Central Perk

vineri, 6 decembrie 2013

Mish's Global Economic Trend Analysis

Spain's Bad Bank "FROB" Admits More Taxpayer Bailouts Likely
Enormous Discrepancy Between Jobs and Employment Continues
Beneath the Headline Numbers, Not a Good Jobs Report
Japan's Prime Minister Wants New Secrecy Laws; What's a Secret? Anything He Wants To Be Secret

Spain's Bad Bank "FROB" Admits More Taxpayer Bailouts Likely

Posted: 06 Dec 2013 04:44 PM PST

Via translation from Huky Guru's Blog in Spain please consider statements by the president of the "FROB" regarding taxpayer support of the "bad bank".

The president of the Fund for Orderly Bank Restructuring (FROB), Fernando Restoy, said "resolution does not guarantee recovery of all public support".

Restoy advocates "steps to minimize costs to the taxpayer".

Restoy calculates pubic aid (so far) at 6% of GDP while Guru calculates Spanish Bank Bailout Funding at 22% of GDP.

Guru states the FROB croaked 26 billion euros in 2012 and 10 billion euros in 2011.

Guru complains, and rightfully so "Until recently they even sold us the idea that we were going to make money. Now the question we ask is whether we will recover anything."

Indeed.

Spanish taxpayers are again on the hook for more "support". But why the announcement now? I can offer three possible reasons.

A genuine recovery is underway, and officials believe they can finally admit the extent of the losses
Officials mistakenly believe a recovery is underway and take this opportunity to disclose losses.
Losses are so big and so obvious, that officials can no longer pretend there will not be additional losses.

My bet is on door number 3, or possibly a combination of door number 2 and door number 3.

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

Enormous Discrepancy Between Jobs and Employment Continues

Posted: 06 Dec 2013 11:56 AM PST

Now that employment distortions related to the government shutdown in October are behind us, let's take a detailed look at the recent and growing discrepancy between jobs as reported on the establishment survey and employment as reported on the household survey.

Jobs vs. Employment Discussion

Before diving into the details, it is important to understand limits on data, and how the BLS measures jobs in the establishment survey vs. employment in the household survey.

Establishment Survey: If you work one hour that counts as a job. There is no difference between one hour and 50 hours.
Establishment Survey: If you work multiple jobs you are counted twice. The BLS does not weed out duplicate social security numbers.

Household Survey: If you work one hour or 80 you are employed.
Household Survey: If you work a total of 35 hours you are considered a full time employee. If you work 25 hours at one job and 10 hours at another, you are a fulltime employee.

Household Survey vs. Establishment Survey

Over time, and with revisions, the two data series move in sync (as they should in normal conditions):

People get jobs (employment should rise)
People lose jobs (employment should drop)

However, there has been a serious discrepancy between the two data series in the last year that is not apparent in the above chart. A few tables will show what I mean.

Household vs. Establishment Year-Over-Year Comparisons

Category	Nov-08	Nov-09	Nov-10	Nov-11	Nov-12	Nov-13
Employed Household	144,100	138,665	139,046	140,771	143,277	144,386
Jobs Establishment	135,130	129,593	130,300	132,268	134,472	136,765

Household vs. Establishment Year-Over-Year Averages

Category	Nov-09	Nov-10	Nov-11	Nov-12	Nov-13
Yoy Change Household	(5,435)	381	1,725	2,506	1,109
Yoy Change establishment	(5,537)	707	1,968	2,204	2,293
Monthly Average Household	-453	32	144	209	92
Monthly Average Establishment	-461	59	164	184	191

Household vs. Establishment Month-Over-Month Changes

Month	Household	Establishment	M/M Change HH	M/M Change Establishment
Sep-12	142974	134065
Oct-12	143328	134225	354	160
Nov-12	143277	134472	-51	247
Dec-12	143305	134691	28	219
Jan-13	143322	134839	17	148
Feb-13	143492	135171	170	332
Mar-13	143286	135313	-206	142
Apr-13	143579	135512	293	199
May-13	143898	135688	319	176
Jun-13	144058	135860	160	172
Jul-13	144285	135949	227	89
Aug-13	144170	136187	-115	238
Sep-13	144303	136362	133	175
Oct-13	143568	136562	-735	200
Nov-13	144386	136765	818	203

The third table shows the volatile nature of the data, especially the household survey. It's the second table that is the important one. Take special note of the bottom two lines in the second table.

