And What About The US Unemployment Market?

Posted on Uk's Telegraph blog: America slides deeper into depression as Wall Street revels

• The labour force contracted by 661,000. This did not show up in the headline jobless rate because so many Americans dropped out of the system. The broad U6 category of unemployment rose to 17.3pc. That is the one that matters.
  
  Wall Street rallied. Bulls hope that weak jobs data will postpone monetary tightening: a silver lining in every catastrophe, or perhaps a further exhibit of market infantilism.

And once more we have the mainstream media reporting showed only 85,000 job losses. Which was good for Wall Street rallied.

Let's deviate from Mr. Ambrose Evans-Pritchard and look at anothr snippet from aother editorial: Stimulus Doing Little To Alleviate Unemployment

• Worsening unemployment continues to thwart economists’ efforts to convince a reluctant public that the worst recession since the 1930s ended in last year’s third quarter. Numbers indicate upticks in consumer spending in such areas as housing and new automobiles, as well as the steady rise in the Dow, but according to the federal government’s own payroll survey, the U.S. economy shed 85,000 jobs in December.
  
  This is the figure being reported in the mainstream media. A separate report, a household survey incorporating the effects of faulty seasonal adjustments, yields a considerably higher number of job losses: 589,000!
  
  The “official” unemployment rate stands at 10 percent (down slightly from 10.2 percent at the end of November). According to broader measures of unemployment which include discouraged workers who have given up looking for a job for as long as a year, as well as part-time workers seeking full-time work, counted as employed for the government’s statistical purposes, unemployment in America is considerably worse. John Williams, of Shadow Government Statistics, estimates that if all workers who have relinquished the search for work are accommodated (who were included before the Clinton Administration changed the definition of unemployment), the real unemployment rate stands at around 21.9 percent!

Yes 21.9%.

Wanna guess how many Americans are unemployed in real numbers? How many millions of Americans are unemployed?

Yeah.. but this doesn't matter!

What matters most is that Wall Street rallied!

Back to Ambrose Evans-Pritchard's piece.

• The home foreclosure guillotine usually drops a year or so after people lose their job, and exhaust their savings. The local sheriff will escort them out of the door, often with some sympathy –– just like the police in 1932, mostly Irish Catholics who tithed 1pc of their pay for soup kitchens.
  
  Realtytrac says defaults and repossessions have been running at over 300,000 a month since February. One million American families lost their homes in the fourth quarter. Moody's Economy.com expects another 2.4m homes to go this year. Taken together, this looks awfully like Steinbeck's Grapes of Wrath.
  
  Judges are finding ways to block evictions. One magistrate in Minnesota halted a case calling the creditor "harsh, repugnant, shocking and repulsive". We are not far from a de facto moratorium in some areas.
  
  This is how it ended between 1932 and 1934, when half the US states declared moratoria or "Farm Holidays". Such flexibility innoculated America's democracy against the appeal of Red Unions and Coughlin Fascists. The home siezures are occurring despite frantic efforts by the Obama administration to delay the process.
  
  This policy is entirely justified given the scale of the social crisis. But it also masks the continued rot in the housing market, allows lenders to hide losses, and stores up an ever larger overhang of unsold properties. It takes heroic naivety to think the US housing market has turned the corner (apologies to Goldman Sachs, as always). The fuse has yet to detonate on the next mortgage bomb, $134bn (£83bn) of "option ARM" contracts due to reset violently upwards this year and next.
  
  US house prices have eked out five months of gains on the Case-Shiller index, but momentum stalled in October in half the cities even before the latest surge of 40 basis points in mortgage rates. Karl Case (of the index) says prices may sink another 15pc. "If the 2008 and 2009 loans go bad, then we're back where we were before – in a nightmare."
  
  David Rosenberg from Gluskin Sheff said it is remarkable how little traction has been achieved by zero rates and the greatest fiscal blitz of all time. The US economy grew at a 2.2pc rate in the third quarter (entirely due to Obama stimulus). This compares to an average of 7.3pc in the first quarter of every recovery since the Second World War.
  
  Fed hawks are playing with fire by talking up about exit strategies, not for the first time. This is what they did in June 2008. We know what happened three months later. For the record, manufacturing capacity use at 67.2pc, and "auto-buying intentions" are the lowest ever.
  
  The Fed's own Monetary Multiplier crashed to an all-time low of 0.809 in mid-December. Commercial paper has shrunk by $280bn ($175bn) in since October. Bank credit has been racing down a hair-raising black run since June. It has dropped from $10.844 trillion to $9.013 trillion since November 25. The MZM money supply is contracting at a 3pc annual rate. Broad M3 money is contracting at over 5pc.
  
  Professor Tim Congdon from International Monetary Research said the Fed is baking deflation into the pie later this year, and perhaps a double-dip recession. Europe is even worse.
  
  This has not stopped an army of commentators is trying to bounce the Fed into early rate rises. They accuse Ben Bernanke of repeating the error of 2004 when the Fed waited too long. Sometimes you just want to scream. In 2004 there was no housing collapse, unemployment was 5.5pc, banks were in rude good health, and the Fed Multiplier was 1.73.
  
  How anybody can see imminent inflation in the dying embers of core PCE, just 0.1pc in November, is beyond me.
  
  Mr Rosenberg is asked by clients why Wall Street does not seem to agree with his grim analysis.
  
