Mish's Global Economic Trend Analysis

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• Goodbye JS-Kit, Hello Echo: New Comment System on This Blog
• Obama's Definition of Halfway: 18%; What Would a Government Shutdown Mean?
• Big-Box Retailers Reconsider Size; Saturation, Online Sales Affect Store Expansion Plans and Hiring Needs

Goodbye JS-Kit, Hello Echo: New Comment System on This Blog Posted: 05 Mar 2011 08:53 PM PST At long last I am upgrading the comment system on my blog. I had been using JS-Kit for years in what is best described as a love-hate relationship. This change will take place shortly. The JS-Kit release I have been on is a couple years old. Time and technology have moved on. My choices were as follows: Write my own software Wither and Die Move to Disqus Migrate to Echo Number 1 is out. I do not have the time or interest in writing my own. I need a commercial product. Wither and die hardly seems like a good option. The choice came down to Disqus vs. Echo. If you search the internet you can find whatever you want to hear, good or bad, with some users frustrated with one or both of the products. However, Echo has a couple of significant advantages. First, Echo is a migration. JS-Kit developed Echo. Disqus, would be starting all over. Second, Echo has attracted quite a following including Sports Illustrated, Newsweek, Slate, the Washington Post, Time, and numerous other big-name companies. Here is a snapshot of some of the companies using Echo. Moreover, Echo has an open architecture. Enhancements and solutions can be developed by end users. That may take a while but it is an enormous advantage. Third, I tested and like the new interface. Echo supports sign-ins from the following. You can also sign-in with your blogger ID (on page 2). Those sign-ins will work regardless of what computer you are on. JS-Kit had issues moving from computer to another. What's New Echo will not pop up in a new window as before. Instead, when clicking on "comments" the window will expand inline. This is typical of most other blogger commenting systems but is new to my blog. It takes no more time to do this than pop up a new window. For new users, login or signup is the same. Just click on one of the options above to sign in. As before, the first comment from everyone requires moderation. In this case, everyone. I need some leeway in the time it takes to approve new users. However, I have better tools under Echo to see what comments await moderation. Hopefully the initial response will be faster than before. The difference is we are starting with a blank slate. Everyone will have to be approved. Here is the login window everyone will see. Once you are logged in, simply type your comments in the above box. Threaded vs. Unthreaded The debate still rages. Some people like threaded mode. Others don't. Threaded mode works beautifully when there are under 50 comments. When comments get beyond a few pages, it can become unwieldy. However, some people always like it. Others want to view comments sequentially by time stamp. It makes it easier to see what is new. Some like new comments displayed first other pure sequential. There is no right or wrong actually. There are only preferences. Unfortunately, and as is with most other commenting systems, those preferences are not usable selectable. For now, I have to make a selection. One of the moderators on my board has a strong preference for threaded mode. Threaded mode it is. Let's try that for a while and see how it works out. In the meantime, I ask Echo for a user selectable set of controls so everyone can display comments as they see fit. Migration of Comments The last couple weeks of comments will be available shortly. A conversion process is already underway for the rest of them. Perhaps I only go back a year or so. Beyond that, I don't see that much use. Those details will be up to the Echo team. Issues I am quite sure issues will arise just as they do with any new system. However, Echo is a big step in the right direction from JS-Kit. It has numerous capabilities I did not turn on initially including incorporating comments from Facebook, Twitter, and other social network sites. Thanks to Those Who Helped With that I want to thank Khris Loux, Andrew Kushnir, Chris Saad, and the rest of the Echo staff for their assistance in this conversion. Finally, one of the difficulties in this process is that nothing is easy in blogger templates. Here's to "MDH" who helped me in this effort. This migration would not have been possible without "MDH". 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.

