vineri, 2 decembrie 2011

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

Bobo’s Travels - Plenty of Job Offers for Skilled Engineers IF You Can be Like Bobo

Posted: 02 Dec 2011 04:34 PM PST

I received an interesting email today from a reader "Freemon" regarding the trials and tribulations of his engineer on the move friend "Bobo".

"Freemon" writes ...
The following is an email I received from a fellow engineer. It pretty much summarizes the times.

My Florida nuclear power plant work ended sooner than promised, so I networked my contacts and in 6 working days landed 2 solid offers. Yep, it's moving time again.

I'm flying to Vancouver CA to work for 3 weeks, then flying back to Florida to move my stuff to AZ. I'm driving my truck the southern route - New Orleans, San Antonio River Walk and Alamo, Austin City Limits, etc. Should be in Phoenix the last few days of 2011, which gives me just enough time for a round of golf and a hike up Squaw Peak. Then I'm going to Nevada for my next job building a new gold mine.

Let's see, that makes 4 states, 3 companies, 2 countries, and 5 different job-sites for me in the past 11 months. Pack-and-move and pack-and-move and pack-and-move. My world is spinning faster and faster and I can barely hold on anymore. I've rented my house, sold all my furniture, dumped my camping gear, and given away my t-shirts, and now I live out of cardboard boxes.

Anything I buy is too much trouble to drag around. I have simplified so much that all I own anymore is a cell phone, a laptop, and an email address. Travel light, move fast, and stay alive. There's no middle ground anymore.

There are thousands of starving engineers, spun out into a ditch, unable to make that next move, meet that upcoming deadline, or attend tomorrow's meeting. So I travel light and move fast. Very fast. Always faster than the last time. Always faster than the next guy. Always jumping higher and farther and better than ever before. One day I'll just burn up, spin out, or perhaps just give up. But not just yet. Somehow, somehow still, I keep missing career death with that one well-placed contact. With that one quick jump, with that one flexible move, lucky me, I just survived another crash.

And, extra lucky me this time — the nukies downsized me in November but paid me thru January, and by next week I'll be polishing gold nuggets in my hotel room in Vancouver. Double-dipping sweet!

So tonight I'm heading to Wal-Mart to buy a trench coat with deep pockets, extra sunglasses, and a 10 gallon hat. While you are sitting in your cubicle smothered in paperclips and yellow stickies, I'll be surrounded with tons of gold! I'm sure they won't miss an ounce or two every now and then.

And, so I spin, faster and faster, around the world. Where it stops nobody knows. It's either spin or spin out in this business anymore.

Another job, another state, another company, another promise, another airplane flight, another hotel. What day of the week is it? Sorry, I don't have a clue.

All I care about now is that this new job is good. I work 6 weeks on and get 2 weeks off. Free airplane, hotel, food, car, etc. They pay for everything. Even overtime. See you on Squaw Peak every day for 2 weeks about mid-February. Or perhaps Hawaii, Mexico, or wherever the plane lands next.

It looks like I'll be living in hotels until the sky caves in, so if anyone needs any towels, shampoos, or soaps, just let me know.

Hey, Freemon, you can certainly understand. What a fast unstable world! You can do anything you want with this letter, but please change everything that identifies me with it. Thousands of engineers like us are stuck in this spin, and the corporate spin of "America needs more engineers, blah blah blah"

We have thousands of engineers too many. We need a stable economy!
That is a slightly edited version (corrected grammatically only) of a version on Freemon's website Market Place of Ideas website Bobo's Travels

I cannot confirm the accuracy of the post, but to me it rings true.

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.

Charts of the Day: Labor Force and Unemployment Rate Adjusted for Population Growth Since 1948 Show Falling Unemployment Rate is "Statistical Mirage"

Posted: 02 Dec 2011 09:53 AM PST

In Unemployment Rate Dips to 8.6% as 487,000 Drop Out of Labor Force I presented some quick facts on the drop in the unemployment rate.

  • In the last year, the civilian population rose by 1,726,000. Yet the labor force fell by 67,000. Those not in the labor force rose by 1,793,000. 
    •  
  • In November, those "Not in Labor Force" rose by a whopping 487,000. If you are not in the labor force, you are not counted as unemployed.
    •  
  • Were it not for people dropping out of the labor force, the unemployment rate would be well over 11%.

Labor Force and Unemployment Rate Adjusted for Population Growth

Reader Tim Wallace responded with a very nice set of graphs and commentary. Wallace writes ...
In the entire history of the labor force data, only in 1951, 1961, 1964, and 2009 did the labor force "shrink". It also "shrank" in 2011 off 2010. Also note that from 1964 to 2007, only in 1991 at 631,000, 1995 at 723,000 and 2002 at 801,000 did the labor force fail to add more than 1,000,000 people.

However, in 2008 the labor force only expanded by 776,000. This was followed by a loss of 826,000 in 2009, a trivial gain of 155,000 in 2010 and a loss of 67,000 in 2011.

If you look at the average labor force growth from 1948 to 2007 of 1,579,000 the labor force should have expanded by 6,316,000 2008-2011. Instead the labor force expanded by a mere 38,000!

Thus, 6,278,000 people are unaccounted for in the unemployment numbers based on historical averages.


