Well, this month brings something similar to good news. The numbers I have been seeing for the past several weeks are saying the recession is likely to wait several more months and is likely to be milder than I expected. Here in the U.S., that is. The recession seems to be right on schedule in Europe and already started in Japan.
Of course if you bet heavily on us going into recession, this might be bad news. I never bet heavily on any particular direction, and thus never lose a lot. Never make a lot either. (Bit of my humor there.)
All though the past year or so, I saw copper losing ground, which is an indicator that manufacturing was weaker than everyone thought. And then oil prices began to drop. That is always a sign that a recession is beginning. And it is. Just not here. The Department of Labor's statistics said this month that the U.S. added 170,000 manufacturing jobs in the past year. While that is not spectacular, it is substantial.
What appears to be happening is some of the manufacturing that used to be overseas is now happening here in the U.S. And what about that drop in oil prices? Well despite the Obama administration attempts to block oil production anywhere they could, oil and gas exploration and extraction has increased everywhere that the Fed's don't have jurisdiction.
Now, when the rest of the world goes into recession, it will have an effect on us. But the effect will not be as bad as we once feared. On the other hand, things will not get better at any appreciable rate for as far into the future as I can forecast.
It may be noted that I don't have any links this month. Just ran out of energy.
Will try to do better in the next few weeks.
Showing posts with label Economics. Show all posts
Showing posts with label Economics. Show all posts
Tuesday, November 18, 2014
Friday, September 12, 2014
The next recession may be starting now
Well, it looks as if the next downturn may be already beginning. There has been a perceptible slowdown in worldwide manufacturing and that is translating itself into visible numbers. Gas, oil and copper prices falling. And employment numbers weakening (or down, depending on which numbers you look at).
There are some good tidbits. Or maybe "not so bad" tidbits. With prices down, if you do have a job, there is no time like the present to be stocking up on things you will need to ride out the next few years. Of course, if you are one of the millions who have fallen victim to Obama's policies and are now out of work, you will be struggling just to survive in the not too distant future.
I am a bit disappointed we didn't get that year of prosperity I forecast last year, but it looks as though we may be in for a rough time in the next few years.Since December 2012, private industries paying up to about $14.50 an hour have added, on net, 972,000 nonsupervisory jobs with an average workweek of a mere 17.7 hours, an IBD analysis finds.That doesn't mean new employees are being hired for such few hours. Rather, it reflects a combination of reduced hours in existing jobs and short workweeks for newly created jobs.Overall, in these low-wage industries which employ 30 million rank-and-file workers, the average workweek shrank to 27.3 hours per week in July, an IBD analysis shows. That's the shortest workweek on record, except for this past February, when mid-month blizzards wreaked havoc during the Bureau of Labor Statistics survey week.The conventional wisdom among economists is that there's been no apparent shift to part-time work and that ObamaCare's employer mandate hasn't led to shorter workweeks.But shorter hours clocked by nonmanagers in low-wage industries are being obscured because the rest of the workforce is now clocking a longer average workweek than even before the recession started.For low-wage industry workers, on the other hand, the recovery in the workweek from a then-record low 27.5 hours in mid-2009 began to reverse in the latter half of 2012, and it's been pretty much all downhill since then.Evidence points to ObamaCare as an important factor in the shrinking workweek.
Read More At Investor's Business Daily: http://news.investors.com/economy/090514-716193-worst-job-stat-keeps-getting-worse.htm#ixzz3D8npd64y
Follow us: @IBDinvestors on Twitter | InvestorsBusinessDaily on Facebook
There are some good tidbits. Or maybe "not so bad" tidbits. With prices down, if you do have a job, there is no time like the present to be stocking up on things you will need to ride out the next few years. Of course, if you are one of the millions who have fallen victim to Obama's policies and are now out of work, you will be struggling just to survive in the not too distant future.
Friday, July 04, 2014
July Economics Report - looking bad
The first part of this months report showed quite a few things looking pretty upbeat. Enough so, that one could wonder why I think the upswing will run out of steam before there is a true recovery.
But the jobs market analysis is pretty horrible. The guy I trust to do the analysis talks like it is catastrophic, but I chock it up to being just one more month with good looking numbers on the surface and some pretty dismal numbers underneath.
First, the headline number the government always tries to push, 288,000 new jobs, isn't too bad. In fact anything over 200,000 jobs should be progress. But the manufacturing jobs, where the wealth is created, was only about 15,0000, and we need 20,000 plus jobs there every month. We haven't gotten sufficient growth in manufacturing jobs in any of the past several months.
But what is worse is the number of part time jobs vs the number of full time. The number of full time jobs actually went down this month. By more than 288,000. So, what has happened, by and large, is that a lot of people who used to work a full time job, are now working two part time jobs.
I do recommend Mish Shedlock's blog on Global Economic Trend Analysis for learning and tracking economic news around the world. I don't recommend learning about war from him. First, I don't think he understands war. I suspect he just cannot get his arms around the idea that someone will kill you for having an opinion different that their own. Second, while he seems to have a fairly realistic opinion of how brutal and under handed our own government can be, he seems to not understand just how much more brutal and dishonest other governments tend to be. Third, his opinions on the war in Ukraine are being formed by someone with an agenda to make Russia look good and Ukraine and The West look bad.
All in all, he is a genius about economics, but about war- not so much.
But the jobs market analysis is pretty horrible. The guy I trust to do the analysis talks like it is catastrophic, but I chock it up to being just one more month with good looking numbers on the surface and some pretty dismal numbers underneath.
First, the headline number the government always tries to push, 288,000 new jobs, isn't too bad. In fact anything over 200,000 jobs should be progress. But the manufacturing jobs, where the wealth is created, was only about 15,0000, and we need 20,000 plus jobs there every month. We haven't gotten sufficient growth in manufacturing jobs in any of the past several months.
But what is worse is the number of part time jobs vs the number of full time. The number of full time jobs actually went down this month. By more than 288,000. So, what has happened, by and large, is that a lot of people who used to work a full time job, are now working two part time jobs.
I do recommend Mish Shedlock's blog on Global Economic Trend Analysis for learning and tracking economic news around the world. I don't recommend learning about war from him. First, I don't think he understands war. I suspect he just cannot get his arms around the idea that someone will kill you for having an opinion different that their own. Second, while he seems to have a fairly realistic opinion of how brutal and under handed our own government can be, he seems to not understand just how much more brutal and dishonest other governments tend to be. Third, his opinions on the war in Ukraine are being formed by someone with an agenda to make Russia look good and Ukraine and The West look bad.
