Central Perk

luni, 10 martie 2014

Seth's Blog : Will they switch for cheaper?

Will they switch for cheaper?

In fact, most people switch for better.

Without a doubt, there's a slot in every market for the cheap enough, good enough alternative.

But rapid growth and long-term loyalty come from being better instead.

When your product or your service doesn't measure up, the answer probably isn't to lower your price or offer a refund to the disappointed customer. Instead, the alternative is to invest in making it better. So much better that people can't help but talk about it—and so much better that they would truly miss it if it were gone.

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Mish's Global Economic Trend Analysis

Word of Thanks
Spain Modifies Bankruptcy Laws to Prevent Corporate Liquidations; 65,000 Companies, 1.3 Trillion Euro Delinquencies in Play
Pro-Russia Troops Install Minefields, Border Markers in Crimea; Gazprom Ups Price of Natural Gas 37%, Calls in $2 Billion Gas Debt

Word of Thanks

Posted: 09 Mar 2014 06:43 PM PDT

Every day numerous people send links to articles, edit my typos, comment on the blog, monitor comments on my blog, translate articles, etc.

It's a community and I appreciate the global involvement and global help.

Each day I get between 50 and 200 emails from readers. I respond to most of them. But even though I spend 2 hours or more every day reading and answering emails, I cannot respond to all of them.

Frequently, I offer a one word response: thanks.

That does not do justice to how I feel, especially to those who send something every day or nearly every day.

Unlike other bloggers, I seldom offer "hat tips" and the reason is simple. I tend to read emails LIFO (last in first out), and most often when someone sends me a link, another person already has.

So here is my word of thanks. But I also need to do more. For those who contribute every day, I need to offer special thanks.

Spell Checkers

I have three mainstay spell checkers: Randy, Curt, and Mark. What one of them misses, another one of them will catch. The only problem is how long it takes me to find the email pointing out my error. Typically it's not spelling per se, as I spellcheck myself, but rather stuff like saying "an" when I mean "and" or vice versa. When you proof your own article you do not see such things.

Content

I am going to get in trouble over this one because I am sure to leave someone out. Apologies offered in advance.

Every day I get emails from Bran in Spain. Every day, Richard sends numerous links I consider writing about. So does Mark the spellchecker.

Tony, Brisbane Bear, Bigpond, and Hugh send frequent emails about Australia and Asia. Many others, including Dave, Bob, Joe, Tony, Donald, and Mayraj send so much content that it's hard for me to know where to stop listing names.

Blog Monitoring

I have one person, "fedwatcher", who monitors comments and removes anything inappropriate.

I hope I touched all the bases here, but most likely I didn't. If I missed your name, please accept my apology.

Thanks!

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

Spain Modifies Bankruptcy Laws to Prevent Corporate Liquidations; 65,000 Companies, 1.3 Trillion Euro Delinquencies in Play

Posted: 09 Mar 2014 04:53 PM PDT

In the name of saving jobs, the Spanish government has decided to change the rules as to whether or not a business is viable.

In bankruptcy proceedings, companies will no longer be free to decide whether they prefer to liquidate the company.

Instead, corporations will be obliged to accept debt restructuring offerings from creditors on creditor-proposed terms centered around debt-to-equity conversions.

Via translation from El Economista.

According to various judicial, legal and bankruptcy administration sources consulted by elEconomista, companies will no longer be free to decide whether they prefer to liquidate the company.

New rules favor foreign financial institutions including the vulture funds, to take over companies. The decree aims to end the massive liquidation of companies in bankruptcy.

Followup post by el Economista

The Ministry of Economy approved the bankruptcy reform legislation to save viable businesses including a provision that transforms debt into equity.

If creditors representing at least 60% of the financial liability agree, forced conversion of loans into equity may last up to five years. If creditors representing at least 75% of the financial liability agree, forced conversion of loans into equity may last ten years.

Dissenting creditors may choose a haircut equivalent to the nominal amount of the shares that would correspond subscribe or take and, where appropriate, the corresponding premium or assumption.

Judges may override the 60% threshold to as low as 51%.

1.3 Trillion Euro Delinquencies in Play

Via translation Libre Mercado discusses the number of potential forced debt-to-equity conversions.

Deputy Prime Minister Soraya Saenz de Santamaria, said that the new law completes a package of measures that are aimed at companies that, despite their high debt, "can continue to run their business while maintaining their employment."

