vineri, 3 iunie 2011

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

No Money to Pay 70,000 Employees In Castilla-La Mancha Region of Spain: Situation a "Total Failure"

Posted: 03 Jun 2011 09:40 PM PDT

My friend Bran who lives in Spain passed along this bit of news regarding Spain.
After the power change in the Castilla-la Mancha community, the new People's Party governorship effectively declares it bankrupt, with 2 billion EU unpaid service bills and 7 billion EU in debt.

70,000 state workers are only guaranteed one month's wage now.
No Money for Payrolls

Courtesy of Google Translate, please consider The PP says there is no money to pay payrolls in Castilla-La Mancha
The PP will have to find ways to pay from next month's payroll of 70,000 employees of the Junta de Comunidades de Castilla-La Mancha, because the situation is "total failure", with a debt to suppliers of 2,000 million euros , has secured the regional secretary of the PP, Vicente Tirado.

The PP leader said that this month other officials charged by the payroll but no money for months, but has sent a message of peace because the PP, he added, will find the mechanisms to pay thereafter, and cited, for example, privatization of public television.

PP general secretary of Castilla-La Mancha has criticized Barreda have "paralyzed the administration" and that since his "irresponsibility want to mount a minefield" that cannot pay anything.

He will be remembered, he added, as the "worst" president of an autonomous region that has more than 7,000 million euros of debt owed ​​on unpaid invoices more than 2,000 million, which is leading to the ruin of small entrepreneurs as well to lead the ranking of communities deficit.
Those who can read Spanish may wish to consider El PP asegura que no hay dinero para pagar nóminas en Castilla-La Mancha

The following map and facts courtesy of Wikipedia will help put the region and population in proper perspective.

Castilla la Mancha



Area-wise that is about 15.7% of Spain, population-wise, only 4.3% of Spain.

From Wikipedia
It is mostly in this region where the story of the famous Spanish novel Don Quixote by Miguel de Cervantes is situated - due to which La Mancha is internationally well-known. Although La Mancha is a windswept, battered plateau, it remains a symbol of the Spanish culture with its vineyards, sunflowers, mushrooms, oliveyards, windmills, Manchego cheese, and Don Quixote.
Castilla-la Mancha is one of the more sparsely populated regions. However, where there is smoke, there is going to be fire, and much of Spain is smoking in protests, high unemployment, property bubbles, union inefficiencies, and other related problems.

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.

Boehner Accepts Obama's Invite to Play 18 Holes of Golf to Discuss Debt Ceiling

Posted: 03 Jun 2011 03:52 PM PDT

On the lighter side of the news, Obama Invites for Golf Summit Amid Debate Over U.S.'s Debt Ceiling
President Barack Obama has invited U.S. House Speaker John Boehner for a round of golf June 18 as the administration and congressional Republicans wrangle over federal spending and the national debt.

Boehner, an Ohio Republican who earlier this week began pressing Obama to get more directly involved in the budget negotiations, has accepted the invitation, said his spokesman, Brendan Buck.

Neither Buck nor a White House official who confirmed the invitation on condition of anonymity would say where the game would be played.

A major dispute concerns Republican insistence that no new taxes be part of any agreement, while Democrats say increased revenue has to accompany spending cuts.

The current debt stalemate could culminate in the year's second high-level negotiation between Obama and Republican leaders on spending cuts. Obama and Boehner hashed out the final details of an agreement on the 2011 federal budget face-to-face at the White House in April, agreeing to about $38.5 billion in reductions with just hours to spare before a government shutdown.
Does anyone think this will resolve anything?

Speaking of golf, I hope to get some in myself this weekend.

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.

BLS Jobs Report: +54,000, Unemployment +9.1%; Awful at First Glance, Merely Bad Beneath the Surface

Posted: 03 Jun 2011 09:16 AM PDT

Thoughts on the Jobs Report Thoughts on the Jobs Report

Last month I commented that on the surface the job reports was the "best back-to-back reports we have seen for years", not as measured by a typical recovery but as measured by this so-called recovery. Beneath the surface things were awful.

This month things are awful at first glance and simply bad beneath the surface. The number of employed rose by 105,000 which is an anemic number, but for the first time in a long time those in the labor force rose by a considerable amount: 272,000.

That suggests, momentarily that people think there may be jobs and are looking for them. That is a good thing, except for the fact they are not finding jobs. The number of unemployed rose by 167,000 and the unemployment rate ticked up by .1% to 9.1%.

Economists projected a drop to 8.9%, I called for a rise to 9.2%.

For the last two months I commented "It is very questionable if this pace of jobs keeps up." Clearly it didn't and this certainly cannot all be blamed on a Tsunami in Japan. The entire global economy is slowing rapidly.

