Central Perk: 15 mar. 2012

joi, 15 martie 2012

Mish's Global Economic Trend Analysis

California Tax Revenues Plunge; Businesses Exit "Taxifornia" in Droves; Piecing Together the Jobs-Picture Puzzle

Posted: 15 Mar 2012 02:59 PM PDT

California Tax Revenue Plunges

Inquiring minds have noticed a huge plunge in California Tax Revenue for the month of February compared to February 2011.

That is a 22.55% plunge in spite of the fact that this February was a leap year adding a day to the calendar.

Madeline Schnapp, at TrimTabs Investment Research sent me a quick note regarding that plunge a few days ago.

Madeline writes...

Hello Mish

I came across this little tidbit from the February report from the Comptroller's office of the State of CA.

In Feb 2012 income tax receipts are down $328 million y-o-y, or 16.5%. Ouch!

What about retail sales taxes? CA had a "temporary" sales tax hike of one cent that expired last July. Adjust the data to reflect that change, it looks like sales taxes in February are $400 million y-o-y +/-, a decline of about 12.4%. Double ouch!

That doesn't sound like robust growth to me.

Something About the Economy Doesn't Add Up

In Piecing Together the Jobs-Picture Puzzle, Jon Hilsenrath at The Wall Street Journal wonders "How can an economy that is growing so slowly produce such big declines in unemployment?"

Something about the U.S. economy isn't adding up.

At 8.3%, the unemployment rate has fallen 0.7 percentage point from a year earlier and is down 1.7 percentage points from a peak of 10% in October 2009. Many other measures of the job market are improving. Companies have expanded payrolls by more than 200,000 a month for the past three months, according to Labor Department data. And the number of people filing claims for government unemployment benefits has fallen.

Yet the economy is barely growing. Many economists in the past few weeks have again reduced their estimates of growth. The economy by many estimates is on track to grow at an annual rate of less than 2% in the first three months of 2012. The economy expanded just 1.7% last year. And since the final months of 2009, when unemployment peaked, the economy has expanded at a pretty paltry 2.5% annual rate.

How can an economy that is growing so slowly produce such big declines in unemployment?
Trimtabs thinks the problem lies in the heavily massaged BLS employment data and the highly suspect BEA personal income data.

That said, withholding tax data is also messy and not a perfect measure either, but no matter what I do with the data, I can't get to 200,000+ jobs unless a huge percentage of the workforce is suddenly working for McDonalds

Best,

Madeline Schnapp
Director, Macroeconomic Research
TrimTabs Investment Research

Many Explanations for the Unemployment Puzzle

There are many explanations for the "miracle drop" in unemployment.

Disability Fraud: Disability Fraud Holds Down Unemployment Rate; Jobless Disability Claims Hit Record $200B in January
Exploding growth in student loans and middle-aged job hopefuls returning to school: Consumer Credit "Demolishes Expectations" Really? No Not Really! The "Non-Bounce" in Non-Revolving Credit
Involuntary Retirement: Boomers of retirement age that still want and need a job have involuntarily retired to collect social security because unemployment benefts rans out and they have no other source of income.

Divergence with Gallup

Those there things piece together the "unemployment puzzle" nicely except for one thing. Gallup polls do not agree as noted in Gallup Reports Large Jump in Unemployment to 9.1%, Underemployment to 19.1%.

U.S. unemployment, as measured by Gallup without seasonal adjustment, increased to 9.1% in February from 8.6% in January and 8.5% in December.

The 0.5-percentage-point increase in February compared with January is the largest such month-to-month change Gallup has recorded in its not-seasonally adjusted measure since December 2010, when the rate rose 0.8 points to 9.6% from 8.8% in November.

So, is the BLS carefully massaging the data, or are their seasonal adjustments simply that far out of line with reality, tax collections, and common sense?

Businesses Exit California in Droves

Madeline and I are not the only ones who noticed the plunge in California. Chriss W. Street on Beitbart discusses the California Exodus behind the drop. Street has the reason: Businesses fed up with high taxes have fled the state.

