Mish's Global Economic Trend Analysis

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• Irish Support for Merkozy Treaty Drops to 30% with 39% Undecided; ESM Funds At Risk (But That's a Plus!)
• UK Back in Recession, Did it Really Ever Leave? Disappointing Details; Five Reasons the UK Recession Will Get Much Worse
• 53% of New Graduates are Jobless or Underemployed; Rude Awakening for Class of 2012; Useless Degrees; Who Benefits From Student Aid?

Irish Support for Merkozy Treaty Drops to 30% with 39% Undecided; ESM Funds At Risk (But That's a Plus!) Posted: 25 Apr 2012 02:43 PM PDT Ireland was one of few countries to give its voters a say on passing the Merkozy referendum. A couple months ago, support for the treaty was close to 50%. Now, in spite of pro-treaty (and illegal) propaganda from the Irish government, support has fallen to a mere 30%. The Financial times reports Ireland sees support for fiscal treaty wane. With six weeks to go before Ireland votes on the European fiscal treaty there are signs the government's campaign for a Yes vote is in danger of unravelling as public attitudes towards austerity harden and instability in Europe feeds into its referendum debate. On Wednesday the Irish trade union movement said it could not support the treaty, which would tighten budget rules and introduce penalties for states that break the rules. Opponents of the treaty also threatened to take legal action against the government's €2.2m information campaign, which they allege breaches a constitutional requirement in Ireland that all material paid for by public money should be impartial. "Nobody within our ranks is in agreement with the fiscal treaty," said David Begg, general secretary of the Irish Congress of Trade Unions, an umbrella body for Irish unions. "Everyone thinks it is a bad treaty. We don't see any merit in it." "My own view on this is that we are damned if we do and we're damned if we don't," Mr Begg said. Opinion polls show a slim majority (30 per cent) in favour, with 23 per cent against. But with 39 per cent of the public undecided concern is rising in government circles that opinion could swing against the treaty during the campaign, as it did in 2008 when Ireland rejected the Lisbon treaty. "The trade unions' position shows the naysayers are growing. You can see from studying social media there is a higher degree of anti-European rhetoric for this referendum," said David Farrell, professor of politics at University College Dublin. ESM Funds At Risk (But That's a Plus!) Begg's only concerned is access to European Stability Mechanism if the treaty is not passed. It if a concern no one in Ireland should have. Ireland should leave the euro and default on the bailout money it has received. Accepting more and more bailout money from the banker parasites in Brussels and the IMF is exactly the wrong thing to do. Greece is proof enough. 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.

UK Back in Recession, Did it Really Ever Leave? Disappointing Details; Five Reasons the UK Recession Will Get Much Worse Posted: 25 Apr 2012 09:46 AM PDT It is amusing to watch economists toss around ridiculous terms like "technical recession" to justify their poor forecasts. The entire eurozone is now in recession and the UK was sure to follow because so much of its trade is with the eurozone. This was easy to predict, yet few did. The Mail Online reports We ARE back in recession: Economy suffers double dip as GDP figures fall for second quarter in a row Official figures today showed the economy shrank by 0.2 per cent in the first quarter of 2012 It follows a fall of 0.3 per cent in the final quarter of 2011 Cameron: 'I do not seek to explain away the figures' Britain has suffered its first double-dip recession since the 1970s after a surprise contraction in the first three months of the year. Official figures today showed the economy shrank by 0.2 per cent in the first quarter of 2012 having declined by 0.3 per cent in the final quarter of 2011. It marked the first double-dip since 1975 and was a bitter blow to Chancellor George Osborne in the wake of last month's 'omnishambles' Budget. The decline in gross domestic product (GDP) was driven by the biggest fall in construction output for three years, while the manufacturing sector failed to return to growth, the Office for National Statistics (ONS) said. Andrew Smith, chief economist at KPMG, said: 'It's official, we're in a double-dip. 'But worse, output remains broadly unchanged from its level in the third quarter of 2010 and, four years on from its pre-recession peak is still some 4 per cent down – making this slump longer than the 1930s Depression. UK GDP In Perspective The UK had five consecutive quarters of growth so I suppose one can make a claim the recession ended. However, look at how feeble that growth has been. Only one quarter exceeded 1% and then just barely. Moreover, for the last six consecutive quarters, there has not been two consecutive quarters of growth. I suggest the UK slid back into recession during the 4th quarter of 2010. Disappointing Details It's not just the headline numbers that are anemic, the details are also very poor. Via Email from Barclays ... As expected, construction output declined over the quarter. However, the ONS has made some revisions to the weak January and February data, and assumed some further revisions and a strong March outturn in arriving at the Q1 estimate, so that the estimated 3.0% q/q decline in construction output was less than half the fall we had expected. As a result, construction's -0.2pp contribution to GDP growth was a lot less significant than we had anticipated. Rather, much of the downside news came on the services side, where February's Index of Services, published alongside the GDP data, disappointed to the downside, and January's estimate was also revised down. Much of the weakness was concentrated in business services and finance, which accounts for almost 40% of total services output, and where activity declined by 0.1% q/q. As a result, overall services output grew by just 0.1% q/q in Q1, and the downside news on services more than offset the upside surprise on construction. Like the MPC, we had thought that the weakness in the official construction data looked somewhat overdone, and had been prepared to look through downside news from this source. However, the disappointing outturn in services suggests that the economy's underlying growth momentum may be somewhat weaker than previously thought. The weak GDP outturn, combined with more persistent than expected inflation, highlights the MPC's ongoing policy headache. April's minutes showed the committee increasingly focused on inflation and minded to look through weak official activity data, which it expected to be driven mainly by somewhat dubious construction data. Further QE in May seemed unlikely. The configuration of today's outturn, more than the headline number, may give the committee reason to reassess. We still expect no further QE in May, but this is now a less certain call; and even if QE is not extended then a continued stagnation in demand could yet lead the MPC to act later in the year. Wishful Thinking Barclays thinks the UK will "narrowly avoid a further quarter of GDP in Q2". I don't. Why should it? Five Reasons the UK Recession Will Get Much Worse The eurozone is now an economic disaster, credit stress has returned to Spain and Italy The ECB abandoned the LTRO and is in the midst of huge infighting UK services took a huge hit and that trend will strengthen The Eurozone is the UK's largest trading partner and there is no reason for UK exports to the eurozone to rise. In fact, UK exports to the Eurozone, just may collapse. The better than expected (but still feeble construction numbers) will likely disappoint to the downside soon enough, if not immediately. If you thought the euro would help Europe, you thought wrong. The Euro made a disaster in Spain, Portugal, Ireland, Greece, and Italy. It's time to abandon that failed idea. 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.

