Central Perk: 7 feb. 2014

vineri, 7 februarie 2014

Mish's Global Economic Trend Analysis

Paper Tiger: German Constitutional Court Bows Before Draghi as Higher Judge and Jury
Ominous Looking Picture in Healthcare and Education Jobs
Boom Bust Video with Mish: Why Is the Sky Green?
Nonfarm Payrolls +113,000, Median Bloomberg Estimate 180,000; Huge March 2013 Employment Revision
Rise of Eurosceptics in Netherlands Prompts Serious Discussion of "Nexit"

Paper Tiger: German Constitutional Court Bows Before Draghi as Higher Judge and Jury

Posted: 07 Feb 2014 06:27 PM PST

In a 6-2 ruling, German Court Defers to Draghi as Euro's Judge and Jury.

Germany's supreme judges have decided to let Mario Draghi be the euro's monetary judge, at least for now.

While doubting the legality of the European Central Bank's 2012 bond-buying plan that defused the euro crisis, the top German court conceded yesterday that it is powerless to impose a veto. It bowed to a future judgment by the European Union's high court, leaving Draghi's pledge to do "whatever it takes" to save the euro unquestioned for a year or more.

"This German court, which everyone's so frightened of, turns out to be a bit of a toothless tiger," Charles Dumas, chairman of Lombard Street Research, a London-based consulting firm, said in a Bloomberg Television interview. "They're copping out."

By a vote of 6-2, the German judges sided with the Bundesbank -- which plays the role of an economic supreme court in the German imagination -- in arguing that Draghi's ECB overstepped its authority in rolling out the bond-buying initiative known as Outright Monetary Transactions, or OMT.

At the same time, acknowledging that Europe's largest economy is bound by EU laws, the court stopped short of overstepping its own authority and asked for a ruling from the European Court of Justice in Luxembourg, made up of judges from all 28 EU countries.

Paper Tiger

The German court found OMT to be unconstitutional but instead of doing anything about it, the court bowed down before the European Court of Justice in Luxembourg.

If this is the kind of toothless action the court is going to take, it may as well disband. Here is a fitting musical tribute.

Link if video does not play: Sue Thompson-Paper Tiger-1965

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

Ominous Looking Picture in Healthcare and Education Jobs

Posted: 07 Feb 2014 11:22 AM PST

Month in, month out, recession or not, there has been a strong uptick in the number of healthcare and education jobs. Until now. A few charts will show what I mean.

Education and Health Services Employment 1990-Present

It's hard to tell much from that picture other than things look very rosy. Let's have a look in percentage terms.

Education and Health Services Employment Percent Change

Now let's hone in on the past year.

Education and Health Services Employment 2013-Present

No Growth!

Education and Health Services Employment Monthly Change in Thousands

The chart appears as if there were several instances of negative numbers in 2003, but a download of the actual data shows the only other negative number in the entire series of data dating back to 1990 occurred in 2003-07-01.

I strongly suspect 2003 was affected by a number of teachers strikes. I could find examples in the Chicago area and in Washington State. I bet there were others. Here is a link regarding Washington: School Board Sues to End Teacher Strike.

Month-to-Month Table (in Thousands)