Until this past year, the establishment survey and household survey moved tightly. In the last 12 months, the payroll survey averaged a gain of 191,000 jobs a month while the household survey averaged less than half of that at 92,000 jobs per month.

Blame Obamacare

Obamacare is the most likely explanation for the discrepancy.

Recall that the definition of fulltime under Obamacare is 30 hours, but fulltime to the BLS is 35 hours.

Next, consider what happens under Obamacare if someone working 34 hours is cut back to 25 hours, then picks up another parttime job.

Obamacare Effect

Prior to Obamacare
34 hours worked = 1 parttime job household survey
34 hours worked = 1 job establishment survey

Enter obamacare
Person cut back to 25 hours and takes a second job for 10 hours
Here is the new math

25 + 10 = 1 fulltime job on the household survey.
25 + 10 = 2 jobs on the establishment survey.

In my example, the household survey totals up all the hours and says, voilla! (35 hours = full time). So a few extra hours that people pick up working 2 part time jobs now throws someone into full time status – thus no surge in part-time employment, but there is a surge in jobs.

I commented on this discrepancy last month and repeat my claim again today.

Request to ADP

To prove my thesis, we need to weed out duplicate social security numbers. The BLS can't, but ADP can. I contacted them twice but to no avail.

I would like ADP to crunch the data and determine how many duplicate social security numbers show up vs. the same months in prior years. If I am wrong it won't be the first time. But let's have a look at the numbers and see what they say.

For further discussion and a synopsis of what really happened in today's job report, please see Beneath the Headline Numbers, Not a Good Jobs Report

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

Beneath the Headline Numbers, Not a Good Jobs Report

Posted: 06 Dec 2013 08:48 AM PST

Initial Reaction

Some of the skew in last month's job report related to the government shutdown was taken back today, as expected. The labor force stats and participation rate were exceptions, and details reveal much weakness.

Last month employment fell by 735,000 due to the shutdown, this month it rose by 818,000.
Averaging the two months, household survey employment only rose by 83,000 (a mere 43,500 per month)
Last month, the change in those not in the labor force was +932,000. This month, the change was -268,000.
Last month the labor force declined by 720,000. This month it only rose by 455,000.
Averaging the two months, the labor force fell by 265,000. This explains the drop in the unemployment rate despite anemic employment growth on average.
Last month the participation rate fell 0.4 percentage points to a new low, this month, only 0.2 percentage points were taken back.

Ignoring the decline and the rise in employment over the past two months, the huge discrepancy between the household survey and the establishment survey persists.

In essence, this was a bad report, with people dropping out of the labor force like mad.

Revisions

This was the fifth straight month of revisions to the establishment survey but the revisions were relatively minor.

The change in total nonfarm payroll employment for September was revised from +163,000 to +175,000, and the change for October was revised from +204,000 to +200,000. With these revisions, employment gains in September and October combined were 8,000 higher than previously reported.

Explaining the Unemployment Rate

Unemployment fell by 0.3 percentage points
Employment rose by 818,000
Those in the labor force rose by 455,000
The civilian population rose by 186,000.
The Participation Rate (The labor force as a percent of the civilian noninstitutional population) rose 0.2 to 63.0%.

Employment rose more than the labor force, so the unemployment rate fell as further explained in my "initial reaction" above.

October BLS Jobs Statistics at a Glance

Payrolls +203,000 - Establishment Survey
US Employment +818,000 - Household Survey
US Unemployment -365,000 - Household Survey
Involuntary Part-Time Work -331,000 - Household Survey
Voluntary Part-Time Work +90,000 - Household Survey
Baseline Unemployment Rate -0.3 to 7.0% - Household Survey
U-6 unemployment -0.5 to 13.2% - Household Survey
Civilian Labor Force +455,000 - Household Survey
Not in Labor Force -268,000 - Household Survey
Participation Rate +0.2 at 63.0 - 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 last year, those "not" in the labor force rose by 2,418,000
Over the course of the last year, the number of people employed rose by a mere 1,109,000 (an average of 92,417 a month)
In the last year the number of unemployed fell from 12,042,000 to 10,907,000 (a drop of 1,185,000)
Percentage of long-term unemployment (27 weeks or more) is 37.3%, an increase of of 1.2 percentage points from last month.
The mean duration of unemployment is 37.2 weeks, an increase of 1.1 weeks.
7,619,000 workers who are working part-time but want full-time work. A year ago there were 8,029,000. This is a volatile series.