All in all, he is a genius about economics, but about war- not so much.
Thursday, July 03, 2014
July Economics Report - looking good
Well, the markets are still rising. The underlying economy got better too, though not enough to account for the markets, which were overpriced, and became more so this month. People do, but should not, confuse a rising market with an improving economy.
The U.S. manufacturing sector turned in good numbers last week. We seem to have gotten some real, though slight, growth over the past year. This growth is in parallel to the world wide growth in manufacturing. These are good things. (Remember, it was around this time last year that I said I expected an 18 month growth cycle. The length of the growth cycle seems to be slightly slower than expected, but should still run until the end of the year, and maybe a few months beyond.)
The jobs report is out a day early this month, due to the 4th of July weekend. Not bad, considering it was several weeks late around this time last year, as the Obama administration threw a tantrum because we reminded them that the Administration works for us, and not us for him.
I don't have the analysis of the monthly payroll report yet,
so I will have a follow up to this report, probably tomorrow
(I don't take holidays the same way everyone else does).
Meanwhile, on the global stage, copper has been slowly rising, again pointing to an upsurge in world manufacturing. Add to this the June Global Grain Report from FoodSecurity.org showing the world grain reserves are higher than they have been in years, and it paints a pretty good picture of a world where things are getting better. (Don't get too deceived)
The U.S. Treasury bond market, however, doesn't paint such a good picture. T-Bills are still pulling less than 1% interest for anything up to something over three (almost four) years, an indication that true recovery is still at least three years away. The unfortunate flip-side to this number is devastatingly paradoxical. The 18 month growth cycle I mentioned at the beginning of this article shows there will be NO true recovery.
Despite the Obama Administration attempting to roadblock crude oil production on several fronts, production of crude, and stuff made from it, has increased to the point where we are now net exporters. This means that, in spite of all the talk about instability in the Middle East, the risk of interruption in the U.S. supplies is only the risk of damage to our own infrastructure. This means we have risk from destruction of refineries or pipelines but not from an interruption in supplies from the Middle East. The natural gas sector has not done as well, although I am not sure why.
Our allies are not so fortunate. Disruption in shipping through the Persian Gulf or disruptions in many other places put their supply at risk. Much of Europe is hostage to supplies from Russia. Especially Southern Europe, and the Balkans (small countries in Eastern Europe). The Ukraine and nearby countries are almost certain to suffer gas and oil shortages this coming winter. And that doesn't mean it will just be cold in their homes. Gas is necessary for industry, manufacturing, transportation, and other commerce. Those things grinding to a halt this winter will slow the world economy, although only by a small percentage.
I hope to be posting a follow up to this either late today or tomorrow.
The U.S. manufacturing sector turned in good numbers last week. We seem to have gotten some real, though slight, growth over the past year. This growth is in parallel to the world wide growth in manufacturing. These are good things. (Remember, it was around this time last year that I said I expected an 18 month growth cycle. The length of the growth cycle seems to be slightly slower than expected, but should still run until the end of the year, and maybe a few months beyond.)
The jobs report is out a day early this month, due to the 4th of July weekend. Not bad, considering it was several weeks late around this time last year, as the Obama administration threw a tantrum because we reminded them that the Administration works for us, and not us for him.
I don't have the analysis of the monthly payroll report yet,
so I will have a follow up to this report, probably tomorrow
(I don't take holidays the same way everyone else does).
Meanwhile, on the global stage, copper has been slowly rising, again pointing to an upsurge in world manufacturing. Add to this the June Global Grain Report from FoodSecurity.org showing the world grain reserves are higher than they have been in years, and it paints a pretty good picture of a world where things are getting better. (Don't get too deceived)
The U.S. Treasury bond market, however, doesn't paint such a good picture. T-Bills are still pulling less than 1% interest for anything up to something over three (almost four) years, an indication that true recovery is still at least three years away. The unfortunate flip-side to this number is devastatingly paradoxical. The 18 month growth cycle I mentioned at the beginning of this article shows there will be NO true recovery.
Despite the Obama Administration attempting to roadblock crude oil production on several fronts, production of crude, and stuff made from it, has increased to the point where we are now net exporters. This means that, in spite of all the talk about instability in the Middle East, the risk of interruption in the U.S. supplies is only the risk of damage to our own infrastructure. This means we have risk from destruction of refineries or pipelines but not from an interruption in supplies from the Middle East. The natural gas sector has not done as well, although I am not sure why.
Our allies are not so fortunate. Disruption in shipping through the Persian Gulf or disruptions in many other places put their supply at risk. Much of Europe is hostage to supplies from Russia. Especially Southern Europe, and the Balkans (small countries in Eastern Europe). The Ukraine and nearby countries are almost certain to suffer gas and oil shortages this coming winter. And that doesn't mean it will just be cold in their homes. Gas is necessary for industry, manufacturing, transportation, and other commerce. Those things grinding to a halt this winter will slow the world economy, although only by a small percentage.
I hope to be posting a follow up to this either late today or tomorrow.
Monday, June 09, 2014
Monthly Economic Post, Part 3
Payroll numbers are out, and again, I am letting Mish Shedlock do the heavy lifting. His report is not as detailed as some of the ones he has done in the past, but then, this month is not that noteworthy. Employment numbers are up, but not quite enough to keep up with population growth. Manufacturing, likewise, is up, but not enough to keep up with population growth. Another stagnant month in the actual economy.
The market have risen for another month, as they have for the past dozen months. Not to be confused with the economy, the markets are rising because people invest, and they invest because they think the markets will rise. This will continue until enough of those betting on the markets need to use that money for something else, and then there will be a race to the bottom.
The market have risen for another month, as they have for the past dozen months. Not to be confused with the economy, the markets are rising because people invest, and they invest because they think the markets will rise. This will continue until enough of those betting on the markets need to use that money for something else, and then there will be a race to the bottom.
Thursday, June 05, 2014
Monthly Economic Outlook Pt. 2
It appears there is real growth in the Manufacturing Sector, as the ISM is above my benchmark of 52.5, which is where I consider real growth to start.
While this growth doesn't seem to be adequate to account for the market bubble, it may be more in line with my expectations that 2014 would be a year of good economic growth. This may be the growth I predicted in August of last year, and again in December of last year.