Obama's Definition of Halfway: 18%; What Would a Government Shutdown Mean? Posted: 05 Mar 2011 03:15 PM PST President Obama claims he is meeting Republicans "half-way" on Republican plans to reduce the deficit by $61 billion. "Half-way" is $11 billion ($10.5 billion to be more precise). My math strongly suggests the president needs math lessons. Please consider Obama offers deeper cuts, appeals for budget deal President Barack Obama says he's willing to make deeper spending cuts if Congress can compromise on a budget deal that would end the threat of a government shutdown. Obama's appeal for common ground came Saturday in his weekly radio and Internet address, but lacked specifics on how to bridge the $50 billion gulf that divides the White House and Democratic budget proposal from the deeper reductions offered by Republicans. The government is running on a temporary spending bill that expires March 18, so the parties have until then to come up with a plan to pay for the remainder of the budget year through September. "We need to come together, Democrats and Republicans, around a long-term budget that sacrifices wasteful spending without sacrificing the job-creating investments in our future," Obama said. "My administration has already put forward specific cuts that meet congressional Republicans halfway. And I'm prepared to do more," said Obama. But the claim that Democrats are meeting Republicans halfway only stands up under the Democratic explanation of the intricate numbers game being played on Capitol Hill. Obama has threatened to veto that plan, and a Democratic offer of $6.5 billion in cuts -- on top of $4 billion already signed into law -- restores money the House GOP cuts from education, health and other programs. "You may have heard President Obama say that we need to make sure 'we're living within our means,'" said freshman Rep. Diane Black, R-Tenn. "He's right about that. Unfortunately, his budget doesn't match his words. Tortured Math The way that article is worded, I am not even positive the Democrats have offered up even as as the $11 billion I gave them credit for. I am struggling with the fact that the Democratic proposal "restores money the House GOP cuts from education, health and other programs." What kind of tortured logic allows you to claim credit for cuts if you restore money elsewhere? Let's dive deeper into one of Obama's statements: "We need to come together, Democrats and Republicans, around a long-term budget that sacrifices wasteful spending without sacrificing the job-creating investments in our future" Since when is getting rid of wasteful spending "a sacrifice"? What Would a Government Shutdown Do? For all this concern about having a budget in place by March 18 (revised later from March 5 by some sort of emergency funding provision), does it really matter? CNN Money discusses the setup in Shutdown: What you need to know Which services would stop? During the last major shutdown, the government closed 368 National Park Service sites, along with national museums and monuments. In addition, 200,000 passport applications went unprocessed, and toxic waste cleanup work at 609 sites stopped. The National Institutes of Health stopped accepting new clinical research patients, and services for veterans, including health care, were curtailed. Work on bankruptcy cases could slow. In the last shutdown, more than 3,500 cases were delayed. Which services would the government keep running? Agencies are allowed to perform any operations necessary for the safety of human life and protection of property. The government would keep essential services -- like air traffic control and the national security apparatus -- in full operating mode. Federal workers who provide medical care on the job would be kept on, as well as employees who handle hazardous waste, inspect food, patrol the borders, protect federal property, guard inmates or work in power distribution. Workers who protect essential elements of the money and banking system would also report to work. The Postal Service, which is self-funded, will continue to operate. Preposterous Hype For all the hype over a shutdown, I fail to see how it would matter much. Republicans should stick to their guns. I assure you the world will not end. The world did not end in the Clinton administration during five days in November 1995 and another 21 days that ended January 1996. Indeed the best thing might be for everyone to see how little a "shutdown" would matter. 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.