November 2013 Jobs Report

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

The unemployment rate declined from 7.3 percent to 7.0 percent in November, and total nonfarm payroll employment rose by 203,000, the U.S. Bureau of Labor Statistics reported today. Employment increased in transportation and warehousing, health care, and manufacturing.

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

Unemployment Rate - Seasonally Adjusted

Employment History Since January 2009

click on chart for sharper image

Change from Previous Month by Job Type

Hours and Wages

Average weekly hours of all private employees rose 0.1 to 34.5 hours. Average weekly hours of all private service-providing employees rose 0.1 to 33.3 hours.

Average hourly earnings of production and non-supervisory private workers rose $0.03 to $20.28. Average hourly earnings of private service-providing employees rose $0.03 to $20.09.

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.

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 7.0%. 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 in the last row labeled U-6.

U-6 is much higher at 13.2%. 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%.

Grossly Distorted Statistics

Digging under the surface, much of the drop in the unemployment rate over the past two years is nothing but a statistical mirage coupled with a massive increase in part-time jobs starting in October 2012 as a result of Obamacare legislation.

Digging beneath the surface, the snap-back from the government shutdown was nowhere near as strong as it should have been in the household survey. More on the the discrepancy between the two reports shortly.

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

Japan's Prime Minister Wants New Secrecy Laws; What's a Secret? Anything He Wants To Be Secret

Posted: 06 Dec 2013 07:24 AM PST

I would like to use the word shocking, but hardly anything any government does anymore is shocking.

The best I can hope for is Japanese citizens are disgusted enough to boot their fascist, economically illiterate prime minister before its too late.

Unfortunately, I highly doubt that happens.

Please consider Japan's Abe Seeks to Pass Secrecy Bill That Sapped Support

Japan's government will move today to pass a bill granting it sweeping powers to declare state secrets, a measure pushed by Prime Minister Shinzo Abe to boost ties with the U.S. even as it sapped his public support at home.

The bill, which is backed by the U.S. and forms part of Abe's broader push to strengthen Japan's defense policy in the face of China's military assertiveness, would stiffen penalties for bureaucrats who leak secrets and journalists who publish them. It would give government officials, rather than the courts, the power to define what constitutes a state secret under categories from defense to diplomacy, terrorism and safety threats.

The measure, criticized by much of Japanese media, has prompted rare public protests. Demonstrators gathered outside parliament last night and organizers called for more protests today, while the ending of debate on the law sparked an outcry from opposition lawmakers.

The approval rating of Abe's government fell 4 percentage points from a month ago to 49 percent, the first time it dropped below 50 percent since Abe's election almost a year ago, according to a recent poll by the Asahi newspaper.

Half of those surveyed opposed the bill that punishes leaks of government information with jail terms of as much as 10 years. The newspaper polled 1,001 people by phone Nov. 30 to Dec. 1 and didn't give a margin of error.

Public criticism heightened after Shigeru Ishiba, secretary general of the LDP, wrote a blog post Nov. 29 likening those who demonstrate against the bill to terrorists.

U.S. officials have supported Abe's push for collective self-defense and said they welcome the secrecy bill.

US War-Mongers Support Abe

Also disgusting (and also not surprising) is support for secrecy laws from US warmongers and NSA defenders.

Please notice that the secretary general of the LDP, wrote a blog post Nov. 29 likening those who demonstrate against the bill to terrorists.

Does that remind you of anything?

Goering at the Nuremberg Trials

Please recall what Reichsmarschall Hermann Wilhelm Göring (in English his name is also spelled as Hermann Goering) Nazi founder of the Gestapo, Head of the Luftwaffe, said at the Nuremberg Trials.