My feelings on this are "well, it's about time." The malaise we experienced from Feb until now had me concerned we might just remain stagnant for an extended period, possibly running into years.
Of course, in a way, that would have been a good thing, as the good economy of the next few months (I don't know how many) will inevitably be followed by the economy turning downwards again, and another recession.
The Employment situation from Bureau of Labor Statistics is supposed to come out later this morning, and it will complete the current picture.
UPDATE: It appears the "stupid money" I predicted would surge into the markets may have already begun. 'Mish' Shedlock has an article on his blog showing a surge in risky investments that may be larger than the surges that preceded the bubble collapses of 2000 and 2007.
While this growth doesn't seem to be adequate to account for the market bubble, it may be more in line with my expectations that 2014 would be a year of good economic growth. This may be the growth I predicted in August of last year, and again in December of last year.
My feelings on this are "well, it's about time." The malaise we experienced from Feb until now had me concerned we might just remain stagnant for an extended period, possibly running into years.
Of course, in a way, that would have been a good thing, as the good economy of the next few months (I don't know how many) will inevitably be followed by the economy turning downwards again, and another recession.
The Employment situation from Bureau of Labor Statistics is supposed to come out later this morning, and it will complete the current picture.
UPDATE: It appears the "stupid money" I predicted would surge into the markets may have already begun. 'Mish' Shedlock has an article on his blog showing a surge in risky investments that may be larger than the surges that preceded the bubble collapses of 2000 and 2007.
Wednesday, May 28, 2014
Monthly Economic Outlook, Part 1
There hasn't been a whole lot to report in economics for the last two months. Mostly just a stagnant malaise in the economy, and a steady climb (bull market) in the markets that does not reflect the true underlying economic conditions. There has been, in the past few weeks, a slight increase in the price of copper, which means manufacturing is making something of a comeback. It will need to get above $3.33 per pound, though, to reflect a healthy manufacturing base.
I noticed a slight change in the bond market the past couple of days, and it may be that some of the more conservative investors are moving their money out of the stock market into long term (10 years) Treasury Bonds.
This would be in keeping with the thoughts I heard from a couple of analysts that we are in pretty far along in a Bull Market. Now, if common people begin to think the stock market is a place they can make money, we may soon see what is known as stupid money flowing into it. This is money that is put into stocks in a way that is completely disconnected from any reality of what those stocks are worth. (The very definition of a market bubble.) They unwittingly play a game called the "greater fool rule" where as long as there is someone who will pay more for the stock tomorrow or next week, the stocks will continue to rise.
At this point, all of the traditional investors will leave stocks for bonds or money market accounts, and people with a (sometimes unconscious) survivalist mentality will begin to buy into silver, platinum, gold and palladium. Of course, most of these people (at least in the US and Europe) will buy their metals on paper, since that is more convenient. A side effect of this is that more metal might be traded than actually exists in the world, so prices might climb fairly steeply.
Around this time last year, I expected the market to go into the major bubble building phase in the last half of this year. But at the time, I didn't know the government statisticians were playing around with the methods they use to generate their numbers. That is why I didn't see the stagnant malaise we were in during the last few months of 2013. Of course, that screwed up my timetable pretty dramatically, but the underlying ideas are still sound. I am still trying to judge when the market will go into bubble overdrive, and then burst. Of course, no one knows this for certain. Anyone who can reliably predict when the bubble will burst would soon be rich.
But I can guess when it will get dangerously unstable. Currently, I would look for the S&P to pass 2200 and for the bubble to continue to build past the end of the year. But I have to repeat that this is just a guess. The only thing certain is that there will be a bubble, and it will burst. Safe bets are that it will be a stock bubble (some analysts say we are already in one), and that just as it bursts gold and silver will rise (but I don't know if it will rise by 30%, or 130%).
For your reading pleasure:
I noticed a slight change in the bond market the past couple of days, and it may be that some of the more conservative investors are moving their money out of the stock market into long term (10 years) Treasury Bonds.
This would be in keeping with the thoughts I heard from a couple of analysts that we are in pretty far along in a Bull Market. Now, if common people begin to think the stock market is a place they can make money, we may soon see what is known as stupid money flowing into it. This is money that is put into stocks in a way that is completely disconnected from any reality of what those stocks are worth. (The very definition of a market bubble.) They unwittingly play a game called the "greater fool rule" where as long as there is someone who will pay more for the stock tomorrow or next week, the stocks will continue to rise.
At this point, all of the traditional investors will leave stocks for bonds or money market accounts, and people with a (sometimes unconscious) survivalist mentality will begin to buy into silver, platinum, gold and palladium. Of course, most of these people (at least in the US and Europe) will buy their metals on paper, since that is more convenient. A side effect of this is that more metal might be traded than actually exists in the world, so prices might climb fairly steeply.
Around this time last year, I expected the market to go into the major bubble building phase in the last half of this year. But at the time, I didn't know the government statisticians were playing around with the methods they use to generate their numbers. That is why I didn't see the stagnant malaise we were in during the last few months of 2013. Of course, that screwed up my timetable pretty dramatically, but the underlying ideas are still sound. I am still trying to judge when the market will go into bubble overdrive, and then burst. Of course, no one knows this for certain. Anyone who can reliably predict when the bubble will burst would soon be rich.
But I can guess when it will get dangerously unstable. Currently, I would look for the S&P to pass 2200 and for the bubble to continue to build past the end of the year. But I have to repeat that this is just a guess. The only thing certain is that there will be a bubble, and it will burst. Safe bets are that it will be a stock bubble (some analysts say we are already in one), and that just as it bursts gold and silver will rise (but I don't know if it will rise by 30%, or 130%).
For your reading pleasure:
Anyone who is thinking clearly knows the economic system fostered by central banks is totally and completely out of control.[read what Stark says at the link]
Repetitive rounds of QE, competitive currency debasement, interest rates at zero, and sponsorship of the internet bubble followed by the housing bubble, followed by the current stock market bubble is proof enough.
So, what I am about to report is really nothing but common sense, except for the fact that it comes from an unusual place, where one does not normally hear such discussions.
Jürgen Stark, former vice president of the Bundesbank, and also former chief economist of the ECB (unofficial title) says "The System is Out of Control". Via translation from Libre Mercado:
Wednesday, March 05, 2014
Ukraine, China, and Obamacare Drag us Down
The Ukraine
The markets reacted quite negatively to the invasion of Crimea (in the southernmost tip of Ukraine) by Russian forces. But they returned to normal about 3 days later, when Putin made promises that he wouldn't be using any military forces in the Ukraine.