Big-Box Retailers Reconsider Size; Saturation, Online Sales Affect Store Expansion Plans and Hiring Needs Posted: 04 Mar 2011 11:45 PM PST Online shopping not only has state departments of revenue pulling their hair out over lost sales tax revenue, it also has retailers like Best Buy, Sears, KMart, and Home Depot questioning, the merits of the big-box mentality itself. The Wall Street Journal reports As Big Boxes Shrink, They Also Rethink Major big-box retailers have been shifting to smaller stores—and scratching around for more profitable ways to fill under-used spaces as they go about reinventing themselves. Sears Holdings Corp. is letting prospective tenants browse an online list of Kmart and Sears stores with space to rent. Sears reached a deal to lease 34,000 square feet of store space in Greensboro, N.C., to Whole Foods Market Inc. for a grocery store set to open in 2012. Home Depot Inc. is selling off portions of its parking lots to fast-food chains and auto repair shops. Gap Inc. is reverting to a Russian nesting-doll strategy: after years of expanding by adding standalone stores such as GapKids and Gap Body, it is shrinking them and stacking them back inside its namesake Gap stores. Best Buy Co. last week became the latest retail chain to go smaller, announcing last week that it was slowing growth of new big-box stores this year in favor of adding 150 Best Buy Mobile locations, focused on smartphones. Wal-Mart Stores Inc. also said last week that it was accelerating the rollout of smaller locations—40,000 square feet or less—after it reported a seventh straight quarterly decline in sales at U.S. stores open at least a year. The retail giant, which rose to dominance with 185,000-foot Supercenters, plans to open its first Walmart Express store in the second quarter of this year, though it won't say where. The miniature Staples carries just 1,200 of the retailer's most high-volume sales items, compared to 8,000 items in traditional stores. Office Depot Inc., meanwhile, quietly began opening new shops the size of convenience stores in December. The new 5,000-square-foot Office Depot stores are barely a fifth the size of the company's traditional locations, yet still manage to contain the office supplies and copy and mail services that account for 93% of the bigger stores' sales, said Kevin Peters, Office Depot's North American retail president. "Our box was just too big and didn't work for our customers," Mr. Peters said Wednesday. "We are reinventing Office Depot as a convenience retailer. Think CVS and Walgreens." Key Word is Saturation The "bigger is better model" that collapsed with residential real estate, has expanded to its big brother, commercial real estate. The problem is not the size of the stores, but the sheer number of them. Areas that got by with a single Home Depot, now have 2 Home Depots, a Lowes, and a Menards. If they all shrink, does it do any of them any good? Store Advantages Those who need something and want it now Those who want to make comparisons and see a product in person Online Shopping Advantages It's invariably cheaper online There is frequently no sales tax You do not have to waste time and money traveling Online Sales Have States Furious Over Lost Sales Taxes Cash strapped states are furious with Amazon.Com over sales tax collections. Several states passed laws or have sent Amazon bills. Amazon's response in every case so far is to leave the state. For details, please see Amazon May Cut Ties to California Over Tax Issues; Texas Distribution Site Closed Over Similar Issues Last Month; Litigation Issues Move to Forefront Last week I went to Best Buy to buy a particular cable I needed. They did not have it. I ended up ordering it from Amazon. If stores shrink, and they do not have what customers want, customers will just buy more stuff online. Big-Box Decisions Affect Store Hiring Plans I am wondering, do we really need "Walmart Express" at all? At best it is a sign of total saturation of big boxes and a turf battle for smaller cities and neighborhoods. As such, think about store hiring plans now vs. store hiring plans in the midst of the big-box commercial real estate boom. With the new "smaller is better" model, another commercial real estate boom remotely close to the build-out that occurred in 2005-2007 is not in the cards. Moreover, residential housing is still dead. Together, the picture just does not add up to the 200,000+ jobs a month many economists and market cheerleaders expect. 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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Your Weekly Address: Cutting Waste, Investing in the Future

