Mish's Global Economic Trend Analysis |
- Another Plunge in 3-Month Rolling Average of Petroleum and Gasoline Usage
- Greece "Credit Event" Triggers $3B in CDS Contracts; Wolfgang Schäuble Issues Another Warning to Greece; Eurozone Exit Trigger Is Cocked
- Euro Sell the News Round-Trip
- Nonfarm Payroll +227,000 ; Unemployment Rate Steady 8.3%; BLS vs. Gallup
| Another Plunge in 3-Month Rolling Average of Petroleum and Gasoline Usage Posted: 09 Mar 2012 11:19 PM PST The following chart shows U.S. petroleum and gasoline usage for December-February compared with the same three months in prior years. Chart is courtesy of reader Tim Wallace. Note that petroleum usage is back to December 1995 thru February 1996 levels. Gasoline usage is back to December 2001 thru February 2002 levels.  click on chart for sharper image All data derived directly from the Data 10 section of the EIA download. The daily average of each week in the listed month adds to the monthly total. Some months have four weeks others five, but over three months this tends to average out. Contrary to popular belief, the decline in gasoline usage has little or nothing to do with cash-for clunkers or improved gas mileage in cars unless one fantasizes that gas mileage improvements started precisely in 2007. Wallace comments "If this trend lasts for the rest of the year, Obama's stated goal of a 15% reduction in greenhouse gases based off 2005 numbers may be met this year instead of his 2015 goal." Should that happen, I wonder how many will be happy with the economic result. 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: 09 Mar 2012 01:09 PM PST At long last the ISDA has agreed that Greece in in default, and that default constitutes a "credit event". Bloomberg reports Greece Deal Triggers $3B in Default Swaps. Greece's use of collective action clauses forcing investors to take losses under the nation's debt restructuring will trigger payouts on $3 billion of default insurance, the International Swaps & Derivatives Association said.Wolfgang Schäuble Issues Another Warning to Greece The Financial Times reports Greek debt swap triggers massive payouts. Billions of dollars are to be paid out in insurance-like instruments as Greece on Friday pressed ahead with the largest ever sovereign debt restructuring.Eurozone Exit Trigger Is Cocked Greece will exit the eurozone. However, the timing is still in question. I suggest Greek politicians will not meet increasing conditions placed on Greece by Germany and that later this month funding will be cut off triggering a Greek return to the drachma. If so, look for enough funds to be dispersed to Greece in the next couple weeks that allow a quick round-trip to the ECB to make the ECB whole. Once the ECB is in a no-loss situation, the roof can easily cave in. The exit trigger is cocked. All it takes is for either Greece or Germany to pull it. 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: 09 Mar 2012 09:42 AM PST The following chart shows the silly rise in sentiment over the last two day that "Success at Gunpoint" actually meant something good. Euro 15-Minute Chart (2-Day Timeframe)  click on chart for sharper image Following the announcement the deal would go through coupled with reasonable job growth in the US, traders changed their minds. The euro rose from just above 1.31 to 1.33 and back again. 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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| Nonfarm Payroll +227,000 ; Unemployment Rate Steady 8.3%; BLS vs. Gallup Posted: 09 Mar 2012 08:25 AM PST Quick Notes About the Unemployment Rate
Over the past several years people have dropped out of the labor force at an astounding, almost unbelievable rate, holding the unemployment rate artificially low. Some of this was due to major revisions last month on account of the 2010 census finally factored in. However, most of it is simply economic weakness. Jobs Report at a Glance Here is an overview of 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. February 2012 Jobs Report Please consider the Bureau of Labor Statistics (BLS) February 2012 Employment Report. Nonfarm payroll employment rose by 227,000 in February, and the unemployment rate was unchanged at 8.3 percent, the U.S. Bureau of Labor Statistics reported today. Employment rose in professional and businesses services, health care and social assistance, leisure and hospitality, manufacturing, and mining. Unemployment Rate - Seasonally Adjusted  Nonfarm Employment - Payroll Survey - Annual Look - Seasonally Adjusted  Actual employment is about where it was in 2001. 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. Over the last two years, nonfarm payrolls have added 3.5 million jobs. Of the 8.8 million net jobs lost between January 2008 and February 2010, 40 percent have been recovered. Statistically, 127,000 jobs a month is enough to keep the unemployment rate flat. The average employment gain over the last two years has been 145,000, barely enough (statistically speaking) to make a dent in the unemployment rate. Yet, the civilian unemployment rate has dropped from 9.8% to 8.3%.  Average Weekly Hours  Index of Aggregate Weekly Hours  Average Hourly Earnings vs. CPI  "Success" of QE2 and Operation Twist
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 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  Birth Death Model Adjustments For 2012  Birth-Death Note Once again: Do NOT subtract the Birth-Death number from the reported headline number. That approach is statistically invalid. Household Survey Data  click on chart for sharper image In the last year, the civilian population rose by 3,584,000. Yet the labor force only rose by 1,569,000. Those not in the labor force rose by 2,014,000. That is an amazing "achievement" to say the least, and as noted above most of this is due to economic weakness not census changes. Decline in Labor Force Factors
Were it not for people dropping out of the labor force, the unemployment rate would be well over 11%. Part Time Status  click on chart for sharper image Part-time status shows little improvement vs. a year ago. Table A-15  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 8.3%. 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. U-6 is much higher at 14.9%. Both numbers would be way higher still, were it not for millions dropping out of the labor force over the past few years. Grossly Distorted Statistics Given the complete distortions of reality with respect to not counting people who allegedly dropped out of the work force, it is easy to misrepresent the headline numbers. Digging under the surface, the drop in the unemployment rate over the past two years is nothing but a statistical mirage. Things are much worse than the reported numbers indicate. BLS vs. Gallup Gallup has the unemployment rate at 9.1% not 8.3% and the "underemployment" number at 19.1%, not 14.9%. Bear in mind the Gallup numbers are not seasonally adjusted but the BLS numbers reported above are. Nonetheless, it's entirely safe to say that 19.1% is far closer to the truth than 14.9%. Please see Gallup Reports Large Jump in Unemployment to 9.1%, Underemployment to 19.1% for details. 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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