It looks, on the surface, like the sudden alarm throughout the rest of the world has caused him to reconsider, and he is back pedaling. After all, the impact on Russian markets has been pretty dramatic, and Putin has been making overtures like he is backing down, even claiming the troops in Crimea aren't Russian at all.
China and Copper
China has been changing their statistics and forecasts about as often as the weather changes. Recently, they noted some "softness" in their manufacturing sector that they are seeking to "fine tune." Hogwash. Manufacturing in China has been slowing for some time, and absolutely must slow more before recovery can begin. In the past couple of years, the Chinese economy has been hollowing out, with bad loans, and building that have been built that no one is occupying.
One noticeable effect of the manufacturing slowdown has been the price of copper, which has been slowly losing ground for the past couple of years, especially in light of the cost of energy. Since European manufacturing has been flat, and US manufacturing has risen slightly, the only explanation must be a slowdown elsewhere. Elsewhere in this case has been India and China.
Obamacare and the mid term elections
Obama has been backpedaling on his Unaffordable Care Atrocity for some time now, and with the mid term elections approaching, expect more backpedaling and 'nuancing' (lying). Already this program has put hundreds of thousands out of full time employment and cause cuts in hours to hundreds of thousands more. It has caused the loss of medical insurance to millions, and increases in rates to almost everyone else. The administration's PR machine keeps trotting out fictitious numbers of people who have signed up for healthcare, but when checked the numbers don't match anything that can be confirmed by any means. They seem to be made up out of whole cloth.
Remember though, these are all pretty much ancillary news items. The really important numbers (private employment and manufacturing payroll) will be out on Friday.
The markets reacted quite negatively to the invasion of Crimea (in the southernmost tip of Ukraine) by Russian forces. But they returned to normal about 3 days later, when Putin made promises that he wouldn't be using any military forces in the Ukraine.
It looks, on the surface, like the sudden alarm throughout the rest of the world has caused him to reconsider, and he is back pedaling. After all, the impact on Russian markets has been pretty dramatic, and Putin has been making overtures like he is backing down, even claiming the troops in Crimea aren't Russian at all.
Putin, speaking at a news conference at his residence outside Moscow on Tuesday, denied that the troops guarding Ukrainian military installations across Crimea were regular Russian troops, claiming that they were "local self-defense forces." Many of the uniforms on those troops lack identifying insignia, but their vehicles and uniforms appear to be Russian. Putin shrugged the accusation off, saying "The post-Soviet space is full of such uniforms."Make no mistake Putin, former KGB isn't backing down. He is playing a global chess game with us, and likely has figured his next three moves every step of the way.
China and Copper
China has been changing their statistics and forecasts about as often as the weather changes. Recently, they noted some "softness" in their manufacturing sector that they are seeking to "fine tune." Hogwash. Manufacturing in China has been slowing for some time, and absolutely must slow more before recovery can begin. In the past couple of years, the Chinese economy has been hollowing out, with bad loans, and building that have been built that no one is occupying.
One noticeable effect of the manufacturing slowdown has been the price of copper, which has been slowly losing ground for the past couple of years, especially in light of the cost of energy. Since European manufacturing has been flat, and US manufacturing has risen slightly, the only explanation must be a slowdown elsewhere. Elsewhere in this case has been India and China.
Obamacare and the mid term elections
Obama has been backpedaling on his Unaffordable Care Atrocity for some time now, and with the mid term elections approaching, expect more backpedaling and 'nuancing' (lying). Already this program has put hundreds of thousands out of full time employment and cause cuts in hours to hundreds of thousands more. It has caused the loss of medical insurance to millions, and increases in rates to almost everyone else. The administration's PR machine keeps trotting out fictitious numbers of people who have signed up for healthcare, but when checked the numbers don't match anything that can be confirmed by any means. They seem to be made up out of whole cloth.
Remember though, these are all pretty much ancillary news items. The really important numbers (private employment and manufacturing payroll) will be out on Friday.
Friday, February 21, 2014
Economic Future in Question
Some changes in the underlying numbers have called into question, the upturn in the economic situation I predicted last fall. One of the more troubling aspects is a round of "adjustments" made to the basic calculations I use to determine the underlying health of our economy.
Another problem I recently became aware of, is the expanding number of people carrying two jobs in the statistics. I was unaware both that the monthly payroll report I follow was tracking them twice, and unaware of just how many of these people there are, especially how many more of them there are since Obamacare caused so many to lose their full time jobs.
I have discovered a new blog, "Global Economic Analysis" by 'Mish' Shedlock, that does a lot of straight talk about the world economy. He holds an underlying philosophy of economics very similar to mine, but since he does analysis full time, instead of a few hours a month, he sees a lot of stuff I don't.
Here is his article on the Labor Statistics, and the double reporting of jobs.
This is not the only statistic to be affected by the way it is calculated. GDP calculations changed last year, and the effect is likely to be a 3% difference in the numbers, with no difference in the economy.
More about that, found at "Inc,"a financial investor newspage.
I am still trying to process how this will all play out this year and next, but I know it won't be as cut and dry as I first thought it would be. (Are things of the future ever so clear that we simply know what to do?)
One point of good news, Mish Shedlock sees the US economy as far more resilient than I usually do (although he has been about as astonished as I am that Europe has held together in the face of numbers that clearly do not work). He also sees a future without the very high inflation spiral that most of us see. He sees rather, that things will grind down to a near halt, with Peter impoverished so that robbing him will still not be able to pay Paul. (Me, I am not so convinced)
Another problem I recently became aware of, is the expanding number of people carrying two jobs in the statistics. I was unaware both that the monthly payroll report I follow was tracking them twice, and unaware of just how many of these people there are, especially how many more of them there are since Obamacare caused so many to lose their full time jobs.
I have discovered a new blog, "Global Economic Analysis" by 'Mish' Shedlock, that does a lot of straight talk about the world economy. He holds an underlying philosophy of economics very similar to mine, but since he does analysis full time, instead of a few hours a month, he sees a lot of stuff I don't.
Here is his article on the Labor Statistics, and the double reporting of jobs.
The higher number 191,000 jobs a month would mean the underlying economy is doing just enough to keep us above water, but the lower number shows we were clearly sinking in 2013.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.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.
