Central Perk: Mish's Global Economic Trend Analysis

miercuri, 10 octombrie 2012

Mish's Global Economic Trend Analysis

Nigel Farage on the Rise of UKIP, the Fall of Europe, and the Parallels for the US; Any Hope For Spain?
Prepping for Obamacare, Olive Garden and Red Lobster Cut Workers' Hours; Are Other Companies Doing the same? Tip Sharing Lowers Minimum Wage; Like One, Like All?
China Skips IMF Meeting In Japan; Taiwan Claims Islands Too; What's the Dispute Really About?
Mish on Capital Account: IMF Downgrades, Unemployment, Participation Rate, Conspiracies; What is the Best Way to Measure Unemployment?

Nigel Farage on the Rise of UKIP, the Fall of Europe, and the Parallels for the US; Any Hope For Spain?

Posted: 10 Oct 2012 11:05 PM PDT

Political and economic tensions are mounting in Spain. No serious economist believes the official budget forecast. Unemployment is near 25%, and tax hikes are about to make matters worse.

Moreover, a proposal from Madrid would force children in Catalonia's schools to speak Spanish even though the dominant language is Catalan.

Proposal to "Hispanicise" Catalan Students

Please consider Madrid sparks Catalan language debate.

Spain's government risked inflaming tensions with Catalonia when it said school students from the north-eastern region should be "Hispanicised" by bringing the curriculum under greater central control.

"Our interest is to Hispanicise Catalan students, so they feel as proud to be Spanish as they do to be Catalan," Mr Wert said in response to a question in Spain's parliament on Wednesday.

Catalan, which was banned under Franco, has become the dominant language among Catalonia's 7.6m people, and is deemed a vital underpinning of its sense of nationhood.

The reopening of the debate over central control of language and curriculum in schools comes amid a surge in popular separatist sentiment in Catalonia, with the region's politicians having declared their intentions to hold a referendum on independence if November elections provide a mandate for one.

A recent poll taken by the Centre for Opinion Studies, an official institute of the Catalan government, indicated that 74 per cent of Catalans wanted a referendum to take place. Some conservative politicians in Spain have called for Madrid to respond by recentralising powers.

Nigel Farage on the Rise of UKIP, the Fall of Europe, and the Parallels for the US

Link is video does not play: Farage on Capital Account

Farage hits the nail squarely on the head. There is virtually no chance the eurozone will stay intact, but German Chancellor Angel Merkel, European Council president Herman Van Rompuy, and European Commission president José Barroso are all willing to destroy Greece, Spain, and anyone and every country who gets in their way.

Farage dod not think Greece would still be in the Eurozone by now, and neither did I. Every day is additional torture just so bureaucrats get their way. In the end, this mess will fall apart anyway, because mathematically it must.

For additional reading, please see

Farage Fined €3,000 for Saying President of European Council, Herman Van Rompuy, has "Charisma of a Damp Rag"; Europe's Most Dangerous Politicians Revisited

What If I Am Wrong About Europe?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Prepping for Obamacare, Olive Garden and Red Lobster Cut Workers' Hours; Are Other Companies Doing the same? Tip Sharing Lowers Minimum Wage; Like One, Like All?

Posted: 10 Oct 2012 12:02 PM PDT

In hopes of reducing the impact of Obamacare, Olive Garden and Red Lobster are reducing hours and studying the impact.

Right now, this is just a small test, involving only four ~~stores~~ markets. However, if large chains are testing in that direction, no doubt other companies are doing the same. I also suspect smaller chains have already shifted to that model completely.

Please consider Prepping for Obamacare, Chain Cuts Workers' Hours.

The owner of Olive Garden and Red Lobster restaurants is putting more workers on part-time status in a test aimed at limiting the impact of looming health coverage requirements.

Darden Restaurants declined to give details but said the test is only in restaurants in four markets across the country. The test entails increasing the number of workers on part-time status, meaning they work less than 30 hours a week. Under the new health care act, companies will be required to provide health care to full-time employees by 2014. That would significantly boost labor costs for businesses.