The final graph takes the adjusted data and calculates the unemployment number off the adjusted workforce and those that actually have jobs. The unemployment numbers using this historical trend method show the following numbers for November in these years:

Unemployment Rate Adjusted for Population Growth

2007 4.7%
2008 7.3%
2009 11.7%
2010 12.4%
2011 12.2%

I am sure it is just coincidence, but it is interesting to note that the flat lining of the labor force began in earnest with the Obama administration.

Tim
Thanks Tim!

click on any chart for sharper image

Labor Force Seasonally Adjusted 1948 to Present



Labor Force Seasonally Adjusted 1948 to Present 
Years 2008-2011 Adjusted to Historic Growth



Unemployment Rate Adjusted for Normal Labor Force Growth 1948 to Present



Due to boom demographics, a slowing rate of increase in the labor force was to be expected. Instead the bottom has fallen out for 3 years.

Conclusion

Those who think the economy is improving based on the falling unemployment rate are looking at a statistical mirage based on an extremely atypical and prolonged drop in the labor force.

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.

Unemployment Rate Dips to 8.6% as 487,000 Drop Out of Labor Force

Posted: 02 Dec 2011 08:18 AM PST

Quick notes about the "falling" unemployment rate:

  • In the last year, the civilian population rose by 1,726,000. Yet the labor force fell by 67,000. Those not in the labor force rose by 1,793,000. 
    •  
  • In November, those "Not in Labor Force" rose by a whopping 487,000. If you are not in the labor force, you are not counted as unemployed.
    •  
  • Were it not for people dropping out of the labor force, the unemployment rate would be well over 11%.

Jobs Report at a Glance

Here is an overview of November Jobs Report, today's release.

  • US Payrolls +120,000
  • US Unemployment Rate Declined .4 to 8.6%
  • Civilian labor force fell by 315,000
  • Those Not in Labor Force rose by 487,000
  • Participation Rate fell .2 percentage points to 64.0%, nearly matching a low last seen in 1984
  • Actual number of Employed (by Household Survey) rose by 278,000
  • Unemployment fell by 594,000
  • Civilian population rose by 172,000
  • Average workweek for all employees on private nonfarm payrolls was unchanged at 34.3 hours for the second consecutive month.
  • The average workweek for production and nonsupervisory employees on private nonfarm payrolls edged down 0.1 hour to 33.6 hours in November.
  • Average hourly earnings for all employees in the private sector fell by 2 cents to $23.18
  • Government employment decreased by 20,000
  • The private sector has only recovered 33 percent of jobs lost in the peak-to-trough period of January 2008 to February 2010.

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.

For the second month the labor force rose. This is a welcome sign. However, were it not for people dropping out of the labor force for the past two years, the unemployment rate would be well over 11%.

November 2011 Jobs Report

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

The unemployment rate fell by 0.4 percentage point to 8.6 percent in November, and nonfarm payroll employment rose by 120,000, the U.S. Bureau of Labor Statistics reported today. Employment continued to trend up in retail trade, leisure and hospitality, professional and business services, and health care. Government employment continued to trend down.

Unemployment Rate - Seasonally Adjusted



Nonfarm Employment - Payroll Survey - Annual Look - Seasonally Adjusted



Notice that actual employment is lower than it was nearly 11 years ago.

Nonfarm Employment - Payroll Survey - Monthly Look - Seasonally Adjusted



click on chart for sharper image

Between January 2008 and February 2010, the U.S. economy lost 8.8 million jobs.

In the last year of the weakest recovery on record, 2.5 years old, the economy averaged about 131,000 jobs a month.

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

Nonfarm Employment - Payroll Survey Details - Seasonally Adjusted



Average Weekly Hours



Index of Aggregate Weekly Hours



Average Hourly Earnings vs. CPI



"Success" of QE2 and Operation Twist

  • Over the past year, average hourly earnings of all employees have increased by 1.8 percent. The consumer price index for all urban consumers (CPI-U) was up 3.6 percent from October 2010 to October 2011.
    •  
  • Average hourly earnings for all employees in the private sector fell by 2 cents to $23.18 in November after increasing 12 cents over the prior 2 months.
    •  
  • 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 BLS Birth/Death Model is an estimation by the BLS as to how many jobs the economy created that were not picked up in the payroll survey.

The BLS has moved to quarterly rather than annual adjustments to smooth out the numbers.

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.

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 Adjustments For 2011



Birth-Death Notes

Do NOT subtract the Birth-Death number from the reported headline number. That is statistically invalid.

It is exceptionally rare to see negative numbers in birth-death adjustments in months other than January and July. Data for much of this year actually seems reasonable.

Household Survey Data



click on chart for sharper image

In the last year, the civilian population rose by 1,726,000. Yet the labor force fell by 67,000. Those not in the labor force rose by 1,793,000.

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

Part-time status is essentially right where it was a year ago.

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 easy to misrepresent the headline numbers. Digging under the surface, the drop in the unemployment rate is nothing  but a statistical mirage.

The official unemployment rate is 8.6%. 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.

While the "official" unemployment rate is an unacceptable 8.6%, U-6 is much higher at 15.6%.

Falling unemployment rate would normally be considered a good thing, but not if it is happening because 1,793,000 people stopped looking for work.

Things are much worse than the reported numbers would have you believe. The entire economic picture is on very thin ice given the clear slowdown in the global economy.

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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