Read more at http://globaleconomicanalysis.blogspot.com/2013/12/enormous-discrepancy-between-jobs-and.html#dP5AxjiU7CwtPyPD.99
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.
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.
Read more at http://globaleconomicanalysis.blogspot.com/2013/12/enormous-discrepancy-between-jobs-and.html#dP5AxjiU7CwtPyPD.99
This is not the only statistic to be affected by the way it is calculated. GDP calculations changed last year, and the effect is likely to be a 3% difference in the numbers, with no difference in the economy.
More about that, found at "Inc,"a financial investor newspage.
I am still trying to process how this will all play out this year and next, but I know it won't be as cut and dry as I first thought it would be. (Are things of the future ever so clear that we simply know what to do?)
One point of good news, Mish Shedlock sees the US economy as far more resilient than I usually do (although he has been about as astonished as I am that Europe has held together in the face of numbers that clearly do not work). He also sees a future without the very high inflation spiral that most of us see. He sees rather, that things will grind down to a near halt, with Peter impoverished so that robbing him will still not be able to pay Paul. (Me, I am not so convinced)
Monday, December 09, 2013
Numbers lining up, for a good 2014
The monthly payroll numbers from the Bureau of Labor Statistics are out, and they are good.
Most of the following comes from one of the Calculated Risk blog entries for today, which is taken directly from the BLS published report that was released this morning. My thanks to Calculated Risk for putting it in English. BTW, Calculated Risk provides a wealth of economics information, in easily understandable language, with lots of excellent graphs. They post about three or four entries a day.
More than 200,000 increase in payroll. More than 20,000 increase in manufacturing. ISM manufacturing Index is about 56.5, beating the 52.5 point (at which I say it is balanced) for the sixth straight month. The civilian labor force increased, causing the labor participation rate to improve for the first time since Obama took office. The employment-population ratio increased by 0.3 percentage point to 58.6 percent in November, reversing a decline of the same size in the prior month.
None of this should surprise anyone who follows economics on this blog, as I said, back in August, we have begun an upswing, and I predicted then, that it would last for about 18 months.
Everything looks like it is lining up for a good year (2014) in the financial world, and a decent growth in the economy for the same. My personal forecasts remain the same, meaning we are almost 6 months into an 18 month up cycle. I should note, I have never been good at forecasting the length of an upcycle, and 2 out of the last five downturns caught me flat footed. I hope to pay enough attention to this one to have an advanced notice of the next downturn.
Most of the following comes from one of the Calculated Risk blog entries for today, which is taken directly from the BLS published report that was released this morning. My thanks to Calculated Risk for putting it in English. BTW, Calculated Risk provides a wealth of economics information, in easily understandable language, with lots of excellent graphs. They post about three or four entries a day.
More than 200,000 increase in payroll. More than 20,000 increase in manufacturing. ISM manufacturing Index is about 56.5, beating the 52.5 point (at which I say it is balanced) for the sixth straight month. The civilian labor force increased, causing the labor participation rate to improve for the first time since Obama took office. The employment-population ratio increased by 0.3 percentage point to 58.6 percent in November, reversing a decline of the same size in the prior month.
None of this should surprise anyone who follows economics on this blog, as I said, back in August, we have begun an upswing, and I predicted then, that it would last for about 18 months.
Everything looks like it is lining up for a good year (2014) in the financial world, and a decent growth in the economy for the same. My personal forecasts remain the same, meaning we are almost 6 months into an 18 month up cycle. I should note, I have never been good at forecasting the length of an upcycle, and 2 out of the last five downturns caught me flat footed. I hope to pay enough attention to this one to have an advanced notice of the next downturn.
Friday, November 08, 2013
Flat Growth Numbers and Painting Ourselves into a Corner
At first look, the report from the Bureau of Labor Statistics looks good, with more than 212k in job growth and more than 19k growth in manufacturing jobs, and favorable revisions to last month's report. While these numbers are nothing to write home about, they are almost an anomaly in the face of all other indicators that indicate a stagnant economy.
In just the past 48 hours before the labor report came out, there was a dramatic shift in the markets, with a lot of money coming out of stocks. Some of it went into bonds, but a considerable amount just "went away." This is because many investors traders and speculators buy stocks "on margin," which means a lot of the money in the stock market is borrowed. The money that just "went away" was simply paid back to the lenders. Some analysts consider this to be an increase in "cash positions." While this is an interesting phenomenon, demonstrating that the markets are, as we say "as nervous as a long tail cat in a room full of rocking chairs" the amount of changes in the market have been pretty small in the grand scheme of things.
With the overall economic slowdowns, and the impending appointment of Janet Yellen as the next Fed Chair, QE is likely to go on for some time (maybe for years, as I will point out below). While the injection of 1050 Billion Dollars a year into the economy should be creating a serious inflationary trend, inflation seems to be mute, indicating that without the injection there would be another recession and deflation.
Here is something new to me:
Last month I said "the economy actually got measurably worse instead, with an increase of only 148k jobs (remember, we need 175k-200k to tread water)" but when I looked again, private sector jobs only increased 126k (revised to 150k), meaning the government grew by 22k jobs (the revisions don't really change this) in the month prior to the shutdown. I also mentioned manufacturing was flat for the year, the Bureau of Labor Statistics reported a gain for Sep of only 2k(revised to 4k) jobs, which was essentially flat.
My current forecasts are that the economy will grow at a modest pace from now till the end of 2014. I have been forecasting that for the past few months and I see nothing in these numbers to make me change my mind. Sometime beyond the end of 2014 (it may happen before that time, end of 2014 is just what it looks like to me) the economy will undergo a contraction, and it is likely to be a contraction of enormous consequences. My current plan, and what I advise my friends to do, is to make money in this upswing, while making plans to deal with the disaster that lies ahead.
In just the past 48 hours before the labor report came out, there was a dramatic shift in the markets, with a lot of money coming out of stocks. Some of it went into bonds, but a considerable amount just "went away." This is because many investors traders and speculators buy stocks "on margin," which means a lot of the money in the stock market is borrowed. The money that just "went away" was simply paid back to the lenders. Some analysts consider this to be an increase in "cash positions." While this is an interesting phenomenon, demonstrating that the markets are, as we say "as nervous as a long tail cat in a room full of rocking chairs" the amount of changes in the market have been pretty small in the grand scheme of things.