Your Daily Snapshot for Saturday, March 5,  2011   Your Weekly Address: Cutting Waste, Investing in the Future The President calls for Democrats and Republicans to come together on a budget that cuts wasteful spending without sacrificing job-creating investments in education, innovation, and infrastructure. Watch the video. Weekly Wrap Up On Education: This month, the President will be focused on his plan to improve American education through investments that focus on responsibility, reform, and results: President Obama travels to Miami to visit a high school that has been an example of how federal support has turned around struggling schools. John Legend encourages students to apply for the Race to the Top Commencement Challenge. One high school will be selected to have President Obama speak at its commencement this spring. The deadline to apply is March 11. Oh, and Nick Jonas did too. The First Lady and Secretary of Education Arne Duncan read to children at the Library of Congress as part of "Read Across America Day," and in celebration of Dr. Seuss' 107th birthday. The Motown Sound: Continuing a favorite White House tradition, the President and First Lady welcome renowned musical artists to the White House to celebrate music that’s at the heart of the American story.  Giving States the Power to Innovate: In his address to the meeting of the National Governors' Association, President Obama called for giving states the flexibility to find the best ways to meet standards of care outlined in the Affordable Care Act. Secretary of Health and Human Services Kathleen Sebelius explained what that flexibility means for states across the country. West Wing Week Video: "Green Eggs and Governors" Focusing on Military Families: The First Lady and Dr. Biden speak to the National Governors' Association, promoting their continued efforts to serve our Nation's military families. More Signs of Economic Growth: Austan Goolsbee, chairman of the Council of Economic Advisers, talks about the positive news from the February jobs report. Labor Secretary Hilda Solis shares photos from her trip to auto manufacturers in the Midwest, and Secretary of Transportation Ray LaHood posts a video from his trip to a clean-energy manufacturing plant in South Carolina. Violence in Libya: President Obama discusses ongoing turmoil in Libya with UN Secretary General Ban Ki-Moon, and also addresses it during his joint press conference with Mexican President Felipe Calderon. Innovation at ARPA-E: The Department of Energy hosts the ARPA-E Energy Innovation Summit, where scientists and business leaders came together to share ideas for developing the next generation of American energy technology. Black History Month 2011: As February came to a close, WhiteHouse.gov wrapped up its Celebrating Black History Month series, and looked back on the events at the White House through the month. Developing Rural Broadband: The USDA is using Recovery Act funds and working with Native Americans to bring high-speed broadband to rural America. Remembering the Last Doughboy: Veterans Affairs commemorates the life of Frank Buckles, the last suriviving American World War One veteran, who died this week at 110. Keeping Homes Affordable: The Department of the Treasury posts information about how terminating foreclosure prevention aid would seriously damage the still-fragile housing market. Get Updates Sign Up for the Daily Snapshot  Stay Connected     Facebook Twitter YouTube Flickr iTunes         This email was sent to e0nstar1.blog@gmail.com Manage Subscriptions for e0nstar1.blog@gmail.com Sign Up for Updates from the White House Unsubscribe e0nstar1.blog@gmail.com | Privacy Policy Please do not reply to this email. Contact the White House The White House • 1600 Pennsylvania Ave NW • Washington, DC 20500 • 202-456-1111

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Keyword Density – Finally Useful for SEOs and Penguins Posted: 04 Mar 2011 06:29 AM PST As it's a Friday afternoon and we're all winding down for the weekend, I thought it would be an appropriate time to reveal a lighthearted tale involving keyword density, penguins, and Sambuca that I recently admitted to the SEOptimise team – something terribly shameful… A story of why keyword density is in fact not dead. A few friends and I were playing the infamous 'Happy Feet drinking game' whereby each player is assigned a frequently mentioned word that whenever they hear whilst watching the film Happy Feet has to drink a shot. I was assigned the word 'fish' (which I wrongly assumed wouldn't be mentioned very much). It was at that point that my geek instincts kicked in and I went to Google to download a script of the movie.  I subsequently inputted it into a keyword density checker to identify the most frequently used keywords in the film so that I could strategically assign the most frequently mentioned words to the friends who I felt deserved the most Sambuca! So there you are, whoever said keyword density is useless? It's only useless when optimising websites :-)   How to kick start your Friday with some Keyword Density Drinking Games: 1.     Pick a film with characters renowned for frequently repeating specific words. My recommendations:  Lord of the Rings, Star Wars, Gordon Ramsay's 'The F Word'. 2.     Download the subtitles for the film & input the text into a KW density checker. 3.     Assign the most frequently mentioned words to those who deserve the most revenge. 4.     Play! Enjoy. © SEOptimise – Download our free business guide to blogging whitepaper and sign-up for the SEOptimise monthly newsletter. Keyword Density – Finally Useful for SEOs and Penguins Related posts: Keyword Temperature and Other Exotic Metrics SEO Tutorial: Assessing a Keyword Domain for Purchase – Does Buying Make Sense or Not? 40 Title Tag SEO for Google Ranking Factors & Optimization Techniques + Resources

