Mish's Global Economic Trend Analysis |
- Italian Bond Yields and Spreads at Euro-Record High; Massive and Growing 2-10 Inversion a Sign of Pending Portuguese Implosion
- US Payrolls Rise by 80,000, Unemployment Rate Drops .1% to 9%; Recap and Analysis
- Pimco El-Erian Video: "Unfortunately it's a Mess" in Europe, Credibility Declines, Merkozy Cannot Even Agree on the "Easy Part"
- Canada Loses Most Jobs Since 2009 as Jobless Rate Rises to 7.3%; Meaningful Miss Sends Loonie Lower
- Italy Threatened with Troika Surveillance; Merkozy Sends Inspectors to Italy to Verify the Italian Books; Berlusconi Under Intense Pressure to Resign
- In Cabinet Revolt, Papandreou Ordered to "Calmly Step Down", and He Obliged; What about the Next Tranche of Aid?
Posted: 04 Nov 2011 01:33 PM PDT Following Threats of Troika Surveillance and Inspectors Headed to Italy to Verify the Italian Books it should be no surprise to find Italian bond spreads and yields surging to new highs. Italy 10-Year Government Bond Yield Italy 2-Year Government Bond Yield Germany 10-Year Government Bond Yield Germany 2-Year Government Bond Yield European Sovereign Debt Spread Table 10-Year Bonds
European Sovereign Debt Spread Table 2-Year Bonds
Inquiring minds might be interested in what European spreads look like over time. Chris Puplava at Financial Sense graciously put together a few charts at my suggestion that shows this action. Thanks Chris! 10-Year Spreads vs. Germany Over Time click on chart for sharper image Recent Record Highs: Italy, Belgium, France 1-Year Spreads vs. Germany Over Time click on chart for sharper image Recent Highs: Portugal, Italy, France, Belgium, Spain Note: Portugal does not have 1-year bonds. 2-year bond yield substituted 10-Year Minus 2-Year Yields, by Country click on chart for sharper image That massive inversion in Portuguese bonds with the 10-Year bond yield at 11.88% and the 2-year bond yield at 20.14% is a sign Portugal may blow sky high any time. Ireland recovered from a similar setup, Portugal failed to do so. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
US Payrolls Rise by 80,000, Unemployment Rate Drops .1% to 9%; Recap and Analysis Posted: 04 Nov 2011 11:12 AM PDT Jobs Report at a Glance Here is an overview of October Jobs Report, today's release.
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%. October 2011 Jobs Report Please consider the Bureau of Labor Statistics (BLS) October 2011 Employment Report. Nonfarm payroll employment continued to trend up in October (+80,000), and the unemployment rate was little changed at 9.0 percent, the U.S. Bureau of Labor Statistics reported today. Employment in the private sector rose, with modest job growth continuing in professional and businesses services, leisure and hospitality, health care, and mining. Government employment continued to trend down. 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 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+ years old, the economy averaged about 125,000 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 Over the past 12 months, average hourly earnings have increased by 1.8 percent. The consumer price index for all urban consumers (CPI-U) was up 3.9 percent over the year ending in August. 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. Household Survey Data click on chart for sharper image In the last year, the civilian population rose by 1,739,000. Yet the labor force rose by a mere 238,000. Those not in the labor force rose by 1,501,000. 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 hard to discuss the numbers. The official unemployment rate is 9.0%. 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 16.2%. The jump in U-6 this month is from part-time workers. Things are much worse than the reported numbers would have you believe. Encouraging Signs The one encouraging factor is that for the second consecutive month the household survey was significantly stronger than the payroll survey. A significant number of workers are looking for and finding jobs. Also for the second consecutive month, the labor force rose a significant amount, this month by 181,000. However, I wonder how much of this increase is "forced employment" fueled by expiring unemployment benefits. Regardless, the jobs still have to come from somewhere. Yet, the entire setup 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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Posted: 04 Nov 2011 09:51 AM PDT Here is an interesting interview between Mohamed El-Erian, CEO of PIMCO, and Bloomberg Television's Betty Liu and Michael McKee this morning regarding the situation in Europe and the global economy. El-Erian said that it's "striking" that German Chancellor Angela Merkel can't agree on the "easy part" and that "unfortunately it's a mess" in Europe. Link if video does not play: http://www.youtube.com/watch?v=-erklhXVv80 I agree with 60% of what El-Erian says. Yet once again, "non-solutions" coming