  His answer is that this is the same Mr Market that bought stocks in October 1987 when they were 25pc overvalued on Shiller "10-year normalized earnings basis" – exactly as they are today – and bought them at even more overvalued prices in 2007, long after the property crash had begun, Bear Stearns funds had imploded, and credit had its August heart attack. The stock market has become a lagging indicator. Tear up the textbooks.

From Henry Blodget: The Scariest Jobs Chart Ever

• To date in this recession, we've lost more than 8 million jobs. The decline as a percentage of the workforce is the worst since the Great Depression, matching the sharp but short drop in 1948, as the war machine wound down.
  Equally important, the duration of these job losses, as well as the lack of a sharp recovery (at least so far), suggests that the problem will be with us for a long while. We're now 24 months into this decline, and we're still at the bottom. By this point in most previous recessions, we had already recovered all of the lost jobs.
  

Gave Up Looking For Jobs!

9.7% Jobless rate? Try the following article.

Posted on New York Times,

• Out of Work, and Too Down to Search On
  By MICHAEL LUO
  Published: September 7, 2009
  
  They were left out of the latest unemployment rate, as they are every month: millions of hidden casualties of the Great Recession who are not counted in the rate because they have stopped looking for work.
  
  But that does not mean these discouraged Americans do not want to be employed. As interviews with several of them demonstrate, many desperately long for a job, but their inability to find one has made them perhaps the ultimate embodiment of pessimism as this recession wears on.
  
  Some have halted their job searches out of sheer frustration. Others have decided it makes more sense to become stay-at-home fathers or mothers, or to go back to school, until the job market improves. Still others have chosen to retire for now and have begun collecting Social Security or disability benefits, for which claims have surged.
  
  Rick Alexander, a master carpenter in Florida who has given up searching after months of effort, said the disappointment eventually became unbearable.
  
  “When you were in high school and kept asking the head cheerleader out for a date and she kept saying no, at some point you stopped asking her,” he said. “It becomes a ‘why bother?’ scenario.”
  
  The official jobless rate, which garners the bulk of attention from politicians and the public, was reported on Friday to have risen to 9.7 percent in August. But to be included in that measure, which is calculated by the Bureau of Labor Statistics from a monthly nationwide survey, a worker must have actively looked for a job at some point in the preceding four weeks.
  
  For an increasing number of people in this country who would prefer to be working, that is not the case.
  
  It is difficult to assign an exact figure, because of limitations in the data collected by the bureau, but various measures that capture discouragement have swelled in this recession.
  
  In the most direct measure of job market hopelessness, the bureau has a narrow definition of a group it classifies as “discouraged workers.” These are people who have looked for work at some point in the past year but have not looked in the last four weeks because they believe that no jobs are available or that they would not qualify, among other reasons. In August, there were roughly 758,000 discouraged workers nationally, compared with 349,000 in November 2007, the month before the recession officially began.
  
  The bureau also has a broader category of jobless it calls “marginally attached to the labor force,” which includes discouraged workers as well as those who have stopped looking because of other reasons, like school, family responsibilities or health issues. But economists agree that many of these workers probably would have found a way to work in a good economy.
  
  There were roughly 2.3 million people in this group in August, up from 1.4 million in November 2007. If the unemployment rate were expanded to include all marginally attached workers, it would have been 11 percent in August.
  
  But even this figure is probably an undercount of the extent of the jobless problem in this country. There are about 1.4 million more people who are not in the labor force than when the recession began. Some of these are retirees, stay-at-home parents, people on disability and students. But it is also rather likely that many of these people have given up looking for work at least partly because of economic reasons as well.
  
  Here are four people’s stories:..... do read the rest here.

In an another article: For unemployed, Labor Day is hardly a holiday

Impact Of US Jobles 'Recovery'...

Posted this morning: Let's Cheer The Jobless Recovery!

Ever wonder the impact of the US unemployment market on the rest of the world?

Surely this is not a non-issue yes?

I was reading Professor Pettit's blog and I found his comments on his latest posting, The Shanghai market calls the tune, rather enlightening for me.

Here are some of the interesting passages from his editorial.

• The Shanghai and Shenzhen stock markets are still hogging the spotlight. Although down 18.0% from its recent peak exactly one month ago, the past three days have been good for Chinese stock market investors. After rising 0.60% on Tuesday and 1.17% on Wednesday, the SSE composite was up a very smart 4.79% today.
  
  So what happened? Better-than-expected earnings from Chinese corporations? A surge in US household income and a decline in US unemployment boosting the prospects for China’s tradable goods sector? A huge new loan number for the month of August?
  
  Actually, none of the above. In fact the US numbers look especially bleak for China. In spite of some seemingly good news on the macroeconomic side, unemployment in the US is still rising, and even that masks the depth of the problem. Many Americans who have lost jobs have since then found new jobs, but at lower pay, so that although they don’t show up adversely in the unemployment data, they nonetheless represent lower income to workers as certainly as rising unemployment does, and this will have an impact on future private consumption.
  
  Societe Generale’s ever bearish Albert Edwards had an excellent piece on the subject on August 6, in which he argues that:
  
  US nominal household incomes are now contracting at an unprecedented rate. The largest component of household income is wages and salaries which had been declining some 1% yoy. But after revisions the statisticians now admit to an unprecedented 4.8% decline! Total pre-tax household income is now recorded as falling 3.4% yoy in June.
  