Mish on Yahoo Finance Daily Ticker on Slowing Global Economy; U.S. Manufacturing ISM Plunge; Order Backlog and New Orders Barely Above Contraction

China's Manufacturing Slowest in 9 Months, New Orders Suggest Manufacturing May Have Already Peaked; Australia Biggest GDP Drop in 20 Years

Recall that the unemployment rate varies in accordance with the Household Survey not the reported headline jobs number, and not in accordance with the weekly claims data.

Digging deeper into the Household Survey, we see some more interesting data. In the last year, the civilian population rose by 1,814,000. Yet the labor force dropped by 544,000. Those not in the labor force rose by 2,358,000.

In January alone, a whopping 319,000 people dropped out of the workforce. In February another 87,000 people dropped out of the labor force. In March 11,000 people dropped out of the labor force. In April, 131,000 dropped out of the labor force.

At long last, the labor force expanded. This month it rose by 272,000. The 5-month total for 2011 is +276,000.

Many of those millions who dropped out of the workforce would start looking if they thought jobs were available. Indeed, in a 2-year old recovery, the labor force should be rising sharply as those who stopped looking for jobs, once again started looking. Instead, an additional 276,000 people dropped out of the labor force in the first four months of the year.

Were it not for people dropping out of the labor force, the unemployment rate would be well over 11%.

I do not know if this is a one-month anomaly with the labor force rising. However, if it continues (and that would be a good thing), it will be very difficult for the unemployment rate to drop.

April 2011 Jobs Report

Please consider the Bureau of Labor Statistics (BLS) May 2011 Employment Report.

Nonfarm payroll employment changed little (+54,000) in May, and the unemployment rate was essentially unchanged at 9.1 percent, the U.S. Bureau of Labor Statistics reported today. Job gains continued in professional and business services, health care, and mining. Employment levels in other major private-sector industries were little changed, and local government employment continued to decline.

Unemployment Rate - Seasonally Adjusted



Nonfarm Employment - Payroll Survey - Annual Look - Seasonally Adjusted



Notice that employment is lower than it was 10 years ago.

Nonfarm Employment - Payroll Survey - Monthly Look - Seasonally Adjusted



click on chart for sharper image

Ignoring the effects of the census, in the last 8 months of a recovery 2 years old, the economy is averaging 150,000 jobs a month. That is enough to hold the unemployment rate flat but is very poor as recoveries go.

Nonfarm Employment - Payroll Survey Details - Seasonally Adjusted



Total nonfarm employment has increased by 1.8 million, or 1.4 percent, since its trough in February of 2010. Between January 2008 and February 2010, the U.S. economy had lost 8.8 million jobs.

Statistically, 127,000 jobs a month is enough to keep the unemployment rate flat.

Average Weekly Hours



Index of Aggregate Weekly Hours



Average weekly hours for both all employees and production employees remained unchanged in May.

The index of aggregate weekly hours for all employees in the private sector increased by 0.1 percent. Since a low point in October 2009, the index has increased by 3.6 percent.

Average Hourly Earnings vs. CPI



"Success" of QE2

  • Average hourly earnings of all employees in the private sector increased by 6 cents in May to $22.98. Hourly earnings are up 1.8 percent over the year.

  • Between April of 2010 and April 2011 the consumer price index for all urban consumers (CPI-U) increased by 3.1 percent.


Not only are wages rising slower than the CPI, there is also a concern as to how those wage gains are distributed.

BLS Birth-Death Model Black Box

The big news in the BLS Birth/Death Model is the BLS has moved to quarterly rather than annual adjustments.

Effective with the release of January 2011 data on February 4, 2011, the establishment survey will begin estimating net business birth/death adjustment factors on a quarterly basis, replacing the current practice of estimating the factors annually. This will allow the establishment survey to incorporate information from the Quarterly Census of Employment and Wages into the birth/death adjustment factors as soon as it becomes available and thereby improve the factors.

For more details please see Introduction of Quarterly Birth/Death Model Updates in the Establishment Survey

In recent years Birth/Death methodology has been so screwed up and there have been so many revisions that it has been painful to watch.

Quarterly rather than annual adjustments can only help the process.

The Birth-Death numbers are not seasonally adjusted while the reported headline number is. In the black box the BLS combines the two coming out with a total.

The Birth Death number influences the overall totals, but the math is not as simple as it appears. Moreover, the effect is nowhere near as big as it might logically appear at first glance.

Do not add or subtract the Birth-Death numbers from the reported headline totals. It does not work that way.

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 as noted by numerous recent revisions.

Birth Death Model May 2011



BLS Back in Outer-Space

Do NOT subtract 206,000 from the headline number. That is statistically invalid. That said, the BLS is back in outer-space.

