can only work for so wrong.   Imbalances will work themselves at some point.  For investors, it will be much like being in a capacity packed room and someone yells fire.  You will not be able to get out of the room fast enough.  Thus, if you are invested heavily in the stock market today, I would at least sit closer to the exit door or better yet consider calling it an early evening.

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It was announced Friday morning that 190,000 jobs were lost, which is higher than economists predicted.   That is significant for one reason.  At this stage in the game, we should NOT be seeing this amount of jobs being lost.  Companies get to the point where they stop laying people off because they have already cut to the bone.  Unfortunately, they are continuing to lay off people.  Of course, we always need to look at how many jobs the government “estimates” that were “created” and “missed” by the Department of Labor.  The government added 86,000 jobs back into the equation.   

The bigger story is the unemployment rate.  The new unemployment rate is 10.2%.  Now, that rate is extremely suspicious given government accounting and a loss of 190,000 jobs.  Also consider that the government went back and “revised” last month’s job losses stating that the original estimate of 263,000 jobs that were lost last month was now really only 219,000.  It is highly unusual that we would get such a jump in the unemployment rate considering how manipulated the number is in the first place.  Once again, it is tough to trust government accounting.  A “stated” unemployment report that shows the rate over the psychological level of 10% sure could be a good excuse for government run healthcare.  After all, all of those people out of a job can end up creating an enormous amount of people scrambling for healthcare coverage.  

The highest rate dating back to 1948 occurred November and December 1982 with a rate of 10.8%.  Many on Wall Street are looking at the unemployment situation in the 80’s, noting that it wasn’t long until the unemployment rate started to improve once it eclipsed 10%, and that a massive new bull market started about the same time. Thus, they are making the comparison between the 80’s and today and feeling very bullish. Well, before we break out those Dow 10,000 party hats again, let’s look at a few major differences.

First, the federal funds rate which is the benchmark set for interest rates was at 9.2%. The Fed had the ability to greatly reduce interest rates to spur demand which in turn positively effects unemployment.  Today, the federal funds rates sits at 0.12% with nowhere to go but up.  Second, the unemployment rate bottomed out in September 1973 and didn’t top out at 10.8% until December 1982.  It took a little over 9 years to gradually increase.

Our low for the unemployment rate was 4.4%, which occurred December 2006.  Fast forward almost 3 years and it has gone from 4.4% to 10.2%.  Further it was at 5% back in April 2008.  The speed at which things have deteriorated presents a much tougher challenge what was faced in the 70’s and 80’s.   

Then there is the 3.5% growth rate of the economy that was released a few weeks ago.  John Williams, founder of shawdowstats.com, states that 92% of the 3.5% growth came from one-time stimulants.  He also notes that “every recession in the last four decades has had at least one positive quarter to quarter growth reading, only to be followed by a renewed downturn.” (from Barrons)

On the front page an argument could be made for a recovery that has started. However, it is what the numbers are not telling that brings up continued concern.

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