  If US household income is declining so sharply, we can’t really expect a sharp pick-up in imports, even ignoring the fact that households are also in the process of deleveraging, and so cutting back even more sharply on consumption that their incomes might indicate. But in spite of still-bad news in both the external or internal environments, the markets are nonetheless in a much better mood than they were just a few days ago. Why?......
• .......................... Or, if you prefer Bloomberg’s slightly more forthright explanation:
  China’s stocks rose the most in two weeks on speculation regulators will adopt measures to boost the nation’s equities following declines in the past month. ................
• There is a general sense that no one wants the markets to misbehave before the all-important October 1 celebration of the sixtieth anniversary of the birth of the People’s Republic. Needless to say this begs the question about when exactly should you, as an investor, get out of the market? The day before? But if everyone knows that, then shouldn’t you get out two days before, or maybe three, since everyone has presumably figured that one out too?
  
  In 2006, 2007 and 2008 I wrote often about the dangers of this sort of market signaling. There may be perfectly good reasons to want to manipulate the markets with non-fundamental information, but every time this happens it further undermines the development of a healthy capital market that allocates capital based on economic prospects by undermining the value of fundamental information and reinforcing the value of speculation on government intentions. Still, on such an important anniversary I suppose it was totally unrealistic to think that the authorities would let angry investors spoil the party.....

ps: DO read the rest of the blog posting.

Yeah... would you cheer the US jobless recovery?

Let's Cheer The Jobless Recovery!

Posted previously, Reality Check: Welcome To The New Bubble , Why The US Is Even More Trouble Than The Unemployment Rate Indicates and The Fudged US Unemployment Claim Numbers!

On CNN: Unemployment rate climbs again

• Job losses ebb, but unemployment up
  Unemployment jumps to a 26-year high of 9.7%, even as employers cut the smallest number of jobs since August 2008.
  By Chris Isidore, CNNMoney.com senior writer
  
  NEW YORK (CNNMoney.com) -- Employers trimmed fewer jobs in August than they did the prior month, but the unemployment rate jumped to a 26-year high, the government reported Friday.
  
  There was a net loss of 216,000 jobs in the month, according to the Labor Department. That was the fewest jobs lost since August 2008 and lower than a revised loss of 276,000 jobs in July. Economists surveyed by Briefing.com predicted a loss of 230,000 jobs in August.
  
  But even with the lower level of losses in August, 6.9 million jobs have been cut from payrolls since the start of 2008.
  
  The unemployment rate, which in July fell for the first time in 15 months, turned higher again, jumping to 9.7% from 9.4% in July. This is the highest the unemployment rate has been since June 1983. Economists forecast that the jobless rate hit 9.5% in August....

On CNN Market Wrap.. Stocks in pre-holiday rally'

• Employers cut less jobs in August than they have in months, but the unemployment rate still rose to a fresh 26-year high.
  
  "It's a good report that generally suggests more healing in the economy," said Jeff Kleintop, chief market strategist, LPL Financial. "But the market has been saturated with good news and is starting to show fatigue after the S&P 500 rallied 50%."

Good report? :p2

Yeah.. US stocks rally after unemployment data

• "The bulls let out a collective sigh of relief today, after the government's highly anticipated payrolls report wasn't as sour as expected," said Andrea Kramer at Schaeffer's Investment Research.
  "Against this backdrop, the bulls won the battle for the session, but the bears won the war for the first week in three."

Yea... let's cheer on for the 'jobless recovery!"

Here's a new video from Peter Schiff. It gives a much better perspective. Oh, he does reckon that US unemployment could hit 25%!

Reality Check: Welcome To The New Bubble

On NYT Times A Scary Reality

• A Scary Reality
  
  By BOB HERBERT
  Published: August 10, 2009
  
  Last week was a pretty good one for President Obama. Bill Clinton helped out big time when he returned from North Korea with the American journalists Laura Ling and Euna Lee. Sonia Sotomayor was elevated to the Supreme Court. And Friday’s unemployment report registered a tiny downward tick in the jobless rate.
  
  But for American workers peering anxiously through their family portholes, the economic ship is still sinking. You can put whatever kind of gloss you want on last week’s jobs numbers, but the truth is that while they may have been a bit better than most economists were expecting, they were still bad, bad, bad.
  
  Some 247,000 jobs were lost in July, a number that under ordinary circumstances would send a shudder through the country. It was the smallest monthly loss of jobs since last summer. And for that reason, it was seen as a hopeful sign. The official monthly unemployment rate ticked down from 9.5 percent to 9.4 percent.
  
  But behind the official numbers is a scary story that illustrates the single biggest challenge facing the United States today. The American economy does not seem able to provide enough jobs — and nowhere near enough good jobs — to maintain the standard of living that most Americans have come to expect.
  
  The country has lost a crippling 6.7 million jobs since the Great Recession began in December 2007. No one is predicting a recovery in the foreseeable future powerful enough to replace the millions of jobs that have vanished in this historic downturn.
  
  Analysts at the Economic Policy Institute noted that the economy has fewer jobs now than it had in 2000, “even though the labor force has grown by around 12 million workers since then.”
  
  Two issues that absolutely undermine any rosy assessment of last week’s employment report are the swelling ranks of the long-term unemployed and the crushing levels of joblessness among young Americans. More than five million workers — about a third of the unemployed — have been jobless for more than six months. That’s the highest number recorded since accurate records have been kept.
  
  For those concerned with the economic viability of the American family going forward, the plight of young workers, especially young men, is particularly frightening. The percentage of young American men who are actually working is the lowest it has been in the 61 years of record-keeping, according to the Center for Labor Market Studies at Northeastern University in Boston.
  
