Mish's Global Economic Trend Analysis |
- Understanding Reality - You Don't Know What You've Lost Till Its Gone
- Reflections on the "Recovery"
- Jobs Decrease by 54,000, Rise by 60,000 Excluding Census; Unemployment Rises Slightly to 9.6%; A Look Beneath the Surface
| Understanding Reality - You Don't Know What You've Lost Till Its Gone Posted: 03 Sep 2010 05:27 PM PDT As everyone should know by now, my main concern with unions is specifically with public unions. While I do not care for unions at all, and never have, at least with private unions, someone other than corrupt politicians buying votes is bargaining at the other end of the table. In the case of public unions, if politicians strike a bad deal, taxpayers foot the bill. In the case of private corporations, if management strikes a bad deal, the company goes bankrupt, shareholders take a hit, or the jobs move elsewhere, as soon as the contract is up. Except in few cases every now and again, private unions just cannot seem to understand this simple economic fact. Machinists Union Pickets Cessna Aircraft The Kansas Wichita Eagle highlights the typical union response, public or private, in Cessna's initial offer to Machinists includes wage cut Machinist union members at Cessna Aircraft picketed near the company's plant in southwest Wichita on Thursday to protest jobs being sent outside the city.Reflections on Job Security Here's the deal. The Hise's and the union in general, appears ready willing and able to "hurt the whole Wichita economy" if they do not get what they want. I have to ask "How stupid is that?" The answer is "tremendously stupid". It is far better to have a good paying job and no job security than no job at all and no prospects of a job. That's what it boils down to, and like it or not, that is the economic reality. I do not know what salaries are, but a 10 year contract with only a 4.2% pay cut does not strike me as a bad deal. Those who think otherwise need to compare it to the alternative: seeing all the jobs go to Louisiana, Mississippi, or outside the country. By the way, wouldn't residents of Louisiana and Mississippi be very grateful for those job, regardless of what the salary was? I think so. So the bottom line is this mess, is the unions would be to blame and only the unions to blame if Cessna moves elsewhere. The union will also be responsible for wrecking the entire local economy if it happens. Take the contract and run! It's for 10 years! Because .... You Don't Know What You've Lost Till Its Gone, Then It's Too Late. In this case, it will be gone forever. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific. 
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| Posted: 03 Sep 2010 12:43 PM PDT One year ago the official unemployment rate was 9.7%. Today it is 9.6%. One year ago U-6 unemployment was 16.8%. Today U-6 is 16.7%  click on chart for sharper image For more details on the jobs report, please see Jobs Decrease by 54,000, Rise by 60,000 Excluding Census; Unemployment Rises Slightly to 9.6%; A Look Beneath the Surface For all the trillions of dollars in stimulus and additional trillions of dollars in bank bailouts and trillions of dollars of expansion of the Fed's balance sheet, this is all we have to show for it. Moreover, the economy is clearly slowing already by many economic reports including new home sales, existing home sales, the regional Fed manufacturing surveys, sentiment measures, and consumer spending trends. The only major discrepancy is ISM. This week, none of that matters. However, I would like to point out that bear market rallies end, not on bad news, but on good news. It will be interesting to see how much more good news there is, and the market's reaction to it. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific. 
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| Posted: 03 Sep 2010 09:08 AM PDT This morning the BLS reported a decrease of 64,000 jobs. However, that reflects a decrease of 114,000 temporary census workers. Excluding the census effect, government lost 7,000 jobs. Were the trend to continue, this would be a good thing because Firing Public Union Workers Creates Real Jobs. Unfortunately, politicians and Keynesian clown economists will not see it that way. Indeed there is a $26 billion bill giving money to the states to keep bureaucrats employed. This is unfortunate because we need to shed government jobs. Birth-Death Model Hidden beneath the surface the BLS Black Box - Birth Death Model added 115,000 jobs, a number likely to be revised lower in coming years. Please note you cannot directly subtract the number from the total because of the way the BLS computes its overall number. Participation Rate Effects June, July Revisions The change in total nonfarm payroll employment for June was revised from -221,000 to -175,000, and the change for July was revised from -131,000 to -54,000. Those revisions look good but it is important to note where the revisions comes from. The loss of government jobs in June was revised from -252,000 to -236,000 and July from -202 to -161,000. Major Discrepancies The BLS jobs report for August does not match ADP payroll estimates. Moreover, neither the BLS jobs report nor the ADP jobs report is consistent with the hot ISM number reported Wednesday. Both the BLS (details below) and ADP have a decline in manufacturing employment while ISM had a rise. Please see Rosenberg says "ISM Flunks Sniff Test "; Cashin calls ISM "an Outlier"; ADP, Other Data Does Not Confirm for more details that suggest the ISM number is nonsense. Part-Time Employment Now for this month's report .... July 2010 Report
Index of Aggregate Weekly Hours Production and non-supervisory work hours rose .1 to 33.5 hours (from a revised lower hours total of 33.4 hours). Average hourly earnings rose $.03 at $19.08. Birth Death Model Revisions 2009  click on chart for sharper image Birth Death Model Revisions 2010  click on chart for sharper image Birth/Death Model Revisions The BLS Birth/Death Model methodology is so screwed up and there have been so many revisions and up it is pointless to further comment other than to repeat a few general statements. Please note that one cannot subtract or add birth death revisions to the reported totals and get a meaningful answer. One set of numbers is seasonally adjusted the other is not. In the black box the BLS combines the two coming out with a total. The Birth Death numbers influence the overall totals but the math is not as simple as it appears and the effect is nowhere near as big as it might logically appear at first glance. BLS Black Box For those unfamiliar with the birth/death model, monthly jobs adjustments are made by the BLS based on economic assumptions about the birth and death of businesses (not individuals). Birth/Death assumptions are supposedly made according to estimates of where the BLS thinks we are in the economic cycle. Theory is one thing. Practice is clearly another. Household Data The number of unemployed persons (14.9 million) and the unemployment rate (9.6 percent) were little changed in August. From May through August, the jobless rate remained in the range of 9.5 to 9.7 percent.Table A-8 Part Time Status  click on chart for sharper image The key take-away is there are 8,860,00 workers whose hours may rise before those companies start hiring more workers. Table A-15 Table A-15 is where one can find a better approximation of what the unemployment rate really is. click on chart for sharper image Grim Statistics The official unemployment rate is 9.6%. However, if you start counting all the people that want a job but gave up, all the people with part-time jobs that want a full-time job, all the people who dropped off the unemployment rolls because their unemployment benefits ran out, etc., you get a closer picture of what the unemployment rate is. That number is in the last row labeled U-6. It reflects how unemployment feels to the average Joe on the street. U-6 is 16.7%, up .2 from last month. Looking ahead, there is no driver for jobs. Moreover, states are in forced cutback mode on account of shrinking revenues and unfunded pension obligations. Shrinking government jobs and benefits at the state and local level is a much needed adjustment. Those cutbacks will weigh on employment and consumer spending for quite some time. Expect to see structurally high unemployment for years to come. Keep in mind that huge cuts in public sector jobs and benefits at the city, county, and state level are on the way. These are badly needed adjustments. However, economists will not see it that way, nor will the politicians. Recap The private sector hiring increase of 67,000 is very weak for a recovery. That number is not enough to keep the unemployment rate steady. However, the unemployment rate comes from the Household Survey (a phone survey), not from actual payroll data. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific. 
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