Mish's Global Economic Trend Analysis |
- Fitch Downgrades Spain, Italy on "Intensification of Euro Zone Crisis"; Outlook Negative; Greek 1-Year Bond Yield Hits 144%
- Brief Note on the Unemployment Rate
- Payrolls +103,000 Jobs , 444,000 Part-Time on Household Survey
- Spain's Net Foreign Debt Exceeds One Trillion Euros for First Time; How does US, Italy, UK, Australia Compare?
| Posted: 07 Oct 2011 01:28 PM PDT Bloomberg reports Spain, Italy Credit Ratings Lowered by Fitch as Europe Debt Crisis Worsens Spain and Italy, the euro region's fourth- and third-largest economies, were downgraded by Fitch Ratings on concern they will struggle to improve their finances as Europe's debt crisis intensifies.Nothing has been solved in Spain, Portugal, Italy, Greece or for that matter Europe in general. The yield on Greek 1-Year Government Bonds ended the day at 144%. 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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| Brief Note on the Unemployment Rate Posted: 07 Oct 2011 12:36 PM PDT I had to rush this morning for an appointment and did not get the following point expressed properly. Addendum to Payrolls +103,000 Jobs , 444,000 Part-Time on Household Survey In the household survey (data repeated below for convenience) there was a gain of 398,000 employed. However, the labor force rose by 423,000 explaining the flat unemployment rate. Of the 398,000 increase in employment, 444,000 were part-time jobs. This can be interpreted two ways. The first way is 46,000 full-time jobs were lost. The second way is 398,000 people who did not have a job, now have one. The correct interpretation depends on the status of those workers over time. My guess now is this is unusual seasonal strength and will not be repeated. End of Addendum Here are the charts once again Household Data  click on chart for sharper image In the last year, the civilian population rose by 1,749,000. Yet the labor force dropped by 107,000. Those not in the labor force rose by 1,856,000. Were it not for people dropping out of the labor force, the unemployment rate would be well over 11%. Table A-8 Part Time Status  click on chart for sharper image A year ago there were 8.6 million people who wanted a full-time job but could only find part-time work. Now there is 9.27 million. In the last month, the number of people working part-time for economic reasons jumped by 444,000. Part-time jobs are volatile but this is a huge jump. 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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| Payrolls +103,000 Jobs , 444,000 Part-Time on Household Survey Posted: 07 Oct 2011 08:25 AM PDT Jobs Report at a Glance Here is an overview of September Jobs Report, today's release.
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. For a change, the labor force actually rose today. This is a welcome sign. However, were it not for people dropping out of the labor force for the past two years, the unemployment rate would be well over 11%. September 2011 Jobs Report Please consider the Bureau of Labor Statistics (BLS) September 2011 Employment Report. Nonfarm payroll employment edged up by 103,000 in September, and the unemployment rate held at 9.1 percent, the U.S. Bureau of Labor Statistics reported today. The increase in employment partially reflected the return to payrolls of about 45,000 telecommunications workers who had been on strike in August. In September, job gains occurred in professional and business services, health care, and construction. Government employment continued to trend down. Unemployment Rate - Seasonally Adjusted  Nonfarm Employment - Payroll Survey - Annual Look - Seasonally Adjusted  Notice that employment is lower than it was 10 years ago. Nonfarm Employment - Payroll Survey - Monthly Look - Seasonally Adjusted  click on chart for sharper image Between January 2008 and February 2010, the U.S. economy lost 8.8 million jobs. In the last year of the weakest recovery on record, 2+ years old, the economy averaged about 116,000 jobs a month. Since April, the economy has averaged 72,000 jobs a month, a downright pathetic number. Statistically, 127,000 jobs a month is enough to keep the unemployment rate flat. Nonfarm Employment - Payroll Survey Details - Seasonally Adjusted  Average Weekly Hours  Index of Aggregate Weekly Hours  Average Hourly Earnings vs. CPI  "Success" of QE2 Over the past 12 months, average hourly earnings have increased by 1.9 percent. The consumer price index for all urban consumers (CPI-U) was up 3.8 percent over the year ending in August. Not only are wages rising slower than the CPI, there is also a concern as to how those wage gains are distributed. 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 BLS has moved to quarterly rather than annual adjustments to smooth out the numbers. 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. 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 Model Adjustments For 2011  BLS Back in Outer-Space Do NOT subtract the Birth-Death number from the reported headline number. That is statistically invalid. I am nearly in shock over the negative BLS adjustment this month. The two revision months historically have been January and July. We have not see a negative number other than January or July for as long as I can remember. Household Data click on chart for sharper image In the last year, the civilian population rose by 1,749,000. Yet the labor force dropped by 107,000. Those not in the labor force rose by 1,856,000. Were it not for people dropping out of the labor force, the unemployment rate would be well over 11%. Table A-8 Part Time Status click on chart for sharper image A year ago there were 8.6 million people who wanted a full-time job but could only find part-time work. In the last month, the number of people working part-time for economic reasons jumped by 444,000. Part-time jobs are volatile but this is a huge jump. 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 Distorted 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 9.1%. 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 9.1%, U-6 is much higher at 16.5%. The jump in U-6 this month is from part-time workers. Things are much worse than the reported numbers would have you believe. Moreover, the unemployment rate is barely better than it was a year ago. It would actually be worse than a year ago were it not for people dropping out of the labor force. Addendum: In the household survey there was a gain of 398,000 employed. However, the labor force rose by 423,000 explaining the flat unemployment rate. Of the 398,000 increase in employment, 444,000 were part-time jobs. This can be interpreted two ways. The first way is 46,000 full-time jobs were lost. The second way is 398,000 people who did not have a job, now have one. The correct interpretation depends on the status of those workers over time. My guess now is this is unusual seasonal strength and will not be repeated. 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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| Posted: 07 Oct 2011 06:58 AM PDT Courtesy of Google translate and my friend Bran who sends links nearly every day from Spain, please consider Spain's net foreign debt for the first time exceeded one trillion euros Note: The Google translation says billion. The correct translation is trillion, and I modified the references below. The latest figures from the Bank of Spain show that the net debt-the difference between what foreigners due to Spain and which in turn owes Spain abroad, not only not reduced but increased. In fact, at the end of the second quarter of 2011 for the first time broke the trillion euro barrier. In relative terms, this means a foreign debt equivalent to 93.7% of GDP, six points more than in 2010.Net External Debt Position  Take a good look at that chart. Spain has 41% of the external debt of the US on an economy about 9% as big. Does anyone think that will be paid back? When? 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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