  Only 65 of every 100 men aged 20 through 24 years old were working on any given day in the first six months of this year. In the age group 25 through 34 years old, traditionally a prime age range for getting married and starting a family, just 81 of 100 men were employed.
  
  For male teenagers, the numbers were disastrous: only 28 of every 100 males were employed in the 16- through 19-year-old age group. For minority teenagers, forget about it. The numbers are beyond scary; they’re catastrophic.
  
  This should be the biggest story in the United States. When joblessness reaches these kinds of extremes, it doesn’t just damage individual families; it corrodes entire communities, fosters a sense of hopelessness and leads to disorder.
  
  The unemployment that has wrought such devastation in black communities for decades is now being experienced by a much wider swath of the population. We’ve been in deep denial about this. Way back in March 2007, when the official unemployment rate was a wildly deceptive 4.5 percent and the Bush crowd was crowing about the alleged strength of the economy, I wrote:
  
  “People can howl all they want about how well the economy is doing. The simple truth is that millions of ordinary American workers are in an employment bind. Steady jobs with good benefits are going the way of Ozzie and Harriet. Young workers, especially, are hurting, which diminishes the prospects for the American family. And blacks, particularly black males, are in a deep danger zone.”
  
  The official jobless rate is now more than twice as high — 9.4 percent — and even more wildly deceptive. It ticked down by 0.1 percent last month not because more people found jobs, but because 450,000 people withdrew from the labor market. They stopped looking, so they weren’t counted as unemployed.
  
  A truer picture of the employment crisis emerges when you combine the number of people who are officially counted as jobless with those who are working part time because they can’t find full-time work and those in the so-called labor market reserve — people who are not actively looking for work (because they have become discouraged, for example) but would take a job if one became available.
  
  The tally from those three categories is a mind-boggling 30 million Americans — 19 percent of the overall work force.
  
  This is, by far, the nation’s biggest problem and should be its No. 1 priority.

The media had been focusing on the rate of decline had slowed. Less jobs were lost. So this is the signal that the worst is over.

But as most would like to point out some 247 thousand lost in July.

Mind you that's one month.

And how many jobs were lost since Dec 2007?

6.7 million!!

Yeah, and thanks to the money printing press, global markets flew up, up and away. No it's not a birdie, it's no plane but it's helicopter Ben and helicopter Wen!

Some are calling it already Stocks: The latest Fed bubble

• NEW YORK (Fortune) -- The Federal Reserve has spent the past year cleaning up after a housing bubble it helped create. But along the way it may have pumped up another bubble, this time in stocks.
  
  To head off the worst downturn since the Great Depression, the central bank has slashed interest rates while funneling money to banks.
  
  The Fed has mostly won praise for its efforts. The pace of job losses has slowed, and there has been a modest recovery in output.
  
  At the same time, stocks have bounced back with startling speed. Since global markets hit their bottom in March, the S&P 500 has jumped 51% -- even as the outlook for economic recovery remains dim.
  
  "This is the most speculative momentum-driven equity market since the early 1930s," Gluskin Sheff economist David Rosenberg wrote in a note to clients Monday......

And many stocks flew insanely to the stars!

Yeah many are cheering that young bulls don't die young! lol

When a stock can increase 33.3% after reporting earnings out of which 96% of it came came a tax credit! Minus out the tax credit and you are talking about pre-tax profit of a mere 248 thousand!

Watch out.

Insanity is surely back in stocks!

LOL!

Of course those who are still in the market won't like what I am saying. For them, market is up and they are making money and they surely can make do without this voice.

LOL!

ps: have you seen what the Baltic indexes are suggesting?

ps/ps: Almost half of U.S. homeowners with a mortgage are likely to owe more than their properties are worth before the housing recession ends, Deutsche Bank AG said

Why The US Is Even More Trouble Than The Unemployment Rate Indicates

From WSJ. Reasons why US in even more trouble than the 9.5% unemployment rate indicates

1. June's total assumed 185,000 people at work who probably were not. The government could not identify them; it made an assumption about trends. But many of the mythical jobs are in industries that have absolutely no job creation, e.g., finance. When the official numbers are adjusted over the next several months, June will look worse.
   
   
2. More companies are asking employees to take unpaid leave. These people don't count on the unemployment roll.
   
   
3. No fewer than 1.4 million people wanted or were available for work in the last 12 months but were not counted. Why? Because they hadn't searched for work in the four weeks preceding the survey.
   
   
4. The number of workers taking part-time jobs due to the slack economy, a kind of stealth underemployment, has doubled in this recession to about nine million, or 5.8% of the work force. Add those whose hours have been cut to those who cannot find a full-time job and the total unemployed rises to 16.5%, putting the number of involuntarily idle in the range of 25 million.
   
   
5. The average work week for rank-and-file employees in the private sector, roughly 80% of the work force, slipped to 33 hours. That's 48 minutes a week less than before the recession began, the lowest level since the government began tracking such data 45 years ago. Full-time workers are being downgraded to part time as businesses slash labor costs to remain above water, and factories are operating at only 65% of capacity. If Americans were still clocking those extra 48 minutes a week now, the same aggregate amount of work would get done with 3.3 million fewer employees, which means that if it were not for the shorter work week the jobless rate would be 11.7%, not 9.5% (which far exceeds the 8% rate projected by the Obama administration).
   
   
6. The average length of official unemployment increased to 24.5 weeks, the longest since government began tracking this data in 1948. The number of long-term unemployed (i.e., for 27 weeks or more) has now jumped to 4.4 million, an all-time high.
   