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Mish's Global Economic Trend Analysis

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• Ben Bernanke is a Fiscal Moron
• Record Gasoline Prices in Europe, Over $8 in UK, Italy, Germany; California Faces $4; Reflections on "Inflation"
• BLS Jobs Report: Nonfarm Payroll +192,000, Unemployment Rate 8.9%; Reflections on the Jobs Report

Ben Bernanke is a Fiscal Moron Posted: 04 Mar 2011 04:48 PM PST Fed chairman Ben Bernanke likes to bitch about Congressional interference in Fed monetary policy yet Bernanke repeatedly tells Congress what to do regarding fiscal policy. I think neither should tell the other what to do because the Fed should not exist at all. With that remark out of the way, please consider Republicans, Fed Clash on Job Impact of Spending Cuts "We need to address the deficit; that's very important," Bernanke told the House Financial Services Committee in a March 2 hearing. "But I think it would be most effective if we did that over a timeframe of 5 or 10 years and not try to do everything immediately." The Fed chief said the House Republican plan to slash $61 billion from 2011 government spending could also subtract "a couple of tenths" of a percentage point from U.S. economic growth over several years. An independent analysis released by Goldman Sachs last month found that the Republican proposal would reduce economic growth by 1.5 to 2 percentage points during the second and third quarters of this year. Bernanke attributed the lower Federal Reserve estimates to some "differences in assumptions." "We've tried to do a realistic analysis of what those cuts would do over a couple of years," he said. Boehner called Zandi the "pet economist" of House Democratic Leader Nancy Pelosi of California, citing his support for an economic-stimulus bill that the White House once estimated would keep unemployment below 8 percent. Boehner cited a statement signed by 150 economists sent to President Barack Obama calling for spending cuts. Stanford University economist John Taylor, a Treasury undersecretary under former President George W. Bush, says both Zandi and Goldman Sachs relied on a flawed methodology. He wrote that he found "no convincing evidence" that the budget-cutting bill would reduce employment or economic growth. We have a freaking $1.4 trillion deficit and Bernanke is bitching about a Congress addressing mere $61 billion of it. Bernanke warns against attempts "to do everything immediately" hoping to spread that $61 billion out over a decade. Bear in mind that $61 billion is a mere 4.36% of what needs to happen. Is Ben Bernanke a fiscal moron or what? As an added bonus for those who may have missed it, please consider Hello Ben Bernanke, Meet "Stephanie" 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.

Record Gasoline Prices in Europe, Over $8 in UK, Italy, Germany; California Faces $4; Reflections on "Inflation" Posted: 04 Mar 2011 11:58 AM PST Bloomberg reports Record Gasoline Grips Europe, California Faces $4 a Gallon. Gasoline prices are setting records across Europe and exceeding $4 a gallon in California as the rise in crude oil caused by the conflict in Libya punishes companies and consumers. Households are cutting back on travel, cinema visits and groceries in the U.K., where prices jumped to 130.68 pence a liter ($8.06 a gallon) yesterday, according to research from the Automobile Association, Britain's largest motoring organization. Prices set records in the Netherlands and Italy today. The current average U.S. gasoline price is near a two-year high at $3.81 a gallon, according to the AAA website. The impact on consumer prices may push European Central Bank President Jean-Claude Trichet to raise interest rates as soon as next month to discourage higher wages and head off the threat of an inflationary spiral. "Rising fuel costs are negative because they push inflation up and slow the economy down," said Philip Shaw, chief economist at Investec Securities in London. "It is essentially energy costs that have resulted in ECB putting its finger on the interest rate trigger." In Italy, gasoline prices reached 1.544 euros a liter and diesel climbed to 1.438 euros a liter ($8.17 a gallon), according to a chart published by web energy daily Quotidiano Energia. Gasoline prices in the Netherlands reached a record 1.697 euro a liter from 1.692 euro