In Spain, 90% of companies that enter bankruptcy end up in liquidation. At first, this may seem logical and even reasonable: if a company is not viable, what is best for everyone to pay the maximum of their debts, creditors save everything and these goods are reallocated to more productive tasks. The problem is that, perhaps, not every business in competition (and even more in preconcursal phase) should close.

According to the Registry of Forensic Economists (REFOR), 65,000 companies, of them 15,000 "quality" companies with the rest being microenterprises that are "at risk of death because of refinancing problems.

Debt held by businesses is equivalent to 130% of GDP, about 1.3 tillion euros. The Ministry of Economy believes that the new RDL could facilitate the refinancing of up to 10% of this amount: 130 billion euros.

Think these debt-to-equity terms will be extremely one-sided?

Addendum

Reader Bran who lives in Spain sent the following pertinent comment: "1.3 trillion is the total debt held by businesses. The article did not stipulate how much of that is delinquent, but it's at least the 10% they hope to save. Registered delinquent business debt has been rising towards 10%. If they talk of saving 10% there is a lot more at stake than the 130 billion euros they think they can save."

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

Pro-Russia Troops Install Minefields, Border Markers in Crimea; Gazprom Ups Price of Natural Gas 37%, Calls in $2 Billion Gas Debt

Posted: 09 Mar 2014 12:10 PM PDT

The takeover of Crimea by Russia is nearly complete. All that remains is the final vote on March 16. There would not be a vote if the outcome was uncertain.

Troops Install Minefields, Border Markers in Crimea

Bloomberg reports Pro-Russia Forces Occupy Ukraine as Separatist Vote Looms.

Pro-Russian forces advanced in Ukraine's Crimean peninsula, ignoring Western calls to halt a military takeover before the region's separatist referendum. The U.S. estimates Russia now has 20,000 troops confronting a smaller Ukrainian force there. Ukraine has stepped up its eastern border defenses in the worst standoff between it and the West since the Cold War.

Pro-Russian units planted minefields in the Kherson region, north of Crimea on Ukraine's mainland, and began to install border markers between the two regions, news website Khersonskie Vesti reported today. Ukraine's border control service said Russian forces now control 13 border bases as well as the ferry crossing across the Kerch Strait to Russia, preventing guards from inspecting trucks arriving in Crimea.

Authorities on the peninsula ordered an anti-aircraft regiment in the city of Yevpatoriya to lay down its arms or its base would be taken over, news service Interfax reported.

The peninsula, where Russian speakers comprise a majority, will join Russia once parliament in Moscow passes the necessary legislation and there's nothing the West can do, according to Sergei Tsekov, the deputy speaker of Crimea's parliament.

"There's no comeback, and the U.S. or Europe can't impede us," Tsekov said by phone on March 7 from Moscow, where he met Russian officials to discuss the region's future. "Crimea won't be part of Ukraine anymore. There are no more options."

The U.S. and European allies will impose sanctions if there isn't a quick resolution, Obama said at the White House on March 6.

Russia Calls in $2 Billion Gas Debt, Gazprom Ups Price of Natural Gas 37%.

A Bloomberg video claims Russia Calls in $2 Billion Gas Debt. In addition, Ukraine Sees Gazprom Charging 37% More for Gas in Second Quarter.

Ukraine faces a 37 percent increase in the price it pays for Russian natural gas after OAO Gazprom canceled a discount and threatened to cut supplies, Ukrainian Energy Minister Yuri Prodan told reporters today.

Ukraine will pay about $368.50 per 1,000 cubic meters of the fuel in the second quarter, Prodan said. Russia agreed last year to cut the price it charges Ukraine to $268.50. Gazprom rescinded the discount last week and said Ukraine risks a repeat of 2009, when the Moscow-based company reduced shipments during a pricing dispute.

Ukraine needs to import about 30 billion cubic meters of gas this year, of which a third may come from Slovakia, Prodan said March 5. Gazprom said March 7 in a statement it's owed $1.89 billion by Ukrainian state gas company NAK Naftogaz Ukrainy for supplies already received.

Minimal Sanctions

It is likely the US issues some sanctions. They probably will not be meaningful. as noted on March 5, Russia Has Upper Hand in Ukraine, No Meaningful Sanctions Coming.

It was easy enough to impose sanctions on Iran because there was no meaningful trade with Iran other than oil. And global oil supply can come from anywhere.

Secondly, and unlike the US which has little trade with Russia, Germany, the UK, and other European countries do have meaningful trade with Russia.

Finally, Germany gets 30% of its natural gas supply from Russia. Impose severe sanctions and Russia can shut down those supply lines, most of which happen to run through Ukraine.