   
7. The average worker saw no wage gains in June, with average compensation running flat at $18.53 an hour.
   
   
8. The goods producing sector is losing the most jobs -- 223,000 in the last report alone.
   
   
9. The prospects for job creation are equally distressing. The likelihood is that when economic activity picks up, employers will first choose to increase hours for existing workers and bring part-time workers back to full time. Many unemployed workers looking for jobs once the recovery begins will discover that jobs as good as the ones they lost are almost impossible to find because many layoffs have been permanent. Instead of shrinking operations, companies have shut down whole business units or made sweeping structural changes in the way they conduct business. General Motors and Chrysler, closed hundreds of dealerships and reduced brands. Citigroup and Bank of America cut tens of thousands of positions and exited many parts of the world of finance.

The article then continues...

• Job losses may last well into 2010 to hit an unemployment peak close to 11%. That unemployment rate may be sustained for an extended period.
  
  Can we find comfort in the fact that employment has long been considered a lagging indicator? It is conventionally seen as having limited predictive power since employment reflects decisions taken earlier in the business cycle. But today is different. Unemployment has doubled to 9.5% from 4.8% in only 16 months, a rate so fast it may influence future economic behavior and outlook.
  
  How could this happen when Washington has thrown trillions of dollars into the pot, including the famous $787 billion in stimulus spending that was supposed to yield $1.50 in growth for every dollar spent? For a start, too much of the money went to transfer payments such as Medicaid, jobless benefits and the like that do nothing for jobs and growth. The spending that creates new jobs is new spending, particularly on infrastructure. It amounts to less than 10% of the stimulus package today.
  
  About 40% of U.S. workers believe the recession will continue for another full year, and their pessimism is justified. As paychecks shrink and disappear, consumers are more hesitant to spend and won't lead the economy out of the doldrums quickly enough.
  
  It may have made him unpopular in parts of the Obama administration, but Vice President Joe Biden was right when he said a week ago that the administration misread how bad the economy was and how effective the stimulus would be. It was supposed to be about jobs but it wasn't. The Recovery Act was a single piece of legislation but it included thousands of funding schemes for tens of thousands of projects, and those programs are stuck in the bureaucracy as the government releases the funds with typical inefficiency.
  
  Another $150 billion, which was allocated to state coffers to continue programs like Medicaid, did not add new jobs; hundreds of billions were set aside for tax cuts and for new benefits for the poor and the unemployed, and they did not add new jobs. Now state budgets are drowning in red ink as jobless claims and Medicaid bills climb.
  
  Next year state budgets will have depleted their initial rescue dollars. Absent another rescue plan, they will have no choice but to slash spending, raise taxes, or both. State and local governments, representing about 15% of the economy, are beginning the worst contraction in postwar history amid a deficit of $166 billion for fiscal 2010, according to the Center on Budget and Policy Priorities, and a gap of $350 billion in fiscal 2011.
  
  Households overburdened with historic levels of debt will also be saving more. The savings rate has already jumped to almost 7% of after-tax income from 0% in 2007, and it is still going up. Every dollar of saving comes out of consumption. Since consumer spending is the economy's main driver, we are going to have a weak consumer sector and many businesses simply won't have the means or the need to hire employees. After the 1990-91 recessions, consumers went out and bought houses, cars and other expensive goods. This time, the combination of a weak job picture and a severe credit crunch means that people won't be able to get the financing for big expenditures, and those who can borrow will be reluctant to do so. The paycheck has returned as the primary source of spending.
  
  This process is nowhere near complete and, until it is, the economy will barely grow if it does at all, and it may well oscillate between sluggish growth and modest decline for the next several years until the rebalancing of excessive debt has been completed. Until then, the economy will be deprived of adequate profits and cash flow, and businesses will not start to hire nor race to make capital expenditures when they have vast idle capacity.
  
  No wonder poll after poll shows a steady erosion of confidence in the stimulus. So what kind of second-act stimulus should we look for? Something that might have a real multiplier effect, not a congressional wish list of pet programs. It is critical that the Obama administration not play politics with the issue. The time to get ready for a serious infrastructure program is now. It's a shame Washington didn't get it right the first time.

Source: http://online.wsj.com/article/SB124753066246235811.html

The Fudged US Unemployment Claim Numbers!

Here's an article not to be missed, it's written by Mike 'Mish' Shedlock and published on Financialsense.com: Unemployment Claims: How Bad are the "Real" Numbers?

• Inquiring minds may wish to consider the Emergency Unemployment Compensation (EUC) PDF.EUC is a federal emergency extension that can provide up to 33 additional weeks of unemployment benefits.
  
  The first payable week was the week of July 6-12, 2008.The original extension passed in July 2008 paid up to 13 weeks of additional benefits.
  
  Effective November 23, 2008, we can pay up to 7 additional weeks of benefits.Effective December 7, 2008, we can pay up to another 13 weeks of benefits. Adding 2.519 million from the above chart to 6.883 million from the second chart the current real total (assuming nothing else is missing) number receiving unemployment benefits is 9.4 million.
  
  I am unsure how Federal Employees, Newly discharged Veterans, the Railroad Retirement Board, and especially the 346,559 Extended Benefit numbers fit into the EUC 2008 program, but I suspect all those numbers need to be added in as well, making the true count still higher.......
• On a percentage of population basis the 2001 recession was not quite as bad as the 1982 recession, whereas the current recession is 50% worse than the 1980 recession.
  
