Mish's Global Economic Trend Analysis |
- Financial Engineering Chart of the Day: Fed Balance Sheet vs. S&P 500
- French Taxi Drivers Burn Tires Block Airports in Mass 24-Hour Strike; 20% of French Flights Cancelled
- How Healthy Is the Labor Market, Really?
- Retail Sales vs. Consumer Confidence; Unwarranted Fed Faith in Wrong Surveys
Financial Engineering Chart of the Day: Fed Balance Sheet vs. S&P 500 Posted: 26 Jan 2016 11:25 PM PST |
Posted: 26 Jan 2016 06:24 PM PST Unfair Competition The nation pastime in France is striking against "unfair competition". To French socialists, the term "unfair competition" means any competition. On Tuesday French unions decided once again to do something about the unfairness: make everyone miserable as best they can. Flights Cancelled Bloomberg reports Taxi Drivers Take to the Streets in 24-Hour French Strikes. France endured mass strikes on Tuesday as taxi drivers, air traffic controllers, civil servants and teachers demanded more purchasing power, job creation and an end to disruptive competition to traditional industries.Economic Emergency With today's strike, the economic emergency in France just got bigger. On January 18, I noted Hollande Declares "Economic Emergency" to Save Jobs - His. Emergency Effort to Save Hollande's JobHollande's job creation proposal centered around training schemes and apprenticeships. Few if any jobs would be created with such schemes. However, unemployment would drop because people in those programs are not considered unemployed. How to Create Jobs The primary reason French companies will not hire workers is that it's so damn hard to get rid of them later if they do. Add to that mountains of regulations including inane laws that tell businesses when they can or cannot open the doors. If Hollande wants to create jobs, this is what he needs to do.
He won't do that because it would cost Hollande his job. And saving one's ass is always the top priority, so much so, it's now a national emergency. Mike "Mish" Shedlock |
How Healthy Is the Labor Market, Really? Posted: 26 Jan 2016 05:08 PM PST What's the "official" unemployment rate vs. economic reality? In my analysis of the monthly jobs reports on the first Friday of the month, I make a statement similar to this: "The official unemployment rate is 5.0%. 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 9.9%. Some of those dropping out of the labor force retired because they wanted to retire. The rest is disability fraud, forced retirement, discouraged workers, and kids moving back home because they cannot find a job." There is no way to track disability fraud for sure, But I suspect it's 75% of those on disability. Hornstein-Kudlyak-Lange Non-Employment Index (NEI) While not addressing disability fraud or forced retirement issues, Richmond Fed economists Andreas Hornstein and Marianna Kudlyak, and McGill University economist Fabian Lange came up with the Non-Employment Index (NEI) as a better way to track the true health of the labor market. The NEI differs from the standard unemployment rate as a measure of resource utilization in two important ways:NEI Chart The above chart is from the Fred Blog How healthy is the labor market, really? The article gives you the means to recreate the chart. It does not allow you to see how the authors determined the weights. My suspicion is that their index undercounts massive disability fraud (those people who would want a job had they not been able to bilk the system). Then again, those people are not likely to be looking for a job, until the fraud stops. Fraud and similar issues aside, this chart is a step in the right direction in terms of understanding how over-hyped the decline in the unemployment rate has been. For those interested in how disability fraud has artificially lowered the labor force I can provide numerous examples. Disability Fraud I have written about Disability Fraud at least a dozen times. 60 Minutes: Mainstream Media Finally Catches on to Disability Fraud: 60 Minutes Reports on "Disability USA" Steve Kroft on 60 Minutes reports on the alarming state of the federal disability program, which has exploded in size in the last six years and could become the first federal benefits program to run out of money.NPR: Unwilling to Work; 25% in Hale County AL Collect Disability, 14 Million Nationwide How Easy is it to Get Disability?States Promote Fraud: States Have an Incentive to Promote (Not Stop) Disability Fraud; So How Much Fraud Is There? This all goes back to 1996 when president Bill Clinton promised to "end welfare as we know it". He did indeed do just that, and fraud is the result.Results of Clinton Ending Welfare "As We Know It"
Dr. Timberlake asks a simple question to all his patients. "What grade did you finish?" If you claim "back pain" and do not have a degree, Timberlake believes you are disabled. Timberlake gets paid for his "analysis". States are willing to go along thanks to Bill Clinton who "ended welfare as we know it", creating an even worse disability fraud scheme in the wake. There has been no president since, Republican or Democrat, willing to stop fraud at the federal level. And clearly Obama is doing his best to expand fraud. Disability Deal Explained If Democrats give enough free benefits to enough people, no one can ever vote them out of office. Mike "Mish" Shedlock |
Retail Sales vs. Consumer Confidence; Unwarranted Fed Faith in Wrong Surveys Posted: 26 Jan 2016 11:32 AM PST Conference Board Consumer Survey The consumer conference board does a paper survey every month on consumer confidence. The board's technical notes say (emphasis mine) "The targeted responding sample size - approximately 3,000 completed questionnaires - has remained essentially unchanged throughout the history of the CCI." I called up the board with a simple question: How many surveys do you send out to get 3,000 completed questionnaires? The very snooty person who answered the phone told me to look in the technical notes. However, the information isn't there or I cannot find it. I had already read the technical notes before I called. Besides, my question was quite simple. Retail Sales vs. Consumer Confidence The Fed places a lot of faith in this survey. Yellen cites strong consumer confidence frequently, as did Bernanke before her. The numbers are out today. Consumer confidence is up. In general, confidence been high and rising for years. Happy consumers are supposed to be shopping like mad, especially given the collapse in the price of gasoline. Let's investigate those theories from today's Econoday Report. Alleged ties of this survey to consumer spending appear to be a complete bunch of hooey. I keep wondering if paper surveys are part of the problem. Are the people who respond to random paper surveys more likely to be happier than those who don't? New York Fed Survey The New York Fed also does a survey. Every month, the New York Fed interviews a rolling group of 1200 people to produce a detailed Survey of Consumer Expectations. Here are the results of the Fed's latest survey. One Year Look Ahead Household Spending Projections click on chart for sharper image Given the Fed places so much faith in various consumer confidence numbers, I have a simple question: Why don't they believe their own survey? Mike "Mish" Shedlock |
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