California politicians seem delusional in their continued delusion that high taxes have not savaged the State's economy. Each month's disappointment is written off as due to some one-time event.

The more likely reason tax collections continue falling is that businesses and successful people are leaving California for the better tax rates available in more pro-business states.

Derisively referred to as "Taxifornia" by the independent Pacific Research Institute, California wins the booby prize for the highest personal income taxes in the nation and higher sales tax rates than all but four other states. Though Californians benefit from Proposition 13 restrictions on how much their property tax can increase in one year, the state still has the worst state tax burden in the U.S.

Spectrum Locations Consultants recorded 254 California companies moved some or all of their work and jobs out of state in 2011, 26% more than in 2010 and five times as many as in 2009. According SLC President, Joe Vranich: the "top ten reasons companies are leaving California: 1) Poor rankings in surveys 2) More adversarial toward business 3) Uncontrollable public spending 4) Unfriendly business climate 5) Provable savings elsewhere 6) Most expensive business locations 7) Unfriendly legal environment for business 8) Worst regulatory burden 9) Severe tax treatment 10) Unprecedented energy costs.

Vranich considers California the worst state in the nation to locate a business and Los Angeles is considered the worst city to start a business. Leaving Los Angeles for another surrounding county can save businesses 20% of costs. Leaving the state for Texas can save up to 40% of costs. This probably explains why California lost 120,000 jobs last year and Texas gained 130,000 jobs.

California Governor Jerry Brown's answer to the State's failing economy and crumbling tax revenue is to place a $6 billion tax increase initiative on the ballot to support K-12 public schools. He promises to only "temporarily" raise personal income rates by 25% on any of the rich folk who haven't already left.

Taxed to Death

If Brown continues to suck up to the public unions responsible for the mess California is in, expect still more businesses to leave, expect the unemployment rate to rise, and expect a continued plunge in revenue.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

"Curbs Needed to Avoid China Property Chaos" Says China's Premier; Chinese Economy Already in Hard Landing? Regardless, It's Too Late to Prevent Chaos

Posted: 15 Mar 2012 10:04 AM PDT

JPMorgan analyst Adrian Mowat says Chinese Economy Already in 'Hard Landing'

"If you look at the Chinese data, you should stop debating about a hard landing," Mowat, who is based in Hong Kong, said at a conference in Singapore yesterday. "China is in a hard landing. Car sales are down, cement production is down, steel production is down, construction stocks are down. It's not a debate anymore, it's a fact." His team was a runner-up for best Asian equity strategists in a 2011 Institutional Investor magazine poll.

Mowat said in May the risk of a hard landing was building in China as fixed-asset investment in real estate had increased even as property demand remained weak. That meant residential inventories will increase and lead to a contraction in construction activity, he said in a May 17 interview.

Gary Shilling, president of A. Gary Shilling & Co., a Springfield, New Jersey-based consultancy firm, said on Feb. 2 that China's economy is headed for a "hard landing" this year as weaker demand overseas chokes off exports. Shilling, who correctly forecast the U.S. recession that began in December 2007, defines a hard landing as a growth rate below 6 percent.

Shilling and Mowat's views are in contrast with Yale University Professor Stephen Roach, a former non-executive chairman for Morgan Stanley in Asia, who said on March 8 that concerns China will enter a hard landing are "vastly overblown."

"I don't think the banking system will collapse and the property bubble will burst," Roach said at a conference in Shanghai. "These are all exaggerations."

Roach's Misses the Boat

Bubbles always burst. Moreover, it should be plain to see

China has a huge property bubble
China's banking sector is unsound
China's state-owned-enterprises (SOEs) are in horrible shape
China's over-reliance on investments with no genuine economic feasibility guarantee China's current boom is not sustainable.