  Furthermore, the jobs picture is even worse than it looks. The US consumer was nowhere near as leveraged to real estate in 1980 as now. Also note that boomers are heading into retirement now, undercapitalized and looking for jobs, in effect competing against their kids and grandkids for jobs.
  
  Look at the average age of baggers in grocery stores or greeters at Wal-Mart. These people are not working because they want to; they are working because they have to. Demand for jobs is at an all time high while the number of available jobs and the pay scales of those jobs have both collapsed. The employment situation is not only an unmitigated disaster, things are about to get even worse with pending state cutbacks.

Warren Buffett : US Economy Is Weaker Than Expected

On ABC News Warren Buffett Backs Second Stimulus

• As debate grows about a possible second stimulus package for the flagging American economy, at least one legendary investor is giving the idea his guarded approval.
  
  "I think that a second one may well be called for," Warren Buffett, the CEO of Berkshire Hathaway, told "Good Morning America" today. But, he added, "you hope it doesn't get watered down in many ways."
  
  Buffett cautioned that a second stimulus package, like the first, won't be "a panacea," because stimulus packages take time to work. He criticized lawmakers' work on the first stimulus package, which contained $787 billion in spending.
  
  "Our first stimulus bill ... was sort of like taking half a tablet of Viagra and having also a bunch of candy mixed in ... as if everybody was putting in enough for their own constituents," he said. "It doesn't have really quite the wall that might have been anticipated there."
  
  Buffett also criticized the government's public-private investment plan, through which private investors are supposed to buy so-called toxic assets off the balance sheets of ailing banks that received billions in government aid.
  
  "I do not like the idea of any kind of a plan involving the government where Wall Street makes a lot of money. My plan provided that they would make no money whatsoever, and the American public would make the money. I just think that Wall Street owes the American people one at this point," he said.
  
  Nebraska native Buffett, known as the "Oracle of Omaha" for his long history of prescient stock picks, said that despite the talk of recent economic "green shoots," he couldn't predict when the flagging economy would bounce back.
  
  "We are not in a freefall, but we are not in a recovery either," Buffett said. "We were in a freefall really in the last quarter of last year, starting in the financial markets and spreading to the economy, and we had this huge change in behavior. That change hasn't changed."
  
  The U.S. unemployment rate, which currently stands at 9.5 percent, still "has a ways to go" before it peaks, he said. His own company, he said, had to lay off 500 people.
  
  "We didn't want to do it, and if we saw things coming back we wouldn't do it," he said.
  
  Buffett said he's never seen a recession affect consumers the way the current one has.
  
  "I have never seen it quite happen like this, but what happened was in late September, the American public … saw money market funds break the buck. They saw commercial papers stop, they saw all kinds of things that they hadn't seen before," he said. "It was a shock to the system."
  
  Still, Buffett remains optimistic.
  
  "I want to emphasize, we are going to come out of this better than ever," he said. "I mean the best days of America, by far, lie ahead. But not next week or next month and then, I don't know exactly when we will come out, but we will come out big time."
  
  Second Stimulus Debate Grows
  
  Talk of a second stimulus has grown, as the economy shows limited signs of improvement.
  
  "It looks like the economy is weaker than expected. Why not begin to think about over the next several months whether we need a stimulus package and what it should include," Laura D'Andrea Tyson, Obama's economic adviser said recently.
  
  Some, including Nobel Prize-winning economist Paul Krugman, support the second stimulus idea, but Republicans doubt it will yield any results.
  
  

Paul Krugman On The Dismal Employees Work Hours

• If firms were really gearing up to start hiring workers once again, why would they now be cutting back as strongly as ever on the hours that they ask their existing employees to work? My bottom line: the labor market does not quite yet suggest that the economy has hit bottom.

The above comments were taken from the following editorial, The labor market has NOT yet signaled a turning point.

Many thanks to the following Paul Krugman blog posting Dismal Hours

ps. the side-notes is rather interesting too. :D

• Update: Brad Setser also brings us some disappointing news from Korea, which “reports its trade data faster than anyone”, making it a sort of leading indicator.

Do check out that posting too. :D

Less Job Losses Than Forecasted!

On CNBC Job Losses at 345,000, Less Than Forecast; Rate at 9.4%

• U.S. employers cut 345,000 jobs last month, the fewest since September and far less than forecast, according to a government report on Friday that was more evidence the economy's severe weakness was diminishing.
  
  However, the Labor Department said the unemployment rate raced to 9.4 percent, the highest since a matching rate in July 1983, from 8.9 percent in April.

And the markets is loving them 'data'.

Futures Jump After Jobs Report; Apple Up

• Stocks index futures soared Friday after a smaller-than-expected job loss in May.
  
  Nonfarm employers cut payrolls by 345,000 last month, well below the 525,000-drop expected. And, the previous month was revised to show fewer jobs were lost than initially reported. The unemployment rate, however, jumped to 9.4 percent, the highest since August 1983 and higher than the 9.2 percent expected.

Smaller than 'expected'?

Hmm... May Non-Farm Payrolls Preview: The Charts that Matter

Of course there are some that would scoff at the data. From Jesse, ADP: Department of Records Revision. And from Financial Armageddon, do see the chart in the posting: Is U.S. Economic Data Being 'Massaged'?

Of course, for most its matters not.

Unemployment rate at 9.2%? No worries.

Most that matter is Futures Jump After Jobs Report!!

Hmm... economy recovery with unemployment at 9.2%? And no worries that since December 2007, the US economy has lost a net total of 6 million jobs.