Obama can pretend to put down a tough stance, but don't expect any meaningful reaction globally. Events are already firming up along those lines.

Germany and the UK already rejected major sanctions. Europe gets much of its natural gas from Russia and hoarding supplies is now underway.

See Natural Gas Hoarding in Europe Thanks to US Sanction Proposals; Boehner vs. McCain; LNG the Solution.

The chart is from Gazprom and Morgan Stanley.

It is mathematically impossible to be more than 100% dependent on a supplier, at least over the long-term. Certainly, for short periods of time imports can exceed usage, but over the long haul they cannot.

That said, I do not know the timeframe for the chart. It's possible the chart is reflective of recent hoarding.

Regardless, the chart shows the huge dependencies some European countries have for Russian natural gas.

I feel sorry for those who will soon be living in a nation they do not feel part of. But there is little that can be done about it.

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

duminică, 9 martie 2014

Seth's Blog : Entropy, bureaucracy and the fight for great

Entropy, bureaucracy and the fight for great

Here are some laws rarely broken:

As an organization succeeds, it gets bigger.

As it gets bigger, the average amount of passion and initiative of the organization goes down (more people gets you closer to averge, which is another word for mediocre).

More people requires more formal communication, simple instructions to ensure consistent execution. It gets more and more difficult to say, "use your best judgment" and be able to count on the outcome.

Larger still means more bureaucracy, more people who manage and push for comformity, as opposed to do something new.

Success brings with it the fear of blowing it. With more to lose, there's more pressure not to lose it.

Mix all these things together and you discover that going forward, each decision pushes the organization toward do-ability, reliability, risk-proofing and safety.

And, worst of all, like a game of telephone, there will be transcription errors, mistakes in interpreting instructions and general random noise. And most of the time, these mutations don't make things wonderful, they lead to breakage.

Even really good people, really well-intentioned people, then, end up in organizations that plod toward mediocre, interrupted by random errors and dropped balls.

This can be fixed. It can be addressed, but only by a never-ending fight for greatness.

Greatness can't be a policy, and it's hard to delegate to bureaucrats. But yes, greatness is something that people can work for, create an insurgency around and once in a while, actually achieve. It's a commitment, not an event.

It's not easy, which is why it's rare, but it's worth it.

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sâmbătă, 8 martie 2014

Mish's Global Economic Trend Analysis

Is Bitcoin Legal? Illegal? a Currency? a Commodity?

Posted: 08 Mar 2014 12:01 PM PST

Regulators in various countries are grappling with bitcoin. What the hell is it? It's a good question and answers vary widely.

Bloomberg reports Japan Says Bitcoin Not Currency Amid Calls for Regulation.

Japan's government said Bitcoin isn't a currency amid calls for its regulation a week after the bankruptcy of Mt. Gox, the Tokyo-based exchange that was once the world's biggest.

There is no law to define Bitcoin and relevant ministries are gathering information on it, Prime Minister Shinzo Abe's cabinet said in a statement in response to questions from an opposition party lawmaker. Bitcoin transactions can be taxed, according to the statement obtained by Bloomberg News.

Japan isn't the only country grappling with the regulation of Bitcoin amid reports of hacking into exchanges including Mt. Gox and concern that the virtual currency can be used for money laundering. In the U.S., states are wrestling with how digital-currency businesses could be regulated as money transmitters, while Russia has said Bitcoin is illegal under current law and Finland plans to treat it as a commodity.

The Japanese banking law doesn't allow lenders to broker Bitcoin transactions or set up accounts for customers to store the digital assets, according to the statement. At the same time, current rules don't prevent brokerages and asset managers from managing clients' Bitcoins, it said.

"Japan's government is falling behind the curve as Bitcoin grew rapidly over the past five years," said Weizhou Yang, an analyst at Mizuho Securities Co. in Tokyo. "Banks shouldn't take risks to dabble in Bitcoin business. On the other hand, getting Bitcoin into funds may broaden the investment product base."
DPJ's Okubo

Democratic Party of Japan lawmaker Tsutomu Okubo, a former vice finance minister, called on the government to rectify the lack of regulation last week. Officials from the Finance Ministry, Financial Services Agency and Bank of Japan have said they're not in a position to oversee Bitcoin.

"The authorities' stance that they don't have responsibility is disgraceful," Okubo, who also used to work at Morgan Stanley, said in a telephone interview on Feb. 26. "We need to establish a legal system."

