vineri, 1 februarie 2013

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

500,000 People Sign Petition Asking Prime Minister Rajoy to Resign

Posted: 01 Feb 2013 04:09 PM PST

The indignation of citizens over payouts and graft in Spain is highlighted by a flood of protests on Spanish social networks. A campaign on Change.org, a platform with 25 million registered has collected a record 500,000 signatures calling for the resignation of Prime Minister Marinao Rajoy.

Via Google translate from El Pais, please consider 500,000 People Sign Petition Asking Prime Minister Rajoy to Resign.
The indignation of the public by publication in the country of the secret papers of the PP extesoreros, reflecting payments to the party leadership, is flooding social networks with messages calling responsibilities to Prime Minister Mariano Rajoy. appear together under tags like # Rajoydimisión or # quesevayantodos , in addition to the proposal for this diary # lospapelesdebárcena s. This wave of criticism also translates into hundreds of thousands of citizens (over 500,000 in just over a day) have signed a petition asking for "the resignation of the leadership of the PP", including Rajoy, and "all who have received payments in black money ".

"I wish we lived in a democracy and could revoke the government for not fulfilling its election and alleged corruption cases like this," explains Pablo Gallego , petition drives the platform Change.org . This 24 year old from Cadiz that their initiative is collecting 40,000 signatures per hour, a pace that, if continued throughout the day, could mean reaching one million accessions this Saturday.

If that number is reached, Gallego with messages intended to go to the national headquarters of the PP in Madrid.
Tipping Point

As I have said repeatedly, one never knows when the tipping point is. However, given the combination of massive government corruption coupled with unemployment of 26.6% and youth unemployment of 56%, it is certain the tipping point will indeed be reached.

For more on the scandal and what the prime minister is doing to suppress reporting of the corruption, please see Big Brother in Action: EU Wants Power to Sack Journalists; Prime Minister Rajoy Threatens Newspapers Following Corruption Articles.

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

Last Hurrah for Jobs? Establishment Survey +157,000 Jobs; Household Survey +17,000 Jobs; Unemployment Rate +.1 to 7.9%; Unemployment +126,000

Posted: 01 Feb 2013 11:53 AM PST

Initial Reaction

The establishment survey reported a gain of  157,000 job this month.

However, for the third consecutive month, the household survey is much weaker than the headline number.

The household survey shows a gain of a mere 17,000 jobs. Last month the household survey gained only 28,000 jobs. The unemployment rate rose to 7.9%.

As measured by the household survey (the basis for the reported unemployment number) the number of unemployed rose by 126,000.

Note: The BLS did not produce its usual collection of graphs today that I normally include in this report.  I was scrambling to find them but the report has changed, perhaps just for this month.

Massive population adjustments may explain the lack of charts this month.

Census Adjustments

Last month I stated "In the last year, the civilian noninstitutional population rose by 3,766,000"
This month I report "In the last year, the civilian noninstitutional population rose by 2,394,000. That is a huge downward census adjustment.

December BLS Jobs Report at a Glance

  • Payrolls +157,000 - Establishment Survey
  • US Employment +17,000 - Household Survey
  • US Unemployment +126,000 - Household Survey
  • Involuntary Part-Time Work +55,000 - Household Survey
  • Baseline Unemployment Rate +.01 at 7.9% - Household Survey
  • U-6 unemployment +.00 to 14.4% - Household Survey
  • The Civilian Labor Force +143,000 - Household Survey
  • Not in Labor Force  +169,000 - Household Survey
  • Participation Rate +.00 to 63.6 - Household Survey


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.

Quick Notes About the Unemployment Rate

  • In the last year, those "not" in the labor force rose by 1,095,000
  • Over the course of the last year, the number of people employed rose by 1,714,000
  • In the last year the number of unemployed fell from 12,748,000 to 12,322,000 (a drop of 426,000)
  • Long-Term unemployment (27 weeks and over) was 4,708,000 a decline of 58,000
  • Percentage of long-term unemployment is 38.1%. Once someone loses a job it is still very difficult to find another.


January 2013 Jobs Report

Please consider the Bureau of Labor Statistics (BLS) January 2013 Employment Report.

Total nonfarm payroll employment increased by 157,000 in January, and the unemployment rate was essentially unchanged at 7.9 percent, the U.S. Bureau of Labor Statistics reported today. Retail trade, construction, health care, and wholesale trade added jobs over the month.

Click on Any Chart in this Report to See a Sharper Image

Unemployment Rate - Seasonally Adjusted




Average weekly hours remained flat at 34.4 hours. A year ago average hours were 34.5 hours. Average hourly earnings rose this month from $23.74 to $23.78.