Most that matter is the markets is loving it............... for now.

:D

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Just saw that MSNBC had this as their MAIN headlines.. :D

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Other articles: Non-Farm Payrolls Trend Mismatch

Unemployment, Unsustainable Trend In Debt And Taxes

Featured article on John Mauldin's newsletter: Faith-Based Economics (subscription is required - but it's free)

Couple of issues stand out.

John writes about unemployment numbers and questions if the numbers should be a lagging indicator.

• The typical pundit keeps telling us unemployment is a lagging indicator, and that the recovery will be well under way before it shows up in the job numbers. Therefore, you should buy what they are selling, because the recovery is on its way. But that may not be the case this time. One of my favorite reads, when I get to see it, is the economic analysis from Bridgewater. They are among the best thinkers anywhere, and everyone who follows them gives them a great deal of credence. This is what they wrote about unemployment being a lagging indicator last month:
  
  "Normally, labor markets lag the economy because incremental spending transactions are financed via debt, stimulated by interest rate cuts. But as long as credit remains frozen, spending will require income, and income comes from jobs. And debt service payments are made out of income. Therefore, in a deleveraging environment job growth becomes an important leading, causal indicator of demand and other economic conditions.
  
  "... The bounce in the economy and the stabilization in markets reflect government actions that are big enough to impact near-term growth rates, but are not sufficiently directed at the root problem of excessive indebtedness to produce permanent healing. The deterioration in employment markets will continue because companies' profit margins are so deeply damaged that a little bounce in growth won't do much to alter their need to cut costs. This deterioration in labor markets will undermine demand and continue to pressure loan losses, which will keep the pressure on the banks and elevate the cost of capital for tentative borrowers, inhibiting credit expansion."
  
  This again illustrates the problem of using past performance to project future results. You have to look at the underlying conditions in order to get a real comparison, and we have not seen a deleveraging recession in the US for 80 years. Using the past data in today's world is statistical masturbation: it may make you feel good, but it is not producing anything really useful, and may be harmful to your portfolio.

How now my dearest Brown Cow?

John then writes about the debt and tax issue. And like Warren Buffett has stated recently, sooner rather late, the taxes has to increase. (ps. do give the forbes article a read. )

• An Unsustainable Trend in Debt
  
  This week, the federal government published two important reports on long-term budgetary trends. They both show that we are on an unsustainable path that will almost certainly result in massively higher taxes. By 2016 we will have to fund Social Security out of general revenues, as the surplus we now have will be gone. And there are no trust funds. They are a myth. It as if I wrote myself a check for $2 trillion and then declared I was worth $2 trillion. The money is just not there. Social Security makes Bernie Madoff look like a small-time crook.
  
  And Medicare is in far worse shape. For those with the stomach, you can read Bruce Bartlett's analysis at http://www.forbes.com/2009/05/14/taxes-social-security-opinions-columnists-medicare.html. He estimates that taxes will have to go up by 81% if we are to pay the obligations as they now stand.
  
  Now that is unsustainable. It won't happen. And as the saying goes, if something is unsustainable, at some point it will stop. No getting around it. Long before we get there, change you will not like will be forced on the US.
  
  The following headline caught my eye: "Obama Says US Long-Term Debt Load is 'Unsustainable.'" Yet they announced a $1.8 trillion deficit, which is really going to be at least $2 trillion, and are getting ready to pass health-care programs that will mean at least a trillion in deficits for as long as one can project.
  
  How will they pay for it? Even getting rid of the Bush tax cuts will only produce a few hundred billion a year, which is nowhere near enough. They project much lower medical costs in the future, because they assume they are going to figure out ways to cut costs and make medical care more efficient. As if no one has ever tried that.
  
  Yes, there are some savings on the margin; but the only way you really cut costs is to ration health care, especially health care in the last year of life, which is about 30% of health-care expenses. That is going to be very tough in the US. But when faced with a real budget crisis, the choices are going to be stark. And that crisis is coming if we do not control spending.
  
  You cannot propose massive increases in spending without either creating crushing debt that the markets will simply not allow, pushing interest rates much higher and really slowing growth and hurting the economy. It is a simple fact that you cannot increase the debt-to-GDP ratio without limit.
  
  We found the limit on personal and corporate debt this past year. We pushed the limits until the system crashed. And now the US government wants to basically do the same thing. They are planning to see where the limits on government debt-to-GDP will be. Unless cooler and more rational heads in the Democratic Party prevail, this is not going to be pretty. Sometime in the middle of the next decade we will hit the wall, and it will make the current crisis pale in comparison.
  
  The only way to solve the problem is to grow GDP more rapidly than debt, and for that to happen you have to have policies which are shaped for the growth of the economy or massive savings by consumers. And right now we have neither. Cap and trade is hugely anti-growth. So are high corporate taxes, and Obama is proposing to effectively raise corporate taxes by closing loopholes for income earned outside the US. Much better would be to lower the overall corporate level to a competitive world rate and then require the offshore income to be taxed. A lower rate would actually increase tax revenues.
  
  Looming protectionism worldwide is a problem. (See the article at http://www.msnbc.msn.com/id/30758018 .) Towns in Ontario, Canada with a population totalling 500,000 have effectively barred US contractors from doing business with them, in retaliation for job losses stemming from US protectionism in the stimulus plan. That movement is spreading. A US steel mill with 600 union jobs will have to close down because its owners are not US-based, and thus it is not technically a US supplier. They are losing jobs to US-owned mills -- but those are US jobs. The insanity goes on and on. As I have written for many years, the one thing that really gets me worried is protectionism. That can make this very significant recession into a depression quicker than you can imagine. Bad ideas have bad consequences.
  
