Less is NOT more

I need to get something off my chest. THE LABOR DEPARTMENT'S JOBS NUMBERS ARE A LOAD OF CRAP! Don't believe any of the bullshit the financial news media spins and spews regarding the American employment picture.

With companies in no mood to hire, the unemployment rate is still rising. But the furious pace of layoffs is easing as the recession loosens its hold on the country.

A government report provided some evidence of that Thursday, saying the nation's unemployment rolls fell for the first time in 20 weeks. The Labor Department said the number of people filing for jobless benefits dropped by 15,000 to 6.7 million.

Employers throttled back on layoffs in May and cut the fewest jobs in any month since the financial crisis erupted last fall -- raising the brightest hope yet that an economic recovery will take hold later this year.

Perhaps employers are just running out of people to lay-off. Fewer lay-offs DOES NOT represent jobs growth in any way, shape, or form. How can there even be a suggestion that the "recession is nearing and end" where there has yet to be any signs of JOBS GROWTH.

Less is NOT more.

"Less bad, yes," Ian Shepherdson, chief U.S. economist at High Frequency Economics, said, summarizing the economy. "Good, no."

Economists expect the pace of layoffs to keep tapering off, but they don't think the economy will begin to create jobs steadily until late next year at the earliest.

"This tide is turning," said Richard Yamarone, economist at Argus Research. "We expect this trend of slower job loss to continue throughout the year."

Sounds like continued jobs losses to me, not growth in new jobs.

With no place for the out-of-work to land, the unemployment rate bolted to 9.4 percent from 8.9 percent in April. It was the highest rate since August 1983.

Hundreds of thousands of people, perhaps feeling more confident about their job prospects, streamed back into the labor force last month looking for work. That was a factor in the jobless rate's rise, economists said.

I surmise they counted the "unemployed" differently in 1983, and comparing statistics then, to those now, is much like comparing apples to oranges...but then look who's doing the counting, the US Department of Labor. Government statistics are shrouded in bullshit... Consider the above. If you're out of work, but NOT LOOKING for a job, you are NOT considered unemployed. But, if you are out of work and you are LOOKING for work you are considered unemployed. How convenient.

"Unemployment is up because more people are out looking for work."? You have got to be kidding. How can you be "part of the workforce" if you don't even have a job?

There are some sobering statistics included in the Labor Departments Non-farm Payrolls Report that do not get the media coverage they deserve. They also leave you wondering where these talking heads get the idea that an economic recovery is "just around the corner", or "just up ahead", or my favorite example of financial media bluster: "hope yet that an economic recovery will take hold later this year".

Including laid-off workers who have given up looking for new jobs or have settled for part-time work, the so-called underemployment rate would be 16.4 percent in May, the highest on record dating to 1994.

And the number of people out of work six months or more rose to nearly 4 million in May, a record and triple the total from when the recession began.

To cut costs and perhaps avoid imposing further layoffs, employers trimmed workers' hours in May. The average work week fell to 33.1 hours, the lowest on record dating to 1964.

These statistics hardly look like the foundation of an economic recovery. As a matter of fact, they look terrifying. Toss in this overlooked news item below from Friday, and the "hopes" for any economic recovery developing anytime soon look pretty damn dim.

Borrowing by American consumers dropped by the second-biggest amount on record in April. Consumer credit fell $15.7 billion, or 7.4 percent at an annual rate, to $2.52 trillion, according to a Federal Reserve report released in Washington. Credit decreased by a record $16.6 billion in March, more than previously estimated. Spending by consumers declined for a second consecutive month in April.

Again I ask Bumbling Ben, "Who is going to be doing all the buying that is going to drive this imminent recovery?" The US Consumer accounts for 70% of GDP, and it would appear that he has gone on a buyers strike.

Is there any truth in government? What's this?

"Let me be very clear: A lower job-rate loss is not our goal," Vice President Joe Biden said. "`Less bad' is not how we're going to measure success."