It is clear the economy is slowing and the BLS has not picked it up.

Household Data




click on chart for sharper image

In the last year, the civilian population rose by 1,814,000. Yet the labor force dropped by 544,000. Those not in the labor force rose by 2,358,000.

Were it not for people dropping out of the labor force, the unemployment rate would be well over 11%.

Table A-8 Part Time Status



click on chart for sharper image

There are now 8,500,000 workers whose hours may rise before those companies start hiring more workers.

The is little change in these numbers for a year.

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

Distorted Statistics

Given the total distortions of reality with respect to not counting people who allegedly dropped out of the work force, it is hard to discuss the numbers.

The official unemployment rate is 9.1%. 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.

While the "official" unemployment rate is an unacceptable 9.0%, U-6 is much higher at 15.8%.

Things are much worse than the reported numbers would have you believe, and for the second consecutive month the beneath the surface numbers were bad-to-awful.

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.

Why I Continue to Like Gold

Posted: 03 Jun 2011 07:26 AM PDT

In the last of three videos recorded Tuesday on the Yahoo Finance Daily Ticker I explain why I continue to like gold.

Please consider Why Michael "Mish" Shedlock Is Still Betting on Deflation…and Gold



In case you missed the other Daily Ticker videos, please see

Mish on Yahoo Finance Daily Ticker on Slowing Global Economy; U.S. Manufacturing ISM Plunge; Order Backlog and New Orders Barely Above Contraction

Debt Ceiling Discussion on Daily Ticker with Mish, Aaron Task, Henry Blodget: Will the Bond Market Eventually Force Congressional Hands?

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.

Case-Shiller Nominal and Real Housing Declines Since Peak; Home Prices Best in 25 Years, Better Prices Still Coming

Posted: 03 Jun 2011 01:16 AM PDT

Here are some charts showing nominal and real (CPI inflation-adjusted) housing declines in 20 Case-Shiller metro areas. Charts are grouped by 10 least expensive and 10 most expensive areas. Additional tables show housing declines from the peak. An explanation follows the charts.

Charts and tables are courtesy of "TC".

Case-Shiller Nominal Price History 10 Least Expensive Metro Areas



click on any chart or table for a sharper image

Case-Shiller Nominal Price History 10 Most Expensive Metro Areas



Case-Shiller Nominal Price Declines Since Peak


Case-Shiller "Real" Price History 10 Least Expensive Metro Areas



Case-Shiller "Real" Price History 10 Most Expensive Metro Areas



Case-Shiller "Real" Price Declines Since Peak



TC writes ...
Mish, I've attached several Case-Shiller graphs based upon most recent Case-Shiller data.

The charts show that all 20 metros are down from the peak prices between -10.7% (Dallas) and -58.6% (Las Vegas). Note that 13 of 20 cities tracked are presently at the lowest point in the cycle, while 7 cities are presently higher than their early 2009 low.

Of the 7 cities that are higher, San Francisco leads the way at +10.3% (+$43,461). However, San Francisco it still an amazing -40.6% (-$317,790) below peak prices.

Of particular interest is the "Price Level" column which displays how far back prices have reverted. For example, you can see that Atlanta has reverted back to April 1999 prices (and keep in mind this is nominal!). Three-fourths of the US is at the lowest point in the cycle, while 1/4 is up modestly and most likely temporarily.

The fourth chart is of March 2011 real (inflation adjusted) data. It is sorted identically to chart one and again shows that all 20 metros are down from their peak prices with again Dallas in the best shape (-21.6%) and Las Vegas the worst (-63.2%). It also shows that in real terms only 2 of 20 metros are actually higher than their early 2009 low and that both are only up +2.7% (and both still have huge declines of -47.4% and -35.3%).

The remaining 18 metros are all at their lowest point in the cycle. Again, the "Price Level" column is of interest as it shows that 10 of metros are down to levels never seen before in real terms (noted with an asterisk) and have resulted in a "lost" 20+ years of home appreciation. Long story short, housing has collapsed across the country and in real terms national pricing is back to late 1987 pricing - ouch!

I should also mention that this is based upon the latest Case-Shiller data, but many of these homes sold in very early 2011 since it typically takes 45 - 60 days to close and get recorded. So actual current prices (June 2011) are likely even lower and with the lowering of the GSE limits around the corner, we'll likely see even further declines.

On a positive note, prices today (especially when you account for near historic low interest rates) are the best they've been in 25+ years. While prices are still likely to head lower all markets have already experienced the majority of both their real and nominal price declines (i.e. San Francisco is already down in real terms -$420,000 and with median prices at $465,900 another -$420,000 is impossible). That being said, patience will still likely be rewarded with lower prices and maybe even lower interest rates. Time is on the renters side.
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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