Real wages have been declining. Add in increases in state taxes and the average Joe has been hammered pretty badly. For 2013, one needs to factor in the increase in payroll taxes for Social Security.

For further discussion of income distribution, please see What's "Really" Behind Gross Inequalities In Income Distribution?

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 Birth-Death numbers are not seasonally adjusted, while the reported headline number is. In the black box the BLS combines the two, coming up 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 2012



Birth Death Model Adjustments For 2013



Birth-Death Notes

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

In general, analysts attribute much more to birth-death numbers than they should. Except at economic turns, BLS Birth/Death errors are reasonably small.

For a discussion of how little birth-death numbers affect actual monthly reporting, please see BLS Birth/Death Model Yet Again.

Household Survey Data



click on chart for sharper image

There were massive revisions in labor force statistics this month.

Last month I stated "In the last year, the civilian noninstitutional population rose by 3,766,000.

This month I report "In the last year, the civilian noninstitutional population rose by 2,394,000. That is a huge downward census adjustment.

Last month I reported "Year-over-year, those not in the labor force rose by 2,394,000
This month I report "Year-over-year, those not in the labor force rose by 1,095,000 to 89,008,000."

In the last year, the labor force rose by 1,298,000.

Decline in Labor Force Factors

  1. Discouraged workers stop looking for jobs
  2. People retire because they cannot find jobs
  3. People go back to school hoping it will improve their chances of getting a job
  4. People stay in school longer because they cannot find a job

Were it not for people dropping out of the labor force, the unemployment rate would be well over 10%.

Part Time Status (in Thousands)



click on chart for sharper image

There are 7,918,000 workers who are working part-time but want full-time work. This is a volatile series.

Table 15 BLS Alternate Measures of Unemployment



click on chart for sharper image

Table A-15 is where one can find a better approximation of what the unemployment rate really is.

Notice I said "better" approximation not to be confused with "good" approximation.

The official unemployment rate is 7.9%. However, if you start counting all the people who 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 real unemployment rate is. That number is in the last row labeled U-6.

U-6 is much higher at 14.4%. Both numbers would be way higher still, were it not for millions dropping out of the labor force over the past few years.

Duration of Unemployment



Long-term unemployment remains in a disaster zone with 38% of the unemployed in the 27 weeks or longer category.

Grossly Distorted Statistics

Given the complete 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, much of the drop in the unemployment rate over the past two years is nothing but a statistical mirage. Things are much worse than the reported numbers indicate.

The Last Hurrah?

For the third month in a row, the underlying numbers were weak. The revisions to the population statistics support some of the drop in the unemployment rate, but those adjustments are in the past.

The recent divergence between the household survey and the payroll survey will close. The question is which way. Given business hiring plans, Obamacare adjustments, and the increase in payroll taxes that will take 2% of consumer spending away from those who need it most, I expect this is the last hurrah for jobs.

For a look ahead to 2013, please see Small Business Owners' Hiring Intent Plunges to 2008 Lows; Don't Blame Sandy or Fiscal Cliff.

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

"Wine Country" Economic Conference Hosted By Mish
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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.

French Retail Sales Drop 10th Month Accompanied by Sharper Drop in Employment; Italy Retail Sales Drop 23rd Month; Eurozone Sales Collapse 15th Month; Wholesale Prices Soar

Posted: 01 Feb 2013 01:00 AM PST

Is the worst over for the Eurozone? That's what the ECB and heads of state said at the recent economic summit in Davos.

I offer some economic reality.

Eurozone Sales Collapse 15th Month and Wholesale Prices Soar

The Markit Eurozone Retail PMI® shows Eurozone retail sales downturn extends to fifteenth month in January
Key points:

  • Rate of decline remains sharp despite easing since December
  • Sales growth resumes in Germany
  • Wholesale prices rise at fastest rate in ten months

Summary

Markit's Eurozone retail PMI® data for the opening month of 2013 signalled a fifteenth consecutive month-on-month decline in sales values, even after accounting for the post-festive slump in trading and a resumption of growth among German retailers.

The three largest Eurozone economies are covered by the retail PMI surveys. The German Retail PMI hit a seven-month high and rose above 50.0, signalling a return to growth following December's contraction. French retailers meanwhile saw another solid fall in sales at a rate broadly similar to that seen in the final month of 2012 (adjusted for seasonal influences). French retail sales have declined for a survey-record ten successive months. In Italy, retail sales fell for the twenty-third consecutive month, and the rate of decline remained severe despite easing since December.