The S&P 500 (SPX) posted its biggest loss since Aug. 27 yesterday, as faster-than-estimated U.S. growth fueled speculation the economy is strong enough to withstand a reduction in Fed support. The gauge has lost 0.8 percent so far this week,In the global economy of the past few weeks, confidence in Europe (Germany, in particular) has been pretty high, and confidence in Asia pretty low. We are sitting at about middle ground. A sign that the gobal economy might be slowing down is copper (copper is a long term indicator for the health of the manufacturing sector), which is lower than it was this time last year, and this time the year before (despite slight increases in cost of mining the mineral).
With the overall economic slowdowns, and the impending appointment of Janet Yellen as the next Fed Chair, QE is likely to go on for some time (maybe for years, as I will point out below). While the injection of 1050 Billion Dollars a year into the economy should be creating a serious inflationary trend, inflation seems to be mute, indicating that without the injection there would be another recession and deflation.
Here is something new to me:
The Fed may be painting itself into a corner.
The longer the Federal Reserve continues its bond-buying stimulus, the higher the odds it will face a year without any money to give the U.S. Treasury after taxpayers received a record $88.4 billion profit in 2012.So, now the Fed has a vested interest in keeping interest rates low? Some of this is not new to me. The Fed holds T-Bills that it bought, that will go down in "value" if interest rates rise, but that is only important if they sell them or if there is a lot of inflation.
The Fed’s financial-crisis actions -- from acquiring debt in the 2008 rescues of Bear Stearns Cos. and American International Group Inc. to three rounds of quantitative easing -- have led so far to the record payments. Now, the prospect of a stronger economy and rising interest rates means the value of the Fed’s bond holdings will fall at the same time its funding costs climb because the central bank pays interest on the excess reserves it holds for banks.
Dudley said Oct. 15 in Mexico City that the Fed’s “traditional monetary-policy framework” has helped assure the central bank’s budget independence and thus support its overall independence. A “key question” is how unconventional measures that have ballooned the central bank’s balance sheet to a record $3.85 trillion may have threatened that status, he said.Fed Haters? They may be talking about conspiracy theorists, but they are more likely talking about conservatives in general. We don't hate the Fed, but we recognize the behavior outlined in the first paragraph is quite a dangerous game to play, and is part of a larger concern about how much debt the US government is running up.
“The Fed is a lightning rod: It attracts withering criticism from the Republican base,” said Greg Valliere, chief political strategist at the Potomac Research Group in Washington. “So even after several years of turning huge profits over to Treasury, losses would embolden the Fed-haters.”
The Fed receives interest payments on its holdings of government securities and mortgage debt. It uses this and other income for the operations of its board of governors and 12 regional reserve banks, returning the remainder to the Treasury, where the funds are added to the department’s total receipts.
“If the balance sheet expands further from here, the possibility of a loss becomes more and more real,” said Roberto Perli, a partner at Cornerstone Macro LP in Washington and a former Fed economist.This shows the "damned if we do, damned if we don't" corner The Fed is painting itself into. Slowing or stopping its steady $85Billion a month buying of bonds will cause interest rates to rise, and continuing its course will lower the point at which they will begin to lose money. Stopping it now will send the economy into a tailspin and continuing it longer will mean they will, themselves, take a loss at some point in the future. This is the same fix that China is in, that they will take a loss today if they sell their US T-Bills, but if they hold them they stand a better than 50-50 chance of taking a bigger loss in the future. But they can't bring themselves to the truth that they need to take the loss today. (China does seem, however, to be a little honest on this course of action and are slowly divesting themselves of US T-Bills.)
At the current balance-sheet level, an interest rate of 4.9 percent would be sufficient to wipe out the Fed’s income, according to Perli’s calculations. If the balance sheet grows for another year, the rate that causes interest on reserves to produce a loss falls to 4.3 percent.
“It’s not dangerous yet, but it’s getting there,” said Perli. That’s because, in the longer-run, most Fed officials see their target rate rising to 4 percent.
Economists expect quantitative easing to go on for longer. The Fed won’t begin tapering its bond buying until March and will continue purchasing securities until October, according to the median estimate of 40 analysts in a Bloomberg News survey last month.No, they won't. If things go well, this crisis will last longer than her term in office, and if things go badly, the taxpayers will be too busy trying just to stay alive to ask for an accounting of how we got into this mess.
“The right way to think about it is -- what were the economic gains or benefits associated with the way the Fed manages the portfolio?” said Robert Shapiro, chief executive officer of Sonecon LLC, an economic advisory firm in Washington.
“Congress will ask about all these losses, if taxpayers will be on the hook? Well, taxpayers are on the hook for interest payments that rise with other interest rates, but that’s always the case,” said Shapiro, a former Commerce Department official under President Bill Clinton.
“Will they demand an accounting from Janet Yellen?” he said, referring to the Fed vice chairman, who was nominated by President Barack Obama to succeed Bernanke when his term ends Jan. 31. “They certainly could.”
Back to the Economy outside of The Fed.
Last month I said "the economy actually got measurably worse instead, with an increase of only 148k jobs (remember, we need 175k-200k to tread water)" but when I looked again, private sector jobs only increased 126k (revised to 150k), meaning the government grew by 22k jobs (the revisions don't really change this) in the month prior to the shutdown. I also mentioned manufacturing was flat for the year, the Bureau of Labor Statistics reported a gain for Sep of only 2k(revised to 4k) jobs, which was essentially flat.
My current forecasts are that the economy will grow at a modest pace from now till the end of 2014. I have been forecasting that for the past few months and I see nothing in these numbers to make me change my mind. Sometime beyond the end of 2014 (it may happen before that time, end of 2014 is just what it looks like to me) the economy will undergo a contraction, and it is likely to be a contraction of enormous consequences. My current plan, and what I advise my friends to do, is to make money in this upswing, while making plans to deal with the disaster that lies ahead.
Thursday, October 24, 2013
Is this just another false start?
Maybe.
Dept of Labor was supposed to publish their monthly payroll report on the 5th. Now that they seem to have suspended their tantrum, and are no longer spending money to deliberately inflict pain on the citizenry, they got around to actually doing their job.
Seeking Alpa notes that the numbers are not good. The consensus was that we should be treading water, but the economy actually got measurably worse instead, with an increase of only 148k jobs (remember, we need 175k-200k to tread water).
And in Manufacturing the numbers are dismal as well, as manufacturing employment remained flat (total growth for the past 12 months is about 30-40k, instead of the 180-240k we need).