I should hope not Joe. Jumpin' Joe probably got bitch-slapped by the President for that less than CONfident comment. But damn, isn't it refreshing to get a crumb of truth from Washington?

What You Need to Know About the May Jobs Report
"Despite what is a moderating pace of layoffs, there are telling signs that those currently unemployed are having, and will continue to have, increasing difficulty finding work. The mean duration of unemployment rose to 22.5 weeks, while the median duration rose to 14.9 weeks. Moreover, as of May, 52.9 percent of the unemployed are so because they have lost their jobs permanently (see second chart below), the highest figure in the life of the data. This is one sign that the current recession has generated a considerable degree of structural, as opposed to cyclical, unemployment, reflecting the amount of excess capacity that had developed in the economy over recent years. Even as the economy recovers, these displaced workers will likely be unemployed for a prolonged period."
—Richard Moody, chief economist at Forward Capital

"The labor force has now jumped by more than 1 million over just the past two months, with the participation rate (the proportion of the population that is part of the labor force) increasing from 65.5 percent to 65.9 percent. This sort of rise in the participation rate is very unusual at this stage of the economic cycle — usually, an increasing number of individuals become discouraged when employment prospects are bleak and they drop out of the labor force. We suspect that the recent rise in the labor force reflects statistical noise that will be reversed in coming months. .... A pullback in the labor force should help to temper further increase in the unemployment rate. Thus, we still look for a peak unemployment rate of about 10 percent later this year."
—Ted Wieseman and David Greenlaw of Morgan Stanley Research

"While the improvement in the May payroll performance seems to have been at least partly skewed by an overly generous "birth-death adjustment" (which accounted for a full two-thirds of the unadjusted rise in private payrolls in the month), it is nonetheless clear that payroll declines are on a moderating path. However, the reported payroll change for May is considerably smaller than signaled by other labor market indicators, which is probably at least in part due to the birth-death adjustment. ... We continue to believe that we are still some time from stabilization in employment conditions, and even further from sustained growth in payrolls."
— Joshua Shapiro, chief U.S. economist at MFR
http://www.usnews.com/articles/business/careers/2009/06/05/what-you-need-to-know-about-the-may-jobs-report.html

NO, A WHOLE BUNCH OF FOLKS DIDN'T JUST GET JOBS
May is one of those months when the Labor Department adds a boatload of probably non-existence jobs to its count because it wishfully believes new companies are being formed just because it's springtime.

The recession? It doesn't matter to the computers that add these phantom jobs.

This is known as the birth/death model.

But the unemployment rate is a bit more complicated and perplexing. The government calculates the unemployment rate in several ways.

The so-called U-3 figure is the one that makes the newspaper headlines, although there are six different ways that the Labor Department calculates the number of unemployed people as a percentage of the population.

These figures begin with phone calls to just 60,000 of the nation's 105 million households. The US Census Bureau asks the people who answer the phone their employment status.

The results are then scientifically extrapolated for the entire population, seasonally adjusted, nipped and tucked and, voila, delivered to you the first Friday of every month.

The Labor Department swears that the size of the sample is plenty large. And it doesn't think there is a problem with the respondents telling the truth.

But here's my point today: Changes made in 1994 could cause the unemployment rate to actually decline if the economy gets so bad and jobs become so scarce that people become too discouraged to even look for work.

Under the changes made in 1994, a person is considered discouraged if he says he hasn't looked for work in the last four weeks.

If it's been a month since he's looked for a job, the unemployed person falls out of the U-3 category -- and the headlines -- and into something called U-6.

The U-6 unemployment rate is already 15.8 percent, up from 8.9 percent in April 2008. So lots of people are being demoted into this category, which also includes people who say they want full-time work but can only find part-time employment.

Since the US has lost jobs in every month since Dec., 2007, it's easy for people to just give up and fall out of the U-3 category. If they totally give up, the would-be workers could even fall out of the U-6 survey and into statistical oblivion.
http://www.nypost.com/seven/06042009/business/no__a_whole_bunch_of_folks_didnt_just_ge_172449.htm?page=2

As the Dollar Falls Off the Cliff ...
By PAUL CRAIG ROBERTS
Washington’s financial irresponsibility has brought pressure on the dollar and the US bond market. Federal Reserve Chairman Bernanke thought he could push down interest rates on Treasuries by purchasing $300 billion of them. However, the result was to cause a sharp drop in Treasury prices and a rise in interest rates.