The rate of wholesale price inflation accelerated further in January to reach a ten-month high, linked to suppliers passing on higher raw material costs. All areas of retail posted rapid increases in suppliers' prices except for clothing & footwear. Despite this, the value of retailers' new purchases fell sharply, as they aimed to minimise warehouse levels in the face of weak demand. Subsequently, the value of goods held in stock at retailers declined for the fifth month running, and at the fastest rate since August 2010. Pressure on retailers' gross margins remained intense, however, most notably in Italy.

The combination of falling sales, rising cost pressures and a margin squeeze resulted in a
further round of job cuts at Eurozone retailers, even after accounting for the usual post-festive reductions. Employment in the sector has fallen every month since April 2012, and the rate of decline accelerated to the fastest since last July. German retailers again bucked the trend, registering sustained workforce growth.
Italy Retail Sales Drop 23rd Month

The Markit Italy Retail PMI® shows further sharp drop in retail sales, despite reaching four-month high
Key points:

  • PMI rises for second straight month, but still signals steep contraction in sales
  • Sharpest drop in purchasing activity among retailers since August
  • Wholesale price inflation accelerates to 11-month high

Summary:

January saw a further deterioration in the health of Italy's retail sector, with decreased sales leading to another round of job cuts. Purchasing activity among businesses fell accordingly, contributing to a further reduction in stock levels. There was more bad news on the costs front, with purchases prices rising at the fastest rate in 11 months.

Italian retail sales continued to fall at a sharp monthly rate at the start of the year, as indicated by the seasonally adjusted PMI® posting at 37.5 in January. This extended the current period of contraction to almost two years. That said, the index was the highest in four months, having risen slightly from December's mark of 36.8.
Germany Returns to Growth

The Markit Germany Retail PMI® shows return to growth at start of year
Key points:

  • Marginal expansion of retail sales during January
  • Employment growth continues
  • Wholesale price inflation highest since April 2012

At 51.0 in January, the seasonally adjusted Germany Retail PMI recovered from the eight-month low of 47.6 posted during December. However, the month-on-month rate of retail sales growth was only marginal, in part reflecting reports by survey respondents of subdued underlying consumer demand at the start of 2013.

 ...but like-for-like sales are lower than one year earlier

The marginal rise in month-on-month retail sales contrasted with a decline on an annual basis registered during January. Latest data pointed to a moderate reduction in like-for-like sales compared with one year earlier, and the pace of contraction was the sharpest since May 2010. Moreover, the index was in negative territory for the first time in nine months.
January sales disappoint compared to targets

Actual sales in the German retail sector fell short of initial targets during January, as has been the case in each month since April 2012. Moreover, the degree to which sales were lower than expected was the most marked for one year.

Margins squeezed at slowest pace since May 2011, despite sharper pace of cost inflation. Gross operating margins in the German retail sector decreased for the twenty-sixth successive month in January. Average prices paid by retailers for their purchases increased for the thirty-seventh month running, and at the sharpest rate since April 2012.
French Retail Sales Drop 10th Month Accompanied by Sharper Drop in Employment

The Markit France Retail PMI® shows Decline in French retail sales extends to tenth consecutive month.
Key points:

  • Sales continue to decline at solid pace
  • Sharper fall in employment
  • Accelerated drop in purchasing

Summary:

Latest data pointed to another drop in French retail sales at the start of 2013. Falling for a tenth consecutive month, sales contracted at a solid pace during January. Purchase price inflation remained strong, maintaining pressure on gross margins. Retailers cut their purchasing activity at a sharper rate, leading to a faster decline in inventories of goods for resale. Employment meanwhile fell at the sharpest rate in five months.

The index measuring sales versus one year ago also pointed to a sharp decrease in the latest survey period. The annual rate of contraction was the most marked since October 2012.

French retailers signalled that the average price of their purchases continued to increase during January, which they mainly attributed to suppliers passing on higher raw material costs. The rate of purchase price inflation was similar to the strong pace recorded in December.

The value of goods ordered by French retailers for resale fell again in January, extending the current period of contraction to 16 months. The latest decrease was the sharpest since October 2012.

Comment:

Jack Kennedy, Senior Economist at Markit and author of the France Retail PMI, said:
"The new year failed to bring cheer to the French retail sector, with the downturn in sales extending to a tenth consecutive month in January. The deterioration in general economic conditions continues to weigh heavily on the retail sector, with consumers reining in spending and stores reporting decreased levels of footfall. There also seems to be no end in sight to the long-running theme of squeezed margins, reflecting a combination of strongly rising wholesale prices and the need to discount goods in an intensely competitive environment."
Worst of Everything

  • Sales are down year-over-year across the board 
  • Sales are down month-over-month except for a small rise in Germany 
  • Price inflation is up across the board 
  • Margin squeeze across the board 
  • Employment is down 
  • France is sinking into the abyss 
  • Italy already in abyss

But hey ... the worst is behind (or so they say).

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