The trade balance for the past year shows we are still losing money by consuming more as a nation than we create (hey, that would be a Keynesian dream, and would fix the economy, if Keynesians weren't full of horse hocky), to the tune of near $400B a year. Reported plans for reducing the Fed's Quantitative Easing seem to have evaporated with this report, and the situation in other countries isn't any better, and there is talk that this economic up cycle (the one I predict will last maybe though the end of next year) might be just another false start.
Dept of Labor was supposed to publish their monthly payroll report on the 5th. Now that they seem to have suspended their tantrum, and are no longer spending money to deliberately inflict pain on the citizenry, they got around to actually doing their job.
Seeking Alpa notes that the numbers are not good. The consensus was that we should be treading water, but the economy actually got measurably worse instead, with an increase of only 148k jobs (remember, we need 175k-200k to tread water).
And in Manufacturing the numbers are dismal as well, as manufacturing employment remained flat (total growth for the past 12 months is about 30-40k, instead of the 180-240k we need).
The trade balance for the past year shows we are still losing money by consuming more as a nation than we create (hey, that would be a Keynesian dream, and would fix the economy, if Keynesians weren't full of horse hocky), to the tune of near $400B a year. Reported plans for reducing the Fed's Quantitative Easing seem to have evaporated with this report, and the situation in other countries isn't any better, and there is talk that this economic up cycle (the one I predict will last maybe though the end of next year) might be just another false start.
Sunday, October 06, 2013
The Next Government Budget Battle
Will be over the debt ceiling. And it began about two weeks ago. Both Democrats and liberal Republicans (RINO's, anyone?) believe we need to just raise it indefinitely. So that we can continue to spend and "not default on our debts."
Think about it. If you maxed out your credit cards, then called one bank and said they HAVE to raise your limit, so you can use it to buy stuff, and oh, yeah, pay the minimum payment on the other card, how would that fly?
But that is what we are doing.
In the mean time Obama's proposed solution: "give me everything I want, and then I will negociate what more I will take from you, in addition to that."
Oh, right.
Like giving a drunken sailor on shore leave an unlimited credit card.
What could possibly go wrong.
The expected result is another 1100 Billion in debt in the next year. For a total of 17,700 Billion in debt.
Sooner of later the chickens will come home to roost.
Maybe in the form of hyperinflation.
But it could be something else.
We will just have to wait and see.
Think about it. If you maxed out your credit cards, then called one bank and said they HAVE to raise your limit, so you can use it to buy stuff, and oh, yeah, pay the minimum payment on the other card, how would that fly?
But that is what we are doing.
In the mean time Obama's proposed solution: "give me everything I want, and then I will negociate what more I will take from you, in addition to that."
Before the meeting, Obama had told CNBC that he wasn’t in any mood to negotiate on what he considers to be core responsibilities of Congress and will talk about other issues once the government is open and the debt-limit increase is secured.There is a plan to just simply "suspend" our debt ceiling for the next year.
“Until we get that done,” Obama said, “we are not going to engage in a series of negotiations.”
Oh, right.
Like giving a drunken sailor on shore leave an unlimited credit card.
What could possibly go wrong.
The expected result is another 1100 Billion in debt in the next year. For a total of 17,700 Billion in debt.
Sooner of later the chickens will come home to roost.
Maybe in the form of hyperinflation.
But it could be something else.
We will just have to wait and see.
Saturday, October 05, 2013
Government Shutdown and the Economy
Friday morning about 8:30, the Dept of Labor was supposed to publish their monthly payroll report. This, in my opinion, is the most important data the government publishes on the performance of the US economy.
Instead, the DoL was silent, and money was spent barricading off parks and memorials, many of which would normally be free and accessible to the public. In other words, they spent more money on them, for the sole purpose of creating an inconvenience to the public. This spending of taxpayer money for the purpose of annoying the public was, of course, vengeance against people who think the government spends money on things it should not.
No matter. Commercial elements that study the economy for the purpose of, themselves, making money, tell us the payroll report would indicate we are still treading water. Because business continues to become more and more efficient, the US economy, as a whole is gaining, so we are in a sort of up cycle.
As I indicated in last month's post, we can expect this upcycle to last about 18 months, more or less, and begin to collapse on itself again sometime around the end of 2014. This is kinda bad news for the Republicans and other fiscal conservatives, since, if they win the election in 2014, and take office in Jan 2015, they will be there to blame when we go into a downcycle in 2015 and 2016.
Well, more on this later.
Instead, the DoL was silent, and money was spent barricading off parks and memorials, many of which would normally be free and accessible to the public. In other words, they spent more money on them, for the sole purpose of creating an inconvenience to the public. This spending of taxpayer money for the purpose of annoying the public was, of course, vengeance against people who think the government spends money on things it should not.
No matter. Commercial elements that study the economy for the purpose of, themselves, making money, tell us the payroll report would indicate we are still treading water. Because business continues to become more and more efficient, the US economy, as a whole is gaining, so we are in a sort of up cycle.
As I indicated in last month's post, we can expect this upcycle to last about 18 months, more or less, and begin to collapse on itself again sometime around the end of 2014. This is kinda bad news for the Republicans and other fiscal conservatives, since, if they win the election in 2014, and take office in Jan 2015, they will be there to blame when we go into a downcycle in 2015 and 2016.
Well, more on this later.
Monday, August 26, 2013
So, the economy is in an upswing?
So, the economy is in an upswing. How much of an upswing can we expect? How good will times get? and how long will it last? What will the next recession look like?
I think this next upturn in the economy is not likely to last long and is likely to be followed by a dramatic down turn, much like the one we experienced in 2008. Here is how I arrive at that conclusion.
In 1983, we experienced an upturn in the economy. Conservative thinking largely replaced liberalism for a couple of years and we got on this kick making things happen. In the years prior to that, the unemployment rate was over 10% and there was inflation. The media began talking about what was known as the misery index (unemployment + inflation).
Over the next couple of years, the unemployment rate fell to around 4% and manufacturing trended upwards. This was also the beginnings of the desktop computer revolution, although it was mainly a lot of hobbyists and a few businesses. The economy hummed along pretty well for about 7 years.
Then there was a down turn that lasted about 3 years, it was pretty shallow, causing unemployment to rise to around 6% or 7%, but the beginnings of it led to the election of Clinton as our country turned to liberalism.