from Pimco are nothing but Keynesian claptrap. Here is a complete transcript ... El-Erian on the situation in Europe and the G20 meeting in France:No Magic Wands There are no magic wands, Keynesian or otherwise. El-Erian 's idea that global leaders and central bankers can snap their fingers, "agree on a growth and employment pact" fueled by more stimulus and "heavy lifting" by central banks to produce growth is simply Keynesian claptrap. Certainly structural issue need to be fixed. However, the Fed and Central bankers need to stop printing, governments everywhere need to stop deficit spending, the US needs to let housing bottom naturally, and public sector employment needs to shrink globally. In short, there will be no gain without more pain, and that has Keynesian clowns howling at the thought. El-Erian offered a realistic viewpoint of what is happening. Unfortunately, he is essentially clueless about what needs to be done to fix things. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Canada Loses Most Jobs Since 2009 as Jobless Rate Rises to 7.3%; Meaningful Miss Sends Loonie Lower Posted: 04 Nov 2011 09:06 AM PDT More proof the entire global economy is cooling rapidly comes from North of the border where Canada Loses Most Jobs Since 2009 Recession as Jobless Rate Rises to 7.3% Canada's economy lost the most jobs since the 2009 recession during October, led by declines in the manufacturing and construction industries, cementing projections that the recovery is slowing."Meaningful Miss" Sends Loonie Lower Bloomberg reports Canadian Dollar Declines as Jobless Rate Unexpectedly Increased in October Canada's dollar dropped against most of its major counterparts after a government report showed the jobless rate unexpectedly increased in October as the nation's employers eliminated positions.Expect more weakness in the Canadian economy and the Loonie in the coming months. No major countries will escape the global slowdown. The commodity currencies of Canada and Australia may be in for considerable declines as both countries head for recession. My report on the US jobs situation will be out shortly. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Posted: 04 Nov 2011 02:28 AM PDT Angela Merkel and Nicolas Sarkozy were more than a little ticked off when Italian Prime Minister Silvio Berlusconi showed up for the Cannes summit "empty handed". In response. Merkozy proposed a new Troika for Italy and sent inspectors to pour over Italy's books. Courtesy of Google translate, please consider Europe puts Italy under surveillance While outside the world has their eyes on Greece, Italy is to be found in the line of sight of the negotiators inside the palace in Cannes.Moreover, Berlusconi is under intense pressure from his own cabinet and he will likely be the next Prime minister to fall. Please consider Italy PM faces more pressure to resign The calls on Berlusconi to resign come a day after he failed to win support at a cabinet meeting on comprehensive reforms to stimulate growth and cut the European country's massive debt.Flush with a Pyrrhic victory over Greece (but not recognized as such just yet), Merkozy is stepping up the pressure on Italy. Expect more pressure on Spain and Portugal as well. Although reforms are badly needed, Greece, Spain and Portugal are already imploding and budget targets will be increasing hard to meet the more austerity measures are crammed down taxpayer throats. Recovery timelines and haircuts are both insufficient, and budget expectations are outright preposterous across the board. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Posted: 03 Nov 2011 11:22 PM PDT It's the end of the line for Greek Prime Minister George Papandreou. In a cabinet revolt led by his finance minister, Papandreou was ordered to "leave calmly in order to save his party". He obliged, having no real choice in the matter because otherwise he would have been ousted in a vote of confidence. He may survive the vote, but it will do him no good as part of the agreement. Please consider Greek PM ready to go, dump referendum, for euro deal Intense European pressure forced debt-stricken Greece to seek political consensus on a new bailout plan instead of holding a referendum after EU leaders raised the prospect of a Greek exit from the euro to preserve the single currency.Papandreou's Plan Backfired? It may look that way but his days were already numbered. He was gone anyway. It is safe to say his strategy did not work. I supported the strategy because I support democracy. Members of his own cabinet did him in, not demands from Merkozy. What about the Next Tranche of Aid? Radio New Zealand discusses the question of the next tranche of money in Greek PM to stand down Finance Minister Evangelos Venizelos has warned the country needs the next €8 billion tranche of aid within the next 12 days.Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
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