Wednesday, August 18, 2010
Saturday, August 14, 2010
It wasn’t raining yet when Noah was building the Ark ! Then Why did God create economists?
In his morning note, Gluskin-Sheff's David Rosenberg highlights some ugly labor market data you probably haven't seen:
No sooner did we receive last week’s poor employment report than we get added confirmation that the battle against joblessness is being lost. I’m being generous in assuming that the U.S. government has even waged a battle on this front as it focused on auto spending, housing consumption, regulatory reform, health care and loan modifications.
Initial jobless claims rose 2k in the August 7th week from an upwardly revised 482k level the week before — not to mention well above consensus estimates of 464k. A month ago, claims were sitting at 458k and we are now at the highest levels since late January. This is simply awful and if claims back up above 500k, for at least a few weeks, double-dip risks will rise materially.
Even some of the biggest bears — Steve Roach at 40% odds, Gary Shilling near 50% — have yet to make this a base-case scenario. We wonder about that because 98% of the time, when Household employment contracts three months in a row, we are already in a recession or about to head into one. Who knows? Maybe we’ll be lucky and this will be the other 2% this time around.
Now let us pray.
The JOLTS (Job Opening Labor Turnover Survey) just came out from the Bureau of Labor Statistics and it revealed more adverse news (please don’t shoot the messenger):
• The number of job openings dipped 2k in June after a 363k plunge in May. At 2.937 million, they are at a three-month low and this means that there are five unemployed job seekers vying for every job opening. If that doesn’t continue to exert deflationary pressure on wages, we can only assume that the laws of supply and demand have somehow bypassed the labour market.
• Thenumberofnewhiresplummeted327kinJune,theseconddeclineinthe past three months and the steepest falloff since November 2008. The level has rolled back to a four-month low.
• Finally,layoffs rose 130k on top of a 144k bump-up in May, calling into question the veracity of the Challenger survey. At just a snick over two million in June, the number of pink slips that employers handed out were at their highest level in 11 months.
We take no joy in seeing numbers like these, or the other plethora of economic indicators that have turned south.
Initial jobless claims rose 2k in the August 7th week from an upwardly revised 482k level the week before ...
... On top of that, the JOLTS data just came out and it showed that the number of job openings dipped 2k in June after a huge 363k plunge in May and ...
... the number of new hires plummeted 327k in June, the second decline in the past three months and is now at a four-month low
Just like a meteorologist who hates having to be the bearer of bad news over the looming summer storms that will ruin the weekend beach party, but is at least proud of the fact he/she kept people out of harm’s way (or dry, at the very least). And remember, it wasn’t raining yet when Noah was building the Ark! Well, that’s how we feel. Mixed emotions.
Which then brings up an oldie but a goodie:
Why did God create economists?
To make weathermen feel good about themselves.
No sooner did we receive last week’s poor employment report than we get added confirmation that the battle against joblessness is being lost. I’m being generous in assuming that the U.S. government has even waged a battle on this front as it focused on auto spending, housing consumption, regulatory reform, health care and loan modifications.
Initial jobless claims rose 2k in the August 7th week from an upwardly revised 482k level the week before — not to mention well above consensus estimates of 464k. A month ago, claims were sitting at 458k and we are now at the highest levels since late January. This is simply awful and if claims back up above 500k, for at least a few weeks, double-dip risks will rise materially.
Even some of the biggest bears — Steve Roach at 40% odds, Gary Shilling near 50% — have yet to make this a base-case scenario. We wonder about that because 98% of the time, when Household employment contracts three months in a row, we are already in a recession or about to head into one. Who knows? Maybe we’ll be lucky and this will be the other 2% this time around.
Now let us pray.
The JOLTS (Job Opening Labor Turnover Survey) just came out from the Bureau of Labor Statistics and it revealed more adverse news (please don’t shoot the messenger):
• The number of job openings dipped 2k in June after a 363k plunge in May. At 2.937 million, they are at a three-month low and this means that there are five unemployed job seekers vying for every job opening. If that doesn’t continue to exert deflationary pressure on wages, we can only assume that the laws of supply and demand have somehow bypassed the labour market.
• Thenumberofnewhiresplummeted327kinJune,theseconddeclineinthe past three months and the steepest falloff since November 2008. The level has rolled back to a four-month low.
• Finally,layoffs rose 130k on top of a 144k bump-up in May, calling into question the veracity of the Challenger survey. At just a snick over two million in June, the number of pink slips that employers handed out were at their highest level in 11 months.
We take no joy in seeing numbers like these, or the other plethora of economic indicators that have turned south.
Initial jobless claims rose 2k in the August 7th week from an upwardly revised 482k level the week before ...
... On top of that, the JOLTS data just came out and it showed that the number of job openings dipped 2k in June after a huge 363k plunge in May and ...
... the number of new hires plummeted 327k in June, the second decline in the past three months and is now at a four-month low
Just like a meteorologist who hates having to be the bearer of bad news over the looming summer storms that will ruin the weekend beach party, but is at least proud of the fact he/she kept people out of harm’s way (or dry, at the very least). And remember, it wasn’t raining yet when Noah was building the Ark! Well, that’s how we feel. Mixed emotions.
Which then brings up an oldie but a goodie:
Why did God create economists?
To make weathermen feel good about themselves.
Thursday, August 12, 2010
Stimulus produced a bunch of economic data points that were questionable in authenticity
Today, most pundits are growing increasingly concerned that we are headed for a “double dip” recession. I think this view is idiotic as the US “recovery” was in fact nothing more than a small bounce in economy activity within the context of a DEPRESSION.