Date	Change From Previous Month
1990-01-01	#N/A
1990-02-01	36.3
1990-03-01	41.9
1990-04-01	32.6
1990-05-01	37.4
1990-06-01	40.1
1990-07-01	32.5
1990-08-01	34.3
1990-09-01	32.6
1990-10-01	31.7
1990-11-01	28.6
1990-12-01	35.0
1991-01-01	44.6
1991-02-01	30.6
1991-03-01	32.9
1991-04-01	34.0
1991-05-01	20.5
1991-06-01	45.6
1991-07-01	28.8
1991-08-01	39.7
1991-09-01	32.9
1991-10-01	29.8
1991-11-01	25.3
1991-12-01	37.0
1992-01-01	31.7
1992-02-01	21.2
1992-03-01	20.3
1992-04-01	22.4
1992-05-01	23.5
1992-06-01	25.2
1992-07-01	26.6
1992-08-01	16.7
1992-09-01	20.8
1992-10-01	30.4
1992-11-01	33.1
1992-12-01	23.7
1993-01-01	25.8
1993-02-01	26.4
1993-03-01	14.9
1993-04-01	30.2
1993-05-01	33.7
1993-06-01	23.9
1993-07-01	20.0
1993-08-01	23.2
1993-09-01	31.0
1993-10-01	22.5
1993-11-01	16.1
1993-12-01	16.1
1994-01-01	21.7
1994-02-01	15.7
1994-03-01	33.2
1994-04-01	27.8
1994-05-01	21.1
1994-06-01	21.4
1994-07-01	29.0
1994-08-01	25.6
1994-09-01	20.0
1994-10-01	20.2
1994-11-01	17.4
1994-12-01	26.4
1995-01-01	20.4
1995-02-01	29.6
1995-03-01	27.3
1995-04-01	17.9
1995-05-01	13.7
1995-06-01	29.7
1995-07-01	21.5
1995-08-01	28.4
1995-09-01	24.6
1995-10-01	20.1
1995-11-01	28.3
1995-12-01	26.5
1996-01-01	3.7
1996-02-01	39.4
1996-03-01	29.2
1996-04-01	21.5
1996-05-01	25.5
1996-06-01	23.9
1996-07-01	21.0
1996-08-01	18.7
1996-09-01	22.7
1996-10-01	24.1
1996-11-01	25.9
1996-12-01	18.3
1997-01-01	29.3
1997-02-01	17.8
1997-03-01	21.9
1997-04-01	29.1
1997-05-01	26.1
1997-06-01	7.5
1997-07-01	24.7
1997-08-01	12.6
1997-09-01	15.7
1997-10-01	20.8
1997-11-01	16.7
1997-12-01	26.4
1998-01-01	4.4
1998-02-01	10.4
1998-03-01	11.4
1998-04-01	12.6
1998-05-01	19.4
1998-06-01	12.4
1998-07-01	6.7
1998-08-01	12.2
1998-09-01	18.7
1998-10-01	15.1
1998-11-01	10.9
1998-12-01	10.2
1999-01-01	3.4
1999-02-01	24.4
1999-03-01	14.2
1999-04-01	19.7
1999-05-01	5.4
1999-06-01	9.5
1999-07-01	11.1
1999-08-01	13.0
1999-09-01	5.4
1999-10-01	12.9
1999-11-01	13.8
1999-12-01	11.7
2000-01-01	13.1
2000-02-01	12.0
2000-03-01	10.7
2000-04-01	8.9
2000-05-01	15.0
2000-06-01	19.5
2000-07-01	28.0
2000-08-01	22.1
2000-09-01	25.0
2000-10-01	17.7
2000-11-01	18.4
2000-12-01	30.3
2001-01-01	36.8
2001-02-01	33.7
2001-03-01	28.0
2001-04-01	27.4
2001-05-01	29.7
2001-06-01	41.3
2001-07-01	38.3
2001-08-01	32.5
2001-09-01	25.2
2001-10-01	28.5
2001-11-01	27.1
2001-12-01	33.1
2002-01-01	31.4
2002-02-01	30.1
2002-03-01	27.8
2002-04-01	24.5
2002-05-01	17.9
2002-06-01	21.2
2002-07-01	20.5
2002-08-01	35.3
2002-09-01	45.5
2002-10-01	28.8
2002-11-01	28.6
2002-12-01	13.2
2003-01-01	25.4
2003-02-01	22.9
2003-03-01	21.9
2003-04-01	30.5
2003-05-01	23.2
2003-06-01	19.9
2003-07-01	-9.0
2003-08-01	18.2
2003-09-01	13.7
2003-10-01	23.0
2003-11-01	18.7
2003-12-01	27.0
2004-01-01	17.5
2004-02-01	8.8
2004-03-01	36.6
2004-04-01	30.2
2004-05-01	25.2
2004-06-01	15.7
2004-07-01	15.6
2004-08-01	18.8
2004-09-01	15.7
2004-10-01	31.9
2004-11-01	17.3
2004-12-01	20.0
2005-01-01	8.5
2005-02-01	24.2
2005-03-01	15.7
2005-04-01	25.5
2005-05-01	29.4
2005-06-01	30.2
2005-07-01	35.5
2005-08-01	23.0
2005-09-01	21.9
2005-10-01	10.9
2005-11-01	26.1
2005-12-01	13.6
2006-01-01	32.2
2006-02-01	22.9
2006-03-01	30.3
2006-04-01	15.0
2006-05-01	23.0
2006-06-01	22.2
2006-07-01	29.2
2006-08-01	21.5
2006-09-01	33.0
2006-10-01	24.5
2006-11-01	27.2
2006-12-01	38.8
2007-01-01	22.9
2007-02-01	30.4
2007-03-01	26.1
2007-04-01	36.8
2007-05-01	26.0
2007-06-01	38.1
2007-07-01	26.8
2007-08-01	34.8
2007-09-01	32.9
2007-10-01	28.7
2007-11-01	17.0
2007-12-01	27.2
2008-01-01	35.1
2008-02-01	28.0
2008-03-01	30.6
2008-04-01	35.6
2008-05-01	26.2
2008-06-01	24.9
2008-07-01	31.1
2008-08-01	22.2
2008-09-01	13.4
2008-10-01	19.2
2008-11-01	27.8
2008-12-01	23.3
2009-01-01	13.6
2009-02-01	24.3
2009-03-01	7.1
2009-04-01	10.6
2009-05-01	32.3
2009-06-01	25.8
2009-07-01	17.6
2009-08-01	20.1
2009-09-01	21.4
2009-10-01	25.3
2009-11-01	19.5
2009-12-01	16.6
2010-01-01	15.8
2010-02-01	16.0
2010-03-01	32.8
2010-04-01	11.9
2010-05-01	15.6
2010-06-01	17.4
2010-07-01	18.8
2010-08-01	24.1
2010-09-01	8.5
2010-10-01	27.1
2010-11-01	26.3
2010-12-01	26.8
2011-01-01	2.8
2011-02-01	17.0
2011-03-01	28.7
2011-04-01	30.0
2011-05-01	13.8
2011-06-01	29.0
2011-07-01	25.5
2011-08-01	27.4
2011-09-01	31.1
2011-10-01	16.6
2011-11-01	6.5
2011-12-01	8.4
2012-01-01	28.6
2012-02-01	32.0
2012-03-01	24.0
2012-04-01	12.9
2012-05-01	31.2
2012-06-01	9.1
2012-07-01	14.4
2012-08-01	10.7
2012-09-01	33.8
2012-10-01	26.4
2012-11-01	17.6
2012-12-01	27.5
2013-01-01	5.3
2013-02-01	23.1
2013-03-01	11.1
2013-04-01	29.7
2013-05-01	12.9
2013-06-01	17.1
2013-07-01	4.1
2013-08-01	43.2
2013-09-01	2.7
2013-10-01	22.8
2013-11-01	29.6
2013-12-01	2.4
2014-01-01	-0.4