As monetization of federal debt goes forward, US interest rates will continue to rise, worsening the problems in the real estate sector. The dollar will continue to lose value, making it harder for the US to finance its budget and trade deficits. Domestic inflation will raise its ugly head despite high unemployment.

The incompetents who manage US economic policy have created a perfect storm.

The Obama-Federal Reserve-Wall Street plan for the US to spend its way out of its problems is coming unglued. The reckless spending is pushing the dollar down and interest rates up.

Every sector of the US economy is in trouble. Former US manufacturing firms have been turned into marketing companies trying to sell their foreign-made goods to domestic consumers who have seen their jobs be moved offshore. Much of what is left of US manufacturing--the auto industry--is in bankruptcy. More decline awaits housing and commercial real estate. The dollar is sliding, and interest rates are rising, despite the Federal Reserve’s attempts to hold interest rates down.

When the Reagan administration cured stagflation, the result was a secular bull-market in US Treasuries that lasted 28 years. That bull market is over. Americans’ living standards are headed down. The American standard of living has been destroyed by wars, by offshoring of jobs, by financial deregulation, by trillion dollar handouts to financial gangsters who have, so far, destroyed half of Americans’ retirement savings, and by the monetization of debt.

The next shoe to drop will be the dollar’s loss of the reserve currency role. Then the US, an import-dependent country, will no longer be able to pay for its imports. Shortages will worsen price inflation and disrupt deliveries.

Life for most Americans will become truly stressful.
http://www.counterpunch.com/roberts06032009.html

An update on gold and inflation
By Paul van Eeden
I have updated the US money supply chart on my website (link) up to the end of May.

It is interesting to note that the average rolling 12-month inflation rate averages 8.25% for the past 15 months. To put that in context, the average inflation rate from 1970 to 1979 was 8.32%. We are, absolutely, in a highly inflationary environment. Deflation is not only unlikely given the structure of the US banking system, but nowhere to be seen in the data either.

Demand destruction has had a severe impact on the prices of many goods and services, but that should not be confused with deflation. Inflation and deflation are monetary phenomena and the recent decline in prices has only lead to confusion and further obfuscation of what is really going on.

Monetary inflation is currently mitigating the price declines we are witnessing, meaning those prices that are declining would have declined much more were it not for the inflation, and will eventually cause prices to start rising again. Our greatest concern should not be with the current falling prices of goods and services, but with the rate at which they will rise in the future vis-à-vis our capital and income. I suspect there are very few people out there whose income and investments are keeping up with the inflation rate, which means their wealth is eroding in real terms.

There Goes The Country
In short, GM was brought to its knees by the abuse of trade union power and management's unwillingness to fight back.

Contrary to general belief, GM is not a huge employer. It directly employs only some 60,000 workers. This is less than one tenth of one percent of the number of Americans presently unemployed. However, its trade union pension fund is being given billions of dollars of citizens' money and a major stake in the restructured company. Favoring GM workers over the millions of America's unemployed is grossly inequitable. The reason, however, is found in the murky world of politics.

The United Auto Workers (UAW), GM's primary union, was a major supporter of President Obama's election campaign. Predictably, this Administration has moved aggressively to subsidize them. Obama has taken the position that GM workers are an 'elite' and entitled to privileges not afforded to other workers. If GM were any other company entering bankruptcy, many workers would have lost their jobs, pensions and health coverage. Not so under the protective blanket of Daddy Government.