Finance Minister Taro Aso said today that the government hasn't decided whether to regulate Bitcoin. Earlier this week Aso, who also oversees the banking regulator, said it wasn't clear yet whether Mt. Gox's failure was a crime.

Singapore's finance minister said last month that the central bank didn't recognize Bitcoin as legal tender. China has stopped financial institutions from dealing in it, even as trading continues. Danish regulators are drafting a proposal for lawmakers in an effort to protect consumers and businesses from losses.

The answer to my question is yes, no, don't know, and it depends (dependent on what country you are in).

Newsweek Unmasks Bitcoin Inventor

Two day ago, Newsweek unmasked Satoshi Nakamoto, The Face Behind Bitcoin. It's a fascinating article, and one well worth a look.

Here's a paragraph that caught my attention.

Andresen, a Silicon Valley refugee in Amherst, Mass., says he worked closely with the person "or entity" known as Satoshi Nakamoto on the development of Bitcoin from June 2010 to April 2011. This was before the rise of today's multibillion-dollar Bitcoin economy, boosted last year by the unexpected, if cautious, endorsement of outgoing Federal Reserve chair Ben Bernanke, who said virtual currencies "may hold long-term promise."

Since then, Bitcoin ATMs have been cropping up across North America (with some of the first in Vancouver, British Columbia; Boston; and Albuquerque, N.M.) while the acceptance of Bitcoin has spread to businesses as diverse as Tesla, OkCupid, Reddit, Overstock.com and Virgin Galactic, Richard Branson's aviation company, which has said it will blast people into space if they cough up enough Bitcoin.

Denial, Bizarre Media Road Chase

The Guardian reports Satoshi Nakamoto: man denies being bitcoin inventor amid media frenzy.

Dorian S Nakamoto, the Japanese-American man named as bitcoin inventor Satoshi Nakamoto, has denied any link to the digital currency amid a farcical media chase through Los Angeles.

Nakamoto, 64, disputed a Newsweek cover story that on Thursday unmasked him as the "father of bitcoin". His denial cast doubt on a putative scoop the magazine used to relaunch its print edition.

Nakamoto made the denial in an interview with the Associated Press after a day of near-slapstick scenes in which dozens of journalists pursued him and an AP reporter through the city, provoking a social media storm. "I got nothing to do with it," he said.

A media posse continued seeking Nakamoto on Thursday night after he left the AP office in downtown LA where he and the reporter had sought refuge earlier in the day.

The Newsweek story, written by Leah McGrath Goodman, named him as "the mystery man behind the crypto-currency" which exploded in popularity in 2013 and supposedly made its founder worth $400m.

Satoshi Nakamoto, a name attributed to the currency's founder, was widely deemed a pseudonym for an elusive, genius hacker. Numerous media organisations tried and failed to find him.

Newsweek, a venerable but struggling brand that had dropped its print edition in 2012, returned to newsstands this week trumpeting its 4,500-word story under the headline "Bitcoin's Face".

Within hours of publication dozens of journalists camped outside Nakamoto's door, ringing the bell with no response, until their silver-haired, bespectacled quarry, dressed in a grey sports coat and striped shirt, emerged and said he wanted someone who spoke Japanese and would buy him lunch.

"I'm not involved in bitcoin. Wait a minute, I want my free lunch first. I'm going with this guy," Nakamoto said, pointing at an AP reporter. "I'm not in bitcoin, I don't know anything about it."

Cameras followed as the pair headed in a Prius to a sushi restaurant. When reporters intruded they left and drove downtown, the pursuers tweeting all the way and making comparisons to the OJ Simpson highway chase in 1994.

The pair took refuge in the news agency's downtown headquarters, leaving a media mob outside. In AP's report, published late on Thursday, the alleged currency mastermind said his English was imperfect and that the Newsweek reporter misinterpreted him when he said was "no longer involved in that".

"I'm saying I'm no longer in engineering. That's it," he said of the exchange. "And even if I was, when we get hired you have to sign this document, contract, saying you will not reveal anything we divulge during and after employment. So that's what I implied. It sounded like I was involved before with bitcoin and looked like I'm not involved now. That's not what I meant. I want to clarify that," he said.

McGrath Goodman, who spent two months researching the story, responded that she stood by her version of the exchange on his doorstep. "There was no confusion whatsoever about the context of our conversation – and his acknowledgment of his involvement in bitcoin."