Back-to-back poor months, the last one negative, do not make a trend. Looking ahead, if this is a start of a new trend, it rates to be very ominous for the employment picture.

For more on the latest jobs data, please see Nonfarm Payrolls +113,000, Median Bloomberg Estimate 180,000; Huge March 2013 Employment Revision

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

Boom Bust Video with Mish: Why Is the Sky Green?

Posted: 07 Feb 2014 07:59 AM PST

This week I had the pleasure of being back on RT, this time with Erin Ade.

Link if video does not play: Mike Shedlock and Jim Bruce on US, Fed & minimum wage.

The title of this post "Why is the Sky Green?" comes from a comment in the video that I made regarding my February 3, article Why are Taxpayers Subsidizing Big Mac Buyers?

My favorite topic we discussed was actually deflation and economic prospects in Europe. The producers decided to split things in half, and the second part will come later. I will post it when it arrives

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

Nonfarm Payrolls +113,000, Median Bloomberg Estimate 180,000; Huge March 2013 Employment Revision

Posted: 07 Feb 2014 07:07 AM PST

Initial Reaction

Big Miss: Nonfarm Payrolls rose by 113,000. The Median Bloomberg estimate was +180,000. December was revised up a tiny bit from 74,000 to 75,000. Beneath the surface, things actually look better for a change. The household survey shows a gain of employment of 638,000. That said, revisions were in play.