Regardless, the stooges are out again in full force proclaiming that the US economy is in trouble again (duh), that the Stimulus high is wearing off (duh again) and that the only solution is to issue more Stimulus and money printing to stop another economic contraction (WHAT!?!).
Let’s be honest here. The money printing and Stimulus DIDN’T work last time. All it did was buy time. Indeed, from an economic perspective, the only thing the Feds can claim with any certainty is that the Stimulus produced a bunch of economic data points that were questionable in authenticity (GDP, inflation, employment, etc) many of which have since been revised lower (GDP again).
If the best evidence you can come up with for justifying Stimulus spending is a bunch of accounting gimmicks, why even bother spending the money at all? I mean, if you want to measure success by just fudging a bunch of numbers, why not SAVE the money and just crank out a bunch of nonsensical data from thin air?
Indeed, why not say that we’ve got 17% GDP growth and employment of 500%? Sure our economic researchers would lose all credibility, but they’re already doing that anyway, and at least by simply making stuff up we wouldn’t be ruining the US’s balance sheet and wasting money in the process.
This real issue with US economic policy today is that no one in a position of power actually has a clue how to address the structural issues in the US economy. Either that, or they willingly ignore the obvious for the sake of career risk, choosing instead to take a “wack a mole” approach to handling economic issues: applying the same solution (spend money) to every problem that raises its head.
The fact of the matter is that the US economy, on a structural basis, is BROKEN. Starting in the early ‘70s, we outsourced our manufacturing and began shifting to a services economy (particularly financial services). We also outsourced our wealth to Asia, OPEC, and Wall Street.
Because of this, the average American has seen his income dramatically in the last 30 years. This is obvious to anyone with a functioning brain. Forty years ago one parent worked and people got by. Today both parents work (if they can find jobs) and still can’t have a decent quality life.
THESE are the items that matter for economic growth: jobs and income. If you want people to have money for them to spend and consequently boost economic growth, they need to have decent jobs that pay them well.
However, instead of focusing on these factors, the pundits and powers that be focus on peripheral issues like stock market levels and housing prices. Don’t get me wrong, these two markets matter in terms of retirement and savings (they’re the two largest stores of wealth for most approaching retirement). But people don’t pay for goods and services using stock gains or home equity (at least not since the Housing bust).
No, people pay for things using money they make from their jobs.
Tax credits, stock market manipulation, QE… all of these solutions address asset prices, but NONE of them address income growth: the primary source of funding people need to BUY assets. Put another way, all of the Feds’ efforts have been directed towards financial speculation NOT economic fundamentals.
Until this changes, the US economy is doomed. The consumer drives the US economy and the consumer’s income is the fuel. And we’re fast running out of gas
Regardless, the stooges are out again in full force proclaiming that the US economy is in trouble again (duh), that the Stimulus high is wearing off (duh again) and that the only solution is to issue more Stimulus and money printing to stop another economic contraction (WHAT!?!).
Let’s be honest here. The money printing and Stimulus DIDN’T work last time. All it did was buy time. Indeed, from an economic perspective, the only thing the Feds can claim with any certainty is that the Stimulus produced a bunch of economic data points that were questionable in authenticity (GDP, inflation, employment, etc) many of which have since been revised lower (GDP again).
If the best evidence you can come up with for justifying Stimulus spending is a bunch of accounting gimmicks, why even bother spending the money at all? I mean, if you want to measure success by just fudging a bunch of numbers, why not SAVE the money and just crank out a bunch of nonsensical data from thin air?
Indeed, why not say that we’ve got 17% GDP growth and employment of 500%? Sure our economic researchers would lose all credibility, but they’re already doing that anyway, and at least by simply making stuff up we wouldn’t be ruining the US’s balance sheet and wasting money in the process.
This real issue with US economic policy today is that no one in a position of power actually has a clue how to address the structural issues in the US economy. Either that, or they willingly ignore the obvious for the sake of career risk, choosing instead to take a “wack a mole” approach to handling economic issues: applying the same solution (spend money) to every problem that raises its head.
The fact of the matter is that the US economy, on a structural basis, is BROKEN. Starting in the early ‘70s, we outsourced our manufacturing and began shifting to a services economy (particularly financial services). We also outsourced our wealth to Asia, OPEC, and Wall Street.
Because of this, the average American has seen his income dramatically in the last 30 years. This is obvious to anyone with a functioning brain. Forty years ago one parent worked and people got by. Today both parents work (if they can find jobs) and still can’t have a decent quality life.
THESE are the items that matter for economic growth: jobs and income. If you want people to have money for them to spend and consequently boost economic growth, they need to have decent jobs that pay them well.
However, instead of focusing on these factors, the pundits and powers that be focus on peripheral issues like stock market levels and housing prices. Don’t get me wrong, these two markets matter in terms of retirement and savings (they’re the two largest stores of wealth for most approaching retirement). But people don’t pay for goods and services using stock gains or home equity (at least not since the Housing bust).
No, people pay for things using money they make from their jobs.
Tax credits, stock market manipulation, QE… all of these solutions address asset prices, but NONE of them address income growth: the primary source of funding people need to BUY assets. Put another way, all of the Feds’ efforts have been directed towards financial speculation NOT economic fundamentals.
Until this changes, the US economy is doomed. The consumer drives the US economy and the consumer’s income is the fuel. And we’re fast running out of gas
Sunday, August 8, 2010
Tuesday, August 3, 2010
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