Followup Statement

Newsweek issued a followup statement in regards to the denials ... "Newsweek stands strongly behind Ms. Goodman and her article. Ms. Goodman's reporting was motivated by a search for the truth surrounding a major business story, absent any other agenda. The facts as reported point toward Mr. Nakamoto's role in the founding of Bitcoin."

I believe Newsweek has it correct. Leah McGrath Goodman did a fantsatic job of investigative reporting.

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

China Exports Decline Unexpectedly, Trade Balance Negative

Posted: 08 Mar 2014 10:09 AM PST

In yet another downside surprise, China February Exports Tumble Unexpectedly.

China's exports unexpectedly tumbled in February, swinging the trade balance into deficit and adding to fears of a slowdown in the world's second-largest economy despite the Lunar New Year holidays being blamed for the slide.

The sharp drop in exports follows a series of factory surveys since the start of 2014 that point to weakness in economic activity as demand falters at home and abroad.

Exports in February fell 18.1 percent from a year earlier, following a 10.6 percent jump in January, the General Administration of Customs said on Saturday.

Imports rose 10.1 percent, yielding a trade deficit of $23 billion for the month versus a surplus of $32 billion in January.

That compares with market expectations in a Reuters poll of a rise of 6.8 percent in exports, an 8 percent rise in imports and a trade surplus of $14.5 billion.

Analysts cautioned against reading too much into single-month figures for January or February, given possible distortions caused by the long Lunar New Year holiday, which began on January 31 and covered early February. Many plants and offices shut for extended periods during the festival.

Still, combined exports in January and February fell 1.6 percent from the same period a year earlier, versus a 7.9 percent full-year rise in 2013. Imports rose 10 percent year-on-year in the first two months, compared with a 7.3 percent rise in 2013.

Exports to the United States edged up 1.3 percent in the first two months from a year earlier, while sales to the European Union rose 4.6 percent, according to official data.

CONFIDENT ON OUTLOOK

China's trade outlook is widely expected to be rosier this year in line with a recovery in developed countries. Minsheng Securities' Li said he expected exports to pick up in March.

Expect More Downward Surprises

Why everyone expects a rosy global economic forecast led by the US, Europe, and developed countries in general is a mystery. I expect more downward surprises of all sorts.

China Overtakes US in Trade

By the way, back in January, the Financial Times reported China Overtakes US as World's Largest Goods Trader.

China became the world's biggest trader in goods for the first time last year, overtaking the US for all of 2013 and finishing the year with record trade figures in December.

Coming fast on the heels of China taking over as the world's largest oil importer, the shift is another milestone as the country takes its place among the world's most powerful nations. Trade with the rest of Asia and increasing flows with the Middle East represent a shift in power away from the US, still the world's largest economy.

The total value of China's imports and exports in 2013 was $4.16tn, a 7.6 per cent increase from a year earlier on a renminbi-adjusted basis, according to figures released by the Chinese government on Friday.

The US will release its full-year figures in February but its total imports and exports of goods amounted to $3.57tn in the 11 months from January to November 2013, making it a virtual certainty that China is now the world's biggest goods trading nation.

The country became the world's biggest goods exporter in 2009 and Chinese imports and exports now account for more than 10 per cent of global goods trade, up from just 3 per cent in 2000.

Iron ore imports grow

It was a single cargo of iron ore arriving in Shandong Province on December 19 that pushed China's total trade for 2014 over the milestone $400bn mark, turning the nation into the world's largest trader of goods for the first time in centuries.

"Consensus expectations for Chinese steel demand and production are too low," said Christopher LaFemina of investment bank Jefferies, who argued that China's steel production would not peak for another decade due to continued demand from growing cities.

In spite of obvious malinvestments in vacant cities, vacant malls, unused rail systems, etc., LaFemina thinks the boom will not peak for another 10 years. Amazing.

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

Time for Congress to Raise the Minimum Wage for the American People

Featured

Weekly Address: Time for Congress to Raise the Minimum Wage for the American People

In this week's address, President Obama highlighted the momentum building across the country to give Americans a raise and reiterated his call for Congress to increase the minimum wage from $7.25 to $10.10. The President has already signed an executive order to raise the minimum wage for people working under new federal contracts.

Companies large and small are choosing to give workers a raise because they know it's good business. And Governors across the country are answering the President's call by working to raise their states' minimum wages. Now, it's time for Congress to get the job done and restore opportunity for all Americans by raising the minimum wage to "ten-ten."

Click here to watch this week's Weekly Address.