Huge March 2013 Revision

Nonfarm employment for March 2013 was revised up by 369,000 (347,000 on a not seasonally adjusted basis). The benchmark revision incorporates a large non-economic change that resulted from a reclassification of 466,000 jobs from private households (out of scope by CES definition) to services for the elderly and disabled (in scope for CES).

Blaming the Weather

Once again economists were caught totally unaware by bad weather.

MarketWatch reports "The latest report may have been influenced by other unusual factors that render it less reliable as a bellwether of labor-market trends: extremely cold and snowy weather and the government's annual "benchmark" update on how many jobs were created in the past year. Economists polled by MarketWatch had forecast a gain of 190,000 jobs."

Apparently economists did not realize it has been cold and snowy. Alternatively, they predicted 180,000 to 190,000 jobs even though they knew it was cold and snowy. Which is it?

December BLS Jobs Statistics at a Glance

Nonfarm Payroll: +113,000 - Establishment Survey
Employment: +638,000 - Household Survey
Unemployment: -115,000 - Household Survey
Involuntary Part-Time Work: -514,000 - Household Survey
Voluntary Part-Time Work: +434,000 - Household Survey
Baseline Unemployment Rate: -0.1 to 6.6% - Household Survey
U-6 unemployment: -0.4 to 12.7% - Household Survey
Civilian Non-institutional Population: +170,000
Civilian Labor Force: +523,000 - Household Survey
Not in Labor Force: -355,000 - Household Survey
Participation Rate: -0.2 at 62.8 - Household Survey

Additional Notes About the Unemployment Rate

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.
In the past year the population rose by 2,252,000.
In the last year the labor force fell by 239,000.
In the last year, those "not" in the labor force rose by 2,2533,000
Over the course of the last year, the number of people employed rose by 1,840,000 (an average of 153,33 a month)

The population rose by over 2 million, but the labor force fell by over a quarter-million. People dropping out of the work force accounts for much of the declining unemployment rate.

January 2014 Employment Report

Please consider the Bureau of Labor Statistics (BLS) January 2014 Employment Report.

Total nonfarm payroll employment rose by 113,000 in January, and the unemployment rate was little changed at 6.6 percent, the U.S. Bureau of Labor Statistics reported today. Employment grew in construction, manufacturing, wholesale trade, and mining.

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

Unemployment Rate - Seasonally Adjusted

Employment History Since January 2003

click on chart for sharper image

Change from Previous Month by Job Type

Hours and Wages

Average weekly hours of all private employees was flat at 34.4 hours. Average weekly hours of all private service-providing employees was flat at 33.2 hours.

Average hourly earnings of production and non-supervisory private workers rose $0.06 to $20.39. Average hourly earnings of private service-providing employees rose $0.06 to $20.17.

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?

Birth Death Model

Starting January, I dropped the Birth/Death Model charts from this report. For those who follow the numbers, I keep this caution: Do not subtract the reported Birth-Death number from the reported headline number. That approach is statistically invalid. Should anything interesting arise in the Birth/Death numbers, I will add the charts back.

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 6.6%. 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 unemployment rate is. That number is in the last row labeled U-6.

U-6 is much higher at 12.7%. Both numbers would be way higher still, were it not for millions dropping out of the labor force over the past few years.

Labor Force Factors

Discouraged workers stop looking for jobs
People retire because they cannot find jobs
People go back to school hoping it will improve their chances of getting a job
People stay in school longer because they cannot find a job
Disability and disability fraud

Were it not for people dropping out of the labor force, the unemployment rate would be well over 9%.

Synopsis

On the surface this was a second bad jobs report. Beneath the surface, things looked much better. However, the improvement in household employment dates back to a massive upward revision from March 2013 of 369,000. That revision is not indicative of the current state of hiring patterns.

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

Rise of Eurosceptics in Netherlands Prompts Serious Discussion of "Nexit"

Posted: 06 Feb 2014 11:47 PM PST

Eurozone exit talk first started with "Grexit" (Greece exit). It progressed to "Spexit" (Spain exit), and now talk centers on "Nexit" (Netherlands exit).