in June 2008, according to Paul van Selms, head of UnitedConsumers, a lobby group for consumers in the Netherlands. The average price for super-grade gasoline in Germany, Europe's largest economy, was 1.55 euros per liter today, close to the 1.58 euro record from 2008. Reflections on Inflation I do not know if Trichet hikes short-term interest rates soon or not. It is conceivable it is the correct move. However, the idea that something needs to be done in the face of a supply shock on top of overheating in China and peak oil constraints is ridiculous. Supply shocks are anything BUT inflationary. If Europe or the US was on a rampage with credit expanding wildly it would be a different matter. However, credit expansion is not happening in the US or Europe. Dumb things happen (in both directions) when central-planning jackasses view inflation in terms of prices rather than money supply and credit, then take (or fail to take) action because of prices. For example, Greenspan ignited an enormous housing bubble by failure to consider reckless credit expansion. Instead, Greenspan foolishly focused on the CPI which suggested low inflation. Such policies have central bankers forever-chasing their tails. Where Should Rates Be? Nothing above implies agreement with central bank rates set near zero. The free market, not a bunch of bureaucrats, should set interest rates. None of the central bankers saw this crisis coming, so how the hell do they think they know what interest rates should be? I don't know where they should be and they sure don't know either. At least one of us is smart enough to admit it. For more on this line of thinking, please see Goldman's Blood-Sucking Leeches Model, Money Multipliers, Macroeconomic Dark Ages, the Taylor Rule, and Nonsense from Trichet. 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.

BLS Jobs Report: Nonfarm Payroll +192,000, Unemployment Rate 8.9%; Reflections on the Jobs Report Posted: 04 Mar 2011 08:54 AM PST A Few Words Regarding the Jobs Report This was a solid jobs report, not as measured by the typical recovery, but one of the better reports we have seen for years. Moreover, 30,000 government jobs bit the dust. The higher that number, the better off we will all be. +212,000 private jobs is a good number. However, I suspect this may be as good as it gets for a while. At the current pace, the unemployment number would ordinarily drop, but not fast. However, many of those millions who dropped out of the workforce could start looking if they think jobs may be out there. Should that happen, the unemployment rate could rise, even if the economy adds jobs at this pace. It is very questionable if this pace of jobs keeps up. I rather doubt it in fact. Bear in mind that the unemployment rate varies in accordance with the "household survey" not the reported headline jobs number. In the last year, the civilian population rose by 1,853,000. Yet the labor force dropped by 312,000. Those not in the labor force rose by 2,165,000. In January alone, a whopping 319,000 people dropped out of the workforce. In February (this months' report) another 87,000 people dropped out of the labor force. Were it not for people dropping out of the labor force, the unemployment rate would be over 11%. February 2011 Jobs Report Please consider the Bureau of Labor Statistics (BLS) February 2011 Employment Report. Nonfarm payroll employment increased by 192,000 in February, and the unemployment rate was little changed at 8.9 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in manufacturing, construction, professional and business services, health care, and transportation and warehousing. Unemployment Rate - Seasonally Adjusted Bear in mind, were it not for millions of people allegedly dropping out of the labor force over the last year, the unemployment rate would be over 11% right now. Nonfarm Payroll Employment - Seasonally Adjusted Changes Nonfarm Payroll Employment - Seasonally Adjusted Total Establishment Data Employment in the private sector rose by 222,000 in February. In the past 12 months, the private sector has added 1.5 million jobs – an average of 127,000 per month. Statistically, 127,000 jobs a month is enough to keep the unemployment rate flat. Index of Aggregate Weekly Hours During February, the average workweek for all employees on private nonfarm payrolls was unchanged at 34.2 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls increased by 0.1 hour to 33.5 hours. The index of aggregate weekly hours for all employees rose by 0.2 percent over the month. Since reaching a low point in October 2009, the index has increased by 2.4 percent. Average Hourly Earnings vs. CPI Average hourly earnings of all employees in the private sector were changed little in February, following a 9-cent gain in January. Hourly earnings are up 1.7 percent over the year. Between January 2010 and January 2011, the consumer price index for all urban consumers (CPI-U) increased by 1.7 percent. The big