About 75 percent of Darden's employees are currently part-timers.

Given the challenging job market, Darden has been able to offer lower pay rates to new hires. Bonuses for general managers have been reduced as sales have stagnated. Servers at Red Lobster are handling four tables at a time, instead of three.

And last year, the company also put workers on a "tip sharing" program, meaning waiters and waitresses share their tips with other employees such as busboys and bartenders. That allows Darden to pay more workers a far lower "tip credit wage" of $2.13, rather than the federal minimum wage of $7.25 an hour.

Darden isn't the only restaurant chain looking at managing labor costs.

This summer, McDonald's Chief Financial Officer Peter Bensen noted in a conference call with investors that the fast food company was looking at the many factors that will impact health care costs, including the number of full-time employees.

Like One, Like All

There you have it, right at the end. McDonald's is looking at part-time work as well, hoping to avoid the impact of Obamacare.

Are any major restaurant chains not doing the same thing?

So, let me repeat the same questions I asked on Tuesday: Is Obamacare Responsible for the Surge in Part-Time Jobs? What About Obama's Defense Layoff Suspensions?

1-2-3?

In response to the above article "StockBuzInvestors" wrote ...

Hello Mish

Having one last 19 year old who hasn't flown the coop yet, I took it upon myself over the last year to help him and his numerous friends look for work down here in sunny Dallas.

Here are a few observations.

Companies have cut back as many employees as possible to under 32 hours so as to avoid having to pay any benefits

Christmas hiring actually began in September and is winding down in mid-October. It is definitely ahead of schedule.

Temp agencies are having a field day, absolutely flooded with applicants and temporary, not full time permanent positions.

1, 2, 3

More Like 1-2-3-4

Outlier that will be revised lower, later
Reversion to mean from three previous bad months
Early Christmas Hiring
Obamacare

I suspect all of those came into play. Assigning appropriate weights is not a simple task.

For more discussion, please see Mish on Capital Account: IMF Downgrades, Unemployment, Participation Rate, Conspiracies; What is the Best Way to Measure Unemployment?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

China Skips IMF Meeting In Japan; Taiwan Claims Islands Too; What's the Dispute Really About?

Posted: 10 Oct 2012 10:18 AM PDT

Bloomberg reports Japan Calls China PBOC Chief Skipping IMF Meeting 'Regrettable'

A decision by the Chinese central bank chief and finance minister not to attend International Monetary Fund meetings in Tokyo this week is "regrettable," Japan's finance minister said, as tensions lingered over an island dispute.

The Chinese move follows Japan's decision last month to buy the islands from their private owner, a purchase that sparked protests in China and clouded a $340 billion trade relationship. The protests occurred as China, which begins a leadership transition next month, has been more forceful in making its territorial claims across the region.

The Chinese decision is the latest sign that the tension from the territorial dispute between the two countries hasn't been contained. Japan's move to buy the islands sparked the worst crisis in bilateral relations since 2005.

An NHK poll published today showed 44 percent of Japanese respondents think the government should prioritize improving relations with China, while 41 percent think it should take a tougher stance. The telephone survey, conducted Oct. 6-9, obtained 1,056 responses and didn't give a margin of error.

Celebrating Taiwan's National Day holiday today, President Ma Ying-jeou reiterated his government's claim on the islands, saying in a speech that it will protect its fishing rights in the area. At least 50 Taiwanese fishing boats were in the area around the islands, called Senkaku in Japanese and Diaoyu in Chinese, in late September under escort from patrol boats before returning home because of a typhoon.

"From a historical, geographical or international law perspective, the Diaoyu Islands belong to Taiwan," Ma said in the speech. "Taiwan's fleets will continue to protect fishermen fishing in the area."

What's the Dispute Really About?

Territorial disputes between Japan and China are nothing new. In this case, the dispute is over barren, uninhabited rocks in the East China Sea. However, many think there is likely to be significant oil and natural gas in the area. Both China and Japan need more energy resources.