Before anyone else claims the names, let me propose "Frexit" and "Fexit" (France exit) as well as "Sexit" a sexy sounding alternative for Spain Exit.

So far the "exit" scorecard remains on zero, but eventual exits are likely. No one can be assured of the timing or catalyst, but eurosceptcism is on the rise in a huge way.

Nexit?

In the Netherlands, opposition leader Geert Wilders outlines case for a Dutch 'Nexit' from the EU.

Geert Wilders, leader of the far-right Freedom Party (PVV) that is leading in Dutch polls for May's European parliament elections, presented a study on Thursday that claims the Netherlands would be better off if it left the EU and he urged voters to support his call for "Nexit".

The study, by the consultancy Capital Economics, claims the Dutch economy would quickly emerge from its sluggishness to brisk growth, generating billions of euros – or new Dutch guilders – in fresh revenues for debt-laden households.

Mr Wilders is one of a handful of populist leaders in the EU – including Marine Le Pen in France; Nigel Farage in Britain and Alexis Tsipras in Greece – whose sharp anti-Brussels rhetoric has helped push them into either first or second place in public opinion polls ahead of May's Europe-wide vote.

The Netherlands is one of the founding members of the EU, and has long been seen as a core supporter of a more integrated Europe. Yet public opinion polls reveal growing support across the country for a renegotiation of powers with Brussels over a number of policy areas, including access to domestic welfare for other EU citizens.

Mark Rutte, Dutch prime minister, in June presented a list of 54 competencies that should remain with national governments rather than be given to the EU, a plan many in Brussels have viewed as the Liberal premier's attempt to fend off the challenge from Mr Wilders.

"Nexit means that we no longer have to pay billions to Brussels and weak southern European countries," added Mr Wilders. "We can save billions by liberating ourselves from EU regulations. We can end the mass immigration and stop paying welfare checks to, for instance, Romanians and Bulgarians."

Mark Pragnell, one of the authors of Capital Economics' report, said the Netherlands would be significantly richer if it left the EU and the single currency, despite a short period of volatility.

Capital Economics, a London-based economic research firm, has become a leading voice for eurozone break-up, last year winning a £250,000 prize from a British think-tank for its proposal on how to end the single currency.

What's the Point?

Financial Times columnist Gideon Rachman asks What's the point of calling for a Nexit?

Wilders is after the protest vote, and he will get it – just like Marine Le Pen's National Front and the UK Independence Party of Nigel Farage. All three movements have an excellent chance of topping the polls or at least upsetting the political apple cart in their respective countries.

Here lies the significance of Wilders's call for "Nexit" – or Dutch exit from the EU. As an economic argument, it does not stand up at all: the Netherlands is so deeply integrated into the eurozone and the EU single market that Nexit makes no more sense than "Brexit" for the UK or "Grexit" for Greece.

Bias, Irony, and One Size Fits All Silliness

One can stop reading right there understanding full well the extreme bias in what Rachman wrote. Given that Rachman is a columnist and not a news reporter, bias is to be expected.

But please note the extreme irony in his statement: Nexit makes no more sense than "Brexit" for the UK.

The fact of the matter is that "Brexit" happens to make perfect sense for the UK.

There is not going to be a two-speed EU with some countries in the Eurozone and others not. One is going to be either in or out. Sitting on the fence forever won't happen. Neither French president Francois Hollande nor the UK liberals will allow that.

The moment the UK fully commits to the eurozone, all kinds of financial stupidities are bound to happen, including financial transaction taxes that are bound to cripple London. Moreover, the UK would be subject to the "one size fits Germany" interest rate policy of the EU.

A valid (albeit clearly out of context) interpretation of Rachman's statement is as follows:"Nexit makes sense, because Brexit makes perfect sense".

Addendum:

It's important not to leave the Fed out of these exit scenario discussions. I revise my copyright for "Fexit" to mean Fed Exit, while retaining use of "Frexit" for France. Of course we all know the Fed has no exit strategy other than to hold all the assets it accumulated to maturity.

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