In its fight for grotesque entitlements for this small, but heavily Democratic, subset of the workforce, the Administration has run roughshod over those who financed the American auto industry, even labeling some as "unpatriotic" for failing to surrender their contract rights as bondholders. The notion that these stakeholders should "cooperate" to reach an "equitable" solution ignores the free-market cooperation that led to the original, contractual agreements. If I agree to give you half of my steak in return for half of your mashed potatoes when I finish my entrée, and when I go to collect you have eaten 9/10 of your mashed potatoes, can you plead poverty? You ate the potatoes!

Aside from these considerations, the sheer logic of the deal is faulty. Has Obama ever heard of opportunity costs?

Having pursued a path to commercial failure for many decades, it is clear that GM's management and workforce are moribund. However, the government has decided to pump massive amounts of citizens' money into this flaccid firm, without the practical ability to change its operations. Remember, the unions put Mr. Obama in office, and this project is meant to reward them. Will he have the courage to do what a profit-seeking management couldn't, by cutting the fat from this company? Obama now claims that a new "private sector" management team will be installed to make decisions independent of political control. This is farcical.

Economists believe that for each $1 billion spent on infrastructure projects, 35,000 wealth-generating jobs are created in the broader economy. The Administration is set on spending a minimum of $60 billion, and more likely $100 billion, to protect 60,000workers at GM. Spent on much needed infrastructure, these same monies would create between 2.1 and 3.5 million real private sector jobs.

As goes GM, so goes the country.
http://www.321gold.com/editorials/browne/browne060309.html

Geithner Goes Begging in China; What It Means to You …
by Mike Larson, Money and Markets
Well, the Obama administration and members of Congress on both sides of the aisle have been paying a lot of lip service to getting the deficit under control. We’re getting plenty of talk, talk, talk. But policymakers are taking steps that have the exact opposite effect! They’re spending like crazy and borrowing like mad!

The administration itself was just forced to raise its 2009 budget deficit estimate to a staggering $1.84 trillion, up 5 percent from a projection made just two months earlier. The 2010 estimate was jacked up by more than 7 percent to $1.26 trillion.

Geithner told the Chinese that we plan to eventually shrink the deficit to 3 percent of GDP. But that’s a pipe dream. Right now, we’re on track to hit 12.9 percent — by far the worst since the founding of the Republic (excluding an anomalous period during World War II when the war effort was the dominant force in the entire economy).

Getting that under control will require a massive boost in economic growth or a large increase in taxes. To anyone who believes those scenarios are in the cards, all I can say is: I’ve got a bridge to sell you!

Or as Pimco Chief Investment Officer Bill Gross put it in his latest monthly outlook:

“While policymakers, including the President and Treasury Secretary Geithner, assure voters and financial markets alike that such a path is unsustainable and that a return to fiscal conservatism is just around the recovery’s corner, it is hard to comprehend exactly how that more balanced rabbit can be pulled out of Washington’s hat.”

The approach from Geithner, Fed Chairman Ben Bernanke, and others in the political establishment continues to be akin to Alfred E. Neuman’s. You know, the Mad Magazine character whose signature line is “What, me worry?”

They keep telling us to relax. They say the Chinese, the Russians, and everyone else have no alternative to the dollar. They figure they can continue getting away with shafting our creditors, with no consequences.

The broad-based dollar index is down roughly 12 percent in just the past three months. Crude oil has soared as much as 113 percent from its December low. Gold is closing in on $1,000 an ounce, while silver has almost doubled.
http://www.moneyandmarkets.com/geithner-goes-begging-in-china-what-it-means-to-you-2-34113

As we have been anticipating, a bounce in the Dollar has appeared. This of course has forced the anticipated reaction in Gold and Silver. I continue to believe this bounce in the Dollar will be brief, and as stated here before, suspect it will not get much further than 83 on the USD INDEX.

Gold must hold above 942 to keep the current upleg intact. A break of 942 could see Gold revisit the 918 breakout...now support.

Silver is flirting with a breakdow of critical support at 15.25. Support at 14.90 and 14.62 lie below.

The Dollar may sustain a bit of a bid into this coming weekends G8 meeting. There is nothing like the bluster of a bunch of losers like the central bankers of the G8 to prop up the pathetic Dollar...before it's next fall.