Weekly Wrap Up

President Obama Announces His 2015 Budget

The President traveled to Powell Elementary School on Tuesday after sending his 2015 budget to Congress. There, he discussed what he called a "roadmap" for the opportunity agenda he laid out in his State of the Union address.

"Our budget is about choices," President Obama said. "It's about our values. As a country, we've got to make a decision if we're going to protect tax breaks for the wealthiest Americans, or if we're going to make smart investments necessary to create jobs and grow our economy, and expand opportunity for every American."

READ MORE

YouTube Stars Visit The White House

Some of the nation's most popular YouTube video creators stopped by the White House last week to speak with senior administration officials about the issues that matter most to them and their audiences, including anti-bullying, education, economic opportunity, and health care. The President stopped by, too.

The YouTube celebs spoke about how they take advantage of social media platforms and discussed ideas and strategies that can help raise awareness about health care enrollment.

READ MORE

It's Time To Give America a Raise

On Wednesday, President Obama took his opportunity agenda to the road to talk about the importance of raising the minimum wage.

While at Central Connecticut State University, the President reminded the crowd that raising the federal minimum wage to $10.10 an hour would help not only minimum wage workers, but it would life wages for more than 28 million Americans across the country.

READ MORE

An Update On The Crisis In Ukraine

Yesterday, President Obama delivered a statement on efforts to address the ongoing crisis in Ukraine from the Brady Press Briefing Room.

As always, to see even more of this week's events, watch the latest episode of West Wing Week:

WATCH NOW

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vineri, 7 martie 2014

Mish's Global Economic Trend Analysis

European Border Changes Over Last 1000 Years

Posted: 07 Mar 2014 01:57 PM PST

To help put the Russia-Ukraine battle over Crimea in proper perspective, here's a long historical look at European borders.

Link if video does not play: European Border Changes over Last 1000 Years

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

Nonfarm Payrolls +175,000, Household Survey +42,000; Unemployment Rate 6.7%

Posted: 07 Mar 2014 07:59 AM PST

Initial Reaction

Nonfarm Payrolls rose by 175,000 vs. a Bloomberg consensus expectation of 150,000.

The employment change for December 2013 was revised up by 9,000 (from +75,000 to +84,000), and the employment change for January 2014 was revised up by 16,000 (from +113,000 to +129,000). The overall effect was a modest two-month upward revision of +25,000.

Beneath the surface, things look worse again. The household survey shows a gain of employment of only 42,000 while unemployment rose by 223,000.

February BLS Jobs Statistics at a Glance

Nonfarm Payroll: +175,000 - Establishment Survey
Employment: +42,000 - Household Survey
Unemployment: +223,000 - Household Survey
Involuntary Part-Time Work: -71,000 - Household Survey
Voluntary Part-Time Work: -138,000 - Household Survey
Baseline Unemployment Rate: +0.1 to 6.7% - Household Survey
U-6 unemployment: -0.1 to 12.6% - Household Survey
Civilian Non-institutional Population: +170,000
Civilian Labor Force: +264,000 - Household Survey
Not in Labor Force: -94,000 - Household Survey
Participation Rate: +0.0 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 past year the population rose by 2,257,000.
In the last year the labor force fell by 213,000.
In the last year, those "not" in the labor force rose by 2,253,000
Over the course of the last year, the number of people employed rose by 2,044,000 (an average of 170,333 a month)

The population rose by over 2 million, but the labor force fell by over 200,000. People dropping out of the work force accounts for much of the declining unemployment rate.

February 2014 Employment Report

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

Total nonfarm payroll employment increased by 175,000 in February, and the unemployment rate was little changed at 6.7 percent, the U.S. Bureau of Labor Statistics reported today. Employment increased in professional and business services and in wholesale trade but declined in information.

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

Unemployment Rate - Seasonally Adjusted

Nonfarm Employment January 2011 - February 2014

click on chart for sharper image

Nonfarm Employment Change from Previous Month by Job Type

Hours and Wages

Average weekly hours of all private employees declined 0.1 hours at 34.2 hours. Average weekly hours of all private service-providing employees declined 0.2 hours to 33.0 hours.

Average hourly earnings of private workers rose $0.09 to $20.50. Average hourly earnings of private service-providing employees rose $0.10 to $20.30.

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 6.7%. 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 12.6%. 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 month modestly beat expectation with a decent report of 175,000 jobs. Beneath the surface, things looked worse.

Correction: I originally stated the March 2013 adjustment of 369,000 (made just last month) was to the household survey. It was to the establishment survey. Sections revised accordingly.

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