  All in all, we face some very difficult decisions, not just in the US but all over the developed world. Ironically, the less developed nations will have fewer problems and on a relative basis will likely grow much faster than the developed world. But, multi-trillion-dollar deficits and massive new programs are not the right answer.
  
  Obama is right: the debt load is unsustainable. Let's hope he will do more than talk, and show some budget restraint.
  
  

Federal Reserve Cannot Account For $9 Trillion

Highlighted the other day: Does The US Federal Reserve Knows Where The Trillions Went??

Moneynews.com had an article on the video. Federal Reserve Cannot Account for $9 Trillion

• Video: Federal Reserve Cannot Account for $9 Trillion
  
  Tuesday, May 12, 2009 12:30 PM
  
  By: Julie Crawshaw Article Font Size
  
  The Federal Reserve apparently can't account for $9 trillion in off-balance sheet transactions.
  
  When Rep. Alan Grayson (D-Orlando) asked Inspector General Elizabeth Coleman of the Federal Reserve some very basic questions about where the trillions of dollars that have come from the Fed's expanded balance sheet, the IG didn't know.
  
  Worse, nobody at the Fed seems to have any idea what the losses on its $2 trillion portfolio really are.
  
  "I am shocked to find out that nobody at the Federal Reserve is keeping track of anything," Grayson says.
  
  Grayson asked Coleman if her agency had done any research into the decision not to save Lehman Brothers, which “sent shockwaves through the entire financial system,” Coleman said it had not.
  
  “What about the $1 trillion plus expansion of the Federal reserve’s balance sheet since last September?” Grayson asked.
  
  “We have different connotations,” Coleman replied. “We’re actually conducting a fairly high-level review of the various lending facilities collectively.”
  
  Translation: Nobody at the Fed knows where the money went.
  
  Do you know what who got the $1 trillion or more in the Fed's expansion of its balance, Grayson pressed.
  
  "I do not know. We have not looked at this specific area at the particular point on that specific review," Coleman answer.
  
  What about the trillions of off-balance transactions since last September, Grayson asked.
  
  Coleman demurred again, saying the IG does not have jurisdiction to audit the Federal Reserve.
  
  Grayson pointed out that it was the inspector general's job to audit such spending and asked again if the office had done any investigation at all.
  
  Coleman's answer: Not enough yet to even respond. "We are in not a position to say if there losses."
  
  Grayson concluded, "I am shocked to find out that nobody at the Federal Reserve, including the inspector general, is keeping track of this."
  
  Meanwhile, Federal Reserve Chairman Ben Bernanke says the bank is working on ways to rein in the massive balance sheet commitments.
  
  "A majority of the members who made these projections just recently took 2 percent as being an appropriate number" for inflation, Bernanke said Monday.
  
  "Somewhere between 1-1/2 to 2 percent is basically the number that our committee has individually stated is the appropriate medium-term inflation rate.
  
  "To achieve that we need to demonstrate that we will be able to exit from the balance sheet position that we currently have, and have been working on this intensively," Bernanke said in response to questions after a speech to a conference organized by the Federal Reserve Bank of Atlanta, reported by Reuters.

Truly embarrassing and shocking. Just where is the money?

And here is the video clip again.

Poking fun at the US Job Numbers

Rob Kirby from Kirby Analytics had this to say about the US Job Numbers.

• Last month’s Labor Report was revised from 51K to 148K?
  
  And the month’s previous to that from 188K to 230K?
  
  And listen to this one...the unemployment rate declined from 4.6% to 4.4%?

And Allen Wastler had this more colorful commentary posted on CNN website. ( here )

• NEW YORK (CNNMoney.com) -- Numbers lie. Especially economic ones. But some of you already knew that.
  
  And it's all a conspiracy.
  
  Take the employment numbers Friday. The government reported that 92,000 jobs were added to U.S. payrolls. Its previous estimate of jobs created in September was revised from 51,000 to 148,000. And the unemployment rate dropped to 4.4 percent.
  
  Despite our best efforts, the conservative conspiracy was apparent.
  
  "I had to laugh at your story on job creation and unemployment," Miguel G. wrote to us. "How in the hell do you revise the number of jobs created in September from 51,000 to 139,000? (sic) Why does Bush even report the numbers if he's just going to change them a month later? Anything from his fanatical Christian government is pure lies."
  
  Or was it a liberal conspiracy?
  
  "Just curious if you'll be leading your newscasts off today with the new unemployment rate?" David W. flamed. "Our economy is good and it's about time you liberals in the media stop hiding that fact. Tell the truth on the economy and perhaps you'll gain more viewers."
  
  Half-empty, half-full? You're tagged either way.
  
  Either view is right. The employment report is actually made up of two different surveys ... one of employers (the payroll number) and one of households (the unemployment rate). Economists frequently debate the merits of the two and what they do and don't count. The payroll number doesn't reflect the self-employed all that well, say some. The household number doesn't reflect all the people who gave up looking for a job, say others. It's the stuff number-cruncher cage matches are made of.
  
  There's a fight like this about every economic number:
  
  The leading indicators are actually lagging.
  
  The gross domestic product doesn't give the service sector its due.
  
  Shouldn't food and energy be considered "core" to inflation calculations?
  
  And on and on.