question here is how those wages are being distributed. I think we know the answer to that. BLS Birth-Death Model Black Box The big news in the BLS Birth/Death Model is the BLS has moved to quarterly rather than annual adjustments. Effective with the release of January 2011 data on February 4, 2011, the establishment survey will begin estimating net business birth/death adjustment factors on a quarterly basis, replacing the current practice of estimating the factors annually. This will allow the establishment survey to incorporate information from the Quarterly Census of Employment and Wages into the birth/death adjustment factors as soon as it becomes available and thereby improve the factors. For more details please see Introduction of Quarterly Birth/Death Model Updates in the Establishment Survey In recent years Birth/Death methodology has been so screwed up and there have been so many revisions that it has been painful to watch. It is possible that the BLS model is now back in sync with the real world. Moreover, quarterly rather than annual adjustments can only help the process. The Birth-Death numbers are not seasonally adjusted while the reported headline number is. In the black box the BLS combines the two coming out 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 Number Revisions Inquiring minds note enormous backward revisions in Birth-Death reporting. Birth Death Model (as reported in January) Birth Death Model Revisions 2010 (as reported February) Is this new model going to reflect reality going forward? That's hard to say, but things were so screwed up before that it is unlikely to be any worse. One encouraging sign is several negative numbers in the recent chart. January would have been negative too, had they shown it. Historically there were only 2 negative number every year, January and July. That anomaly broke November of 2010. Birth Death Model Revisions 2011 (March) Do NOT subtract that 112,000 from the headline number. That is statistically invalid. Household Data In the last year, the civilian population rose by 1,853,000. Yet the labor force dropped by 312,000. Those not in the labor force rose by 2,165,000. In January alone, a whopping 319,000 people dropped out of the workforce. In February (this months' report) another 87,000 people dropped out of the labor force. Were it not for people dropping out of the labor force, the unemployment rate would be over 11%. Households Stats The number of unemployed persons (13.7 million) and the unemployment rate (8.9 percent) changed little in February. The labor force was about unchanged over the month. The jobless rate was down by 0.9 percentage point since November 2010. The number of long-term unemployed (those jobless for 27 weeks or more) was 6.0 million and accounted for 43.9 percent of the unemployed. Both the civilian labor force participation rate, at 64.2 percent, and the employment-population ratio, at 58.4 percent, were unchanged in February. The number of persons employed part time for economic reasons was essentially unchanged at 8.3 million in February. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job. In February, 2.7 million persons were marginally attached to the labor force, up from 2.5 million a year earlier. These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. Table A-8 Part Time Status click on chart for sharper image There are now 8,340,000 workers whose hours may rise before those companies start hiring more workers. Table A-15 Table A-15 is where one can find a better approximation of what the unemployment rate really is. click on chart for sharper image Grim Statistics Given the total distortions of reality with respect to not counting people who allegedly dropped out of the work force, it is hard to discuss the numbers. The official unemployment rate is 8.9%. However, if you start counting all the people that 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. While the "official" unemployment rate is an unacceptable 8.9%, U-6 is much higher at 15.9%. Moreover, both the official rate and U-6 would be much higher were it not for huge numbers of people dropping out of the workforce. Things are much worse than the reported numbers would have you believe. That said, this was a solid jobs report, not as measured by the typical recovery, but one of the better reports we have seen for years. +212,000 private jobs is a good number. At the current pace, the unemployment number would ordinarily drop, but not fast. However, many of those millions who dropped out of the workforce could start looking if they think jobs may be out there. Should that happen, the unemployment rate could rise, even if the economy adds jobs at this pace. It is very questionable if this pace of jobs keeps up. I rather doubt it in fact. Looking ahead I strongly doubt the reports will be this good over the course of a year. 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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