Here is a clip of the interview in Goering's cell in prison, after the war.

Göring: Why, of course, the people don't want war. Why would some poor slob on a farm want to risk his life in a war when the best that he can get out of it is to come back to his farm in one piece? Naturally, the common people don't want war; neither in Russia nor in England nor in America, nor for that matter in Germany. That is understood. But, after all, it is the leaders of the country who determine the policy and it is always a simple matter to drag the people along, whether it is a democracy or a fascist dictatorship or a Parliament or a Communist dictatorship.

Gilbert: There is one difference. In a democracy, the people have some say in the matter through their elected representatives, and in the United States only Congress can declare wars.

Göring: Oh, that is all well and good, but, voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is tell them they are being attacked and denounce the pacifists for lack of patriotism and exposing the country to danger. It works the same way in any country.

And now we are told by charismatic politicians that we are under attack. We must give up our constitutional rights to prevent further attacks. [And we need more secrecy too.]

Adding an additional note about secrecy, the above is a portion of my November 1, post What's the Greatest Threat to Our Constitutional Rights?

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

Investing in Non-Measurable Serendipitous Marketing - Whiteboard Friday

Posted: 05 Dec 2013 03:16 PM PST

Posted by randfish

Sticking to what can be easily measured often seems like the safest route, but avoiding the unknown also prevents some of the happier accidents from taking place. In today's Whiteboard Friday, Rand explains why it's important to invest some of your time and resources in non-measurable, serendipitous marketing.

For reference, here's a still of this week's whiteboard!

Video Transcription

Howdy Moz fans, and welcome to another edition of Whiteboard Friday. This week I want to talk about something that we don't usually talk about in the inbound marketing world because inbound, of course, is such a hyper-measurable channel, at least most of the investments that we make are very measurable, but I love serendipitous marketing too. That's investing in serendipity to earn out-sized returns that you might not be able to make. That's a tough sell for a lot of management, for a lot of executives, for a lot of marketers because we're so accustomed to this new world of hyper-measurability. But with a couple examples, I'll illustrate what I mean.

So let's say we start by maybe you go and you attend an off-topic conference, a conference that isn't normally in your field, but it was recommended to you by a friend. So you go to that event, and while you are there, you meet a speaker. You happen to run into them, you're having a great chat together, and that speaker later mentions your product, your company, your business on stage at the event. It turns out that that mention yields two audience members who become clients of yours later and, in fact, not just clients, but big advocates for your business that drive even more future customers.

This is pretty frustrating. From a measurability standpoint, first off, it's an off-topic event. How do you even know that this interaction is the one that led to them being mentioned? Maybe that speaker would have mentioned your business anyway. Probably not, but maybe. What about these folks? Would those two customers have come to your business regardless? Were they searching for exactly what you offered anyway? Or were they influenced by this? They probably were. Very, very hard to measure. Definitely not the kind of investment that you would normally make in the course of your marketing campaigns, but potentially huge.

I'll show you another one. Let's say one day you're creating a blog post, and you say, "Boy, you know, this topic is a really tough one to tackle with words alone. I'm going to invest in creating some visual assets." You get to work on them, and you start scrapping them and rebuilding them and rebuilding them. Soon you've spent off hours for the better part of a week building just a couple of visual assets that illustrate a tough concept in your field. You go, "Man, that was a huge expenditure of energy. That was a big investment. I'm not sure that's even going to have any payoff."

Then a few weeks later those visuals get picked up by some major news outlets. It turns out, and you may not even be able to discover this, but it turns out that the reporters for those websites did a Google image search, and you happened to pop up and you clearly had the best image among the 30 or 40 that they scrolled to before they found it. So, not only are they including those images, they're also linking back over to your website. Those links don't just help your site directly, but the news stories themselves, because they're on high-quality domains and because they're so relevant, end up ranking for an important search keyword phrase that continues to drive traffic for years to come back to your site.

How would you even know, right? You couldn't even see that this image had been called by those reporters because it's in the Google image search cache. You may not even connect that up with the rankings and the traffic that's sent over. Hopefully, you'll be able to do that. It's very hard to say, "Boy, if I were to over-invest and spend a ton more time on visual assets, would I ever get this again? Or is this a one-time type of event?"