Second, please be aware that tensions between Japan and China tend to rise when the Chinese economy is sputtering.

Before this dispute started, the main item of Chinese discussion was the economy and the political ouster of Bo Xilai's banishment from the top ranks of China's Communist Party. The dispute over the islands comes at a nice convenient time to get everyone's mind off China's decreasing job opportunities, sinking exports, collapsing real estate, and plunging stock market.

Still, it is easy to argue Japan caused the flare-up, not China, because Japan made the first significant move. I am not taking sides in ownership of the islands, I simply do not know who has the better claims, if indeed anyone, over rocks that far out in the ocean.

Third, face-saving is culturally important to both Japan and China, so neither can realistically back down. Thus, I fail to see how the festering tensions can easily be peacefully resolved.

Given the fragile nature of the global economy, the dispute is not welcome, regardless of who has the better claim.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Mish on Capital Account: IMF Downgrades, Unemployment, Participation Rate, Conspiracies; What is the Best Way to Measure Unemployment?

Posted: 10 Oct 2012 01:55 AM PDT

Once again, on Tuesday, I had the pleasure of being on Capital Account, live television with Lauren Lyster.

We discussed IMF downgrades, unemployment, conspiracy theories, and economic outliers. We also discussed my proposal in regards to the proper way to measure the unemployment rate.

I come in at about the 3:40 mark, but the first few minutes of Lauren are entertaining as usual.

Link if video does not play: Mish on Capital Account.

A New Way to Measure Unemployment

On Monday, in the wake of a controversial drop in the unemployment rate, Gallup Economist Dennis Jacobe proposed a A New Way to Measure Unemployment.

He proposed "Payroll to Population (P2P) -- the number of Americans employed full-time for an employer as a percentage of the U.S. population."

Jacobe's proposal is horrendously flawed. The reason is demographics. Should a someone 80 years old, retired, and does not want a job be considered unemployed?

They would be in Jacobe's model. Simply put, P2P has fatal demographic flaws.

Simple Unemployment Rate Construct

I have a better, simpler, approach, that I mentioned on Capital Account: If you do not have a job and want one, you are unemployed.

Note that my definition picks up those in school because they cannot find a job. It also picks up those who are retired (yet still want to work).

I suspect millions have retired, not because they wanted to, but rather because they used up all their unemployment benefits, ran out of money, and retired to have some money coming in from Social Security.

The BLS "gotcha" question is whether or not a person looked for work in the last four weeks. Yet, few realize "looking" is not enough. One had to have an interview, seek an interview, or apply for a job to be considered "officially" unemployed.

Reading want ads every day and searching for jobs on Monster every day for weeks on end does not constitute "looking" to the BLS.

More Distinctions

Some people in school may want part-time work, but not full-time work. Others may be working part-time but want a full-time jobs. I would track those categories as follows.

U1: Those who want a full time job, are able to work, but are not working.
U2: U1 + Those who want a part-time job, are able to work, but are not working.
U3: U2 + Those working part-time who want a full-time job

In my scheme of things, U2 would be the official unemployment rate. Those in school for economic reasons instead of working full-time would fall in the U1 category. My U3 would pick up under-employment.

Mish Model Unemployment Rate

So what would the "Mish Unemployment" number be?

The answer is the current U5 (9.3%) plus those in school for economic reasons, plus those in forced retirement, etc. I do not have a count of that precisely, but judging from those who dropped out of the labor force, I suspect it would be on the order of 10% to 12% but perhaps a bit higher.

Add in those working part-time for economic reasons "My U3 number" and you are perhaps at 17%.

There is no reasonable way to get to the 22% unemployment rate that some propose. The US is neither Greece nor Spain. Moreover, under-employment, while a serious problem, is simply not "unemployed".

For more on the jobs situation, participation rate, and controversy regarding the surprising drop in the unemployment rate, please see ...