"Hard Landing" Depends on the Definition

Shilling says growth under 6% is a hard landing. Michael Pettis at China Financial Markets makes a strong case for Only 3% Growth for Decade

I think Pettis' growth target is correct, but I am not sure he calls that result "a hard landing". I do, and it will shock a lot of people when it happens.

Jim Chanos is not one of those who will be surprised. He is betting on growth as low as 0% as noted in China's Growth Won't Last; Chanos on Chinese Property Bubble and Growth.

"Curbs Needed to Avoid China Property Chaos"

Even Chinese Premier Wen Jiabao knows China has a property bubble, one that has already popped but has much further yet to fall.

Bloomberg reports Wen Says Curbs Needed to Avoid China Property 'Chaos'

Chinese Premier Wen Jiabao said that home prices remain far from a reasonable level and relaxing curbs could cause "chaos" in the market, indicating no imminent relaxation of cooling measures.

"We must not slacken our efforts in regulating the housing sector," Wen said at a press conference in Beijing today, according to an English translation. A bursting property bubble would hurt the entire economy, and the government wants "long- term steady and sound growth" in housing, he said.

Too Late to Prevent Chaos

Chinese property bubbles and malinvestments are too big, and the Chinese economy too unbalanced to prevent chaos. Indeed the only way to prevent chaos is to not let bubbles form in the first place.

The only question at hand regards the strength and length of the slowdown. I think Pettis has things about right, but I would also caution that risks are far skewed to the downside.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Damn Cool Pics

Beautiful Surfing at Byron Bay

Posted: 15 Mar 2012 12:28 AM PDT

The smooth surfer Jorgelina "Lina" Reyero hails from a small town on the Atlantic Coast of Argentina. She's spent the last 6 years wandering the world with her surfboard in tow and has wound up near the beautiful Wategos Beach. Last month, she mounted a little camera to the nose of her log and captured the beauty of an empty surf. Locally based production company 'Rest Your Eyes' then glued up the tapes for your viewing pleasure.

Exploding Iceberg in Antarctica

Posted: 15 Mar 2012 12:11 AM PDT

Cruising the waters around Antarctica may not appeal to everyone's sense of adventure, but passengers on this ship got a real shock when the iceberg they were passing in Wilhelmina Bay suddenly exploded.

Via: Alltop

Photo Gallery: Your Backstage Pass to the UK State Arrival

Your Daily Snapshot for
Thursday, March 15, 2012

Photo Gallery: Your Backstage Pass to the UK State Arrival

President Obama welcomed Prime Minister David Cameron of the United Kingdom to town this week for an official visit. The two leaders reviewed the troops assembled as an honor guard for the occasion, and talked about "the rock-solid alliance" between the United States and the United Kingdom.

At a joint press conference in the Rose Garden, both leaders expressed interest in a cross-cultural sports exchange -- Prime Minister Cameron offered the President an introduction to cricket in exchange for his crash-course in bracketology.

Check out the full gallery of photos from yesterday’s ceremony.

President Barack Obama and Prime Minister David Cameron of the United Kingdom shake hands with students during the Official Arrival Ceremony on the South Lawn, March 14, 2012. (Official White House Photo by Pete Souza)

Seth's Blog : We say we want a revolution...

We say we want a revolution...

Of course, what we say doesn't matter so much. What we do is what matters, and we have far more influence that we'd like to confess.

We say we want local merchants to offer great service, deep selection and community values, but we cross the street to the big box store to save $3.

We say we want companies to honor their promises and act transparently, but one new product or big discount from a business that has deceived us in the past and we come right back for more.

We say we're disgusted with Congress, but almost all of us vote to re-elect the dufus we sent there in the first place.

We say we hate spam, but we send it. And sometimes buy from it.

We say we'd like people to think first and act later, but we get cut off in traffic and all bets are off.

We say we love art, the brave work that touches us, but we listen to oldies and rarely head out to hear live music or visit a cutting edge gallery.

Hypocrisy may be an epidemic, but the problem isn't in what we say. It's what we do.