53% of New Graduates are Jobless or Underemployed; Rude Awakening for Class of 2012; Useless Degrees; Who Benefits From Student Aid? Posted: 25 Apr 2012 02:35 AM PDT The USA Today reports graduating class of 2012 is in for a rude awakening as Half of new graduates are jobless or underemployed. A weak labor market already has left half of young college graduates either jobless or underemployed in positions that don't fully use their skills and knowledge. Young adults with bachelor's degrees are increasingly scraping by in lower-wage jobs — waiter or waitress, bartender, retail clerk or receptionist, for example — and that's confounding their hopes a degree would pay off despite higher tuition and mounting student loans. Median wages for those with bachelor's degrees are down from 2000, hit by technological changes that are eliminating midlevel jobs such as bank tellers. Most future job openings are projected to be in lower-skilled positions such as home health aides, who can provide personalized attention as the U.S. population ages. Taking underemployment into consideration, the job prospects for bachelor's degree holders fell last year to the lowest level in more than a decade. "I don't even know what I'm looking for," says Michael Bledsoe, who described months of fruitless job searches as he served customers at a Seattle coffeehouse. The 23-year-old graduated in 2010 with a creative writing degree. About 1.5 million, or 53.6%, of bachelor's degree-holders under the age of 25 last year were jobless or underemployed, the highest share in at least 11 years. In 2000, the share was at a low of 41%, before the dot-com bust erased job gains for college graduates in the telecommunications and IT fields. Out of the 1.5 million who languished in the job market, about half were underemployed, an increase from the previous year. Broken down by occupation, young college graduates were heavily represented in jobs that require a high school diploma or less. In the last year, they were more likely to be employed as waiters, waitresses, bartenders and food-service helpers than as engineers, physicists, chemists and mathematicians combined (100,000 versus 90,000). There were more working in office-related jobs such as receptionist or payroll clerk than in all computer professional jobs (163,000 versus 100,000). More also were employed as cashiers, retail clerks and customer representatives than engineers (125,000 versus 80,000). According to government projections released last month, only three of the 30 occupations with the largest projected number of job openings by 2020 will require a bachelor's degree or higher to fill the position — teachers, college professors and accountants. Most job openings are in professions such as retail sales, fast food and truck driving, jobs which aren't easily replaced by computers. Useless Degrees The USA Today talks about the "underemployed". Is that really what's going on? Just what job does someone majoring in Political Science, English, History, Social Studies, Creative Writing, Art, etc., etc., etc., expect to get? Arguably, graduates in those majors (and many more) should be thankful to get any job. Therefore, those who do land a job should therefore be considered fully employed, not underemployed. In turn, this means a college education now has a negative payback for most degrees.  Bledsoe, currently making just above minimum wage, says he has received financial help from his parents to help pay off student loans. He is now mulling whether to go to graduate school, seeing few other options to advance his career. "There is not much out there, it seems," he said. There is nothing out there for many degrees which means that going to graduate school will do nothing but waste more money. Nurses are still in demand, but technology and engineering majors are crapshoots. If you can land a technology or engineering job it is likely to be high paying, but if not, the next step is retail sales. Who Benefits From Student Aid?   Students get no benefit from "student aid". Rather, teachers, administrators, and corrupt for-profit schools like the University of Phoenix do. Obama wants to throw more money at education, and that is exactly the wrong thing to do. Instead, I propose stopping student aid programs and accrediting more online schools to lower the cost of education so that degrees do not have negative payback.    Sadly, there is a trillion dollar student loan bubble, and that debt overhang will negatively impact the economy for years to come. Let's not make the problem worse. It's time to kill the inappropriately named "student aid" program. 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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