The key to all of this serendipitous marketing is that these investments that you're making up front are hard or impossible to predict or to attribute to the return on investment that you actually earn. A lot of the time it's actually going to seem unwise. It's going to seem foolish, even, to make these kinds of investments based on sort of a cost and time investment perspective. Compared to the potential ROI, you just go, "Man, I can't see it." Yet, sometimes we do it anyway, and sometimes it has a huge impact. It has those out-sized serendipitous returns.

Now, the way that I like to do this is I'll give you some tactical stuff. I like to find what's right here, the intersection of this Venn diagram. Things that I'm passionate about, that includes a topic as well as potentially the medium or the type of investment. So if I absolutely hate going to conferences and events, I wouldn't do it, even if I think it might be right from other perspectives.

I do particularly love creating visual assets. So I like tinkering around, taking a long time to sort of get my pixels looking the way I want them to look, and even though I don't create great graphics, as evidenced here, sometimes these can have a return. I like looking at things where I have some skill, at least enough skill to produce something of value. That could mean a presentation at a conference. It could mean a visual asset. It could mean using a social media channel. It could mean a particular type of advertisement. It could mean a crazy idea in the real world. Any of these things.

Then I really like applying empathy as the third point on top of this, looking for things that are something that my audience has the potential to like or enjoy or be interested in. So this conference my be off-topic, but knowing that it was recommended by my friend and that there might be some high-quality people there, I can connect up the empathy and say, "Well, if I'm putting myself in the shoes of these people, I might imagine that some of them will be interested in or need or use my product."

Likewise, if I'm making this visual asset, I can say, "Well, I know that since this is a tough subject to understand, just explaining it with words alone might not be enough for a lot of people. I bet if I make something visual, that will help it be much better understood. It may not spread far and wide, but at least it'll help the small audience who does read it."

That intersection is where I like to make serendipitous investments and where I would recommend that you do too.

There are a few things that we do here at Moz around this model and that I've seen other companies who invest wisely in serendipity make, and that is we basically say 1 out of 5, 20% of our time and our budget goes to serendipitous marketing. It's not a hard and fast rule, like, "Oh boy, I spent $80 on this. I'd better go find $20 to go spend on something serendipitous that'll be hard to measure." But it's a general rule, and it gives people the leeway to say, "Gosh, I'm thinking about this project. I'm thinking about this investment. I don't know how I'd measure it, but I'm going to do it anyway because I haven't invested my 20% yet."

I really like to brainstorm together, so bring people together from the marketing team or from engineering and product and other sections of the company, operations, but I really like having a single owner. The reason for that single owner doing the execution is because I find that with a lot of these kind of more serendipitous, more artistic style investments, and I don't mean artistic just in terms of visuals, but I find that having that single architect, that one person kind of driving it makes it a much more cohesive and cogent vision and a much better execution at the end of the day, rather than kind of the design by committee. So I like the brainstorm, but I like the single owner model.

I think it's critically important, if you're going to do some serendipitous investments, that you have no penalty whatsoever for failure. Essentially, you're saying, "Hey, we know we're going to make this investment. We know that it's the one out of five kind of thing, but if it doesn't work out, that's okay. We're going to keep trying again and again."

The only really critical thing that we do is that we gain intuition and experiential knowledge from every investment that we make. That intuition means that next time you do this, you're going to be even smarter about it. Then the next time you do it, you're going to gain more empathy and more understanding of what your audience really needs and wants and how that can spread. You're going to gain more passion, a little more skill around it. Those kinds of things really predict success.

Then I think the last recommendation that I have is when you make serendipitous investments, don't make them randomly. Have a true business or marketing problem that you're trying to solve. So if that's PR, we don't get enough press, or gosh, sales leads, we're not getting sales leads in this particular field, or boy, traffic overall, like we'd like to broaden our traffic sources, or gosh, we really need links because our kind of domain authority is holding us back from an SEO perspective, great. Make those serendipitous investments in the areas where you hope or think that the ROI might push on one of those particularly big business model, marketing model problems.

All right, everyone. Hope you've enjoyed this edition of Whiteboard Friday. We'll see you again next week. Take care.

Video transcription by Speechpad.com

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