After a few years, in 94, the conservatives took office in both the House and Senate (this was Newt Gingrich and his "Contract with America"), and a more conservative direction was again pursued. This resulted in an upturn that lasted about 6 years, brought unemployment down to around 6% and even brought about a (nearly) balanced budget.
George W Bush was elected, but by then the Republican party had forgotten its Contract with America and was slowly drifting back to "middle" ground, where they thought popular consent was.
The collapse of the "dot com bubble" and the 9-11 attacks threw us back into a recession, but at the same time brought out some conservative values. This brought us out of the recession, and despite "W" being a somewhat weak conservative, his handling of the fight against Islamic Extremists assured him of a reelection. We got a weak upturn of the economy for about 3 or 4 years.
The government leaned back to the left, pushing a strong housing market beyond reasonable limits, as a pretense that the economy was getting better (even though its underpinnings were actually weakening), by pushing a lot of extra cash into the markets through extremely irrational mortgage policies. No down payment, no credit check, and no payments required on the principle were pushed as ways to get those who could not afford a house into a house they could not afford.
A large portion of the people, though became disenchanted with the Republicans In Name Only that were currently running congress and in 2006 congressional election a lot of RINO's got replaced by Democrats. The next three budgets were disastrously liberal.
The economy, and the financial markets, and even the banking industry (which had hollowed itself out by retaining less and less capital on hand), all collapsed at once.
The result was the Fed had to do a secret bailout of all the world's banks (to the tune of about 16,000 billion dollars), while the governments around the world propped up the markets through giveaways and other "recapitalization" programs.
These actions prevented the entire world economy from an outright catastrophic collapse, but they took us down a deep, 5 year long recession, that is now known as the "Great Recession." As little as a year ago, because of the weakness that still exists in the foundations of our economy, some economists were predicting that it would be as long as 5 more years before we would begin to see real improvement in the economy.
What they didn't count on was a bumper crop of oil and gas drilling on private land and in Canada, and China and Russia jumping into the game of printing money (they are trading that fiat money for copper, aluminum and coal, as we speak). Thus a stimulus that we didn't expect brought us an upturn in the current economy. (Thee is a lot between the lines in this paragraph, but would require a whole article to go into the details of why the current Russian and Chinese behaviors are actually a time bomb for us.)
Conclusion. So here we are, and let's summarize. The upsides have been 7 years and strong, 6 years and moderate, and 3 or 4 years and weak. The downturns have been 3 years, 4 years, and a deep 6 year recession.
So here we are, the economy is in an upswing. How much of an upswing can we expect? How good will times get? and how long will it last? What will the next recession look like?
I believe we will have about 18 months of good economy, but since we are no longer a manufacturing powerhouse, the whole thing is hollow. It is like building a bridge out over a canyon with no support. No one really knows when or how badly it will fail, we only know it will. But we can guess.
Beyond 18 months, with nothing to support the economy, the system will begin again to decapitalise. It is already extraordinarily weak, with capitalization of banks in the single digit percentages, retirement plans are only 15 to 30 percent funded (and the baby boomers retiring in droves) and most businesses so weak that an interruption of less than 48 hours will cause the business to collapse (in the financial world, this is known as mean time to belly up). In addition, we are building a new housing bubble and there is still, in addition to the official unemployment rate, about 8% of our people that are out of work but not counted as unemployed.
There are those who say we have weathered storms like this before. The truth is, no, there has never been an economic storm like the one that is ahead of us. Our nation has been sold for bread and circuses.
So yes, the next "downturn" of the economy could be complete destruction of our civilization. While this isn't necessary, it could happen if, as happened last time, the economy, the markets, and the banks all drop at once.
I think this next upturn in the economy is not likely to last long and is likely to be followed by a dramatic down turn, much like the one we experienced in 2008. Here is how I arrive at that conclusion.
In 1983, we experienced an upturn in the economy. Conservative thinking largely replaced liberalism for a couple of years and we got on this kick making things happen. In the years prior to that, the unemployment rate was over 10% and there was inflation. The media began talking about what was known as the misery index (unemployment + inflation).
Over the next couple of years, the unemployment rate fell to around 4% and manufacturing trended upwards. This was also the beginnings of the desktop computer revolution, although it was mainly a lot of hobbyists and a few businesses. The economy hummed along pretty well for about 7 years.
Then there was a down turn that lasted about 3 years, it was pretty shallow, causing unemployment to rise to around 6% or 7%, but the beginnings of it led to the election of Clinton as our country turned to liberalism.
After a few years, in 94, the conservatives took office in both the House and Senate (this was Newt Gingrich and his "Contract with America"), and a more conservative direction was again pursued. This resulted in an upturn that lasted about 6 years, brought unemployment down to around 6% and even brought about a (nearly) balanced budget.
George W Bush was elected, but by then the Republican party had forgotten its Contract with America and was slowly drifting back to "middle" ground, where they thought popular consent was.
The collapse of the "dot com bubble" and the 9-11 attacks threw us back into a recession, but at the same time brought out some conservative values. This brought us out of the recession, and despite "W" being a somewhat weak conservative, his handling of the fight against Islamic Extremists assured him of a reelection. We got a weak upturn of the economy for about 3 or 4 years.
The government leaned back to the left, pushing a strong housing market beyond reasonable limits, as a pretense that the economy was getting better (even though its underpinnings were actually weakening), by pushing a lot of extra cash into the markets through extremely irrational mortgage policies. No down payment, no credit check, and no payments required on the principle were pushed as ways to get those who could not afford a house into a house they could not afford.
A large portion of the people, though became disenchanted with the Republicans In Name Only that were currently running congress and in 2006 congressional election a lot of RINO's got replaced by Democrats. The next three budgets were disastrously liberal.
The economy, and the financial markets, and even the banking industry (which had hollowed itself out by retaining less and less capital on hand), all collapsed at once.
The result was the Fed had to do a secret bailout of all the world's banks (to the tune of about 16,000 billion dollars), while the governments around the world propped up the markets through giveaways and other "recapitalization" programs.
These actions prevented the entire world economy from an outright catastrophic collapse, but they took us down a deep, 5 year long recession, that is now known as the "Great Recession." As little as a year ago, because of the weakness that still exists in the foundations of our economy, some economists were predicting that it would be as long as 5 more years before we would begin to see real improvement in the economy.
What they didn't count on was a bumper crop of oil and gas drilling on private land and in Canada, and China and Russia jumping into the game of printing money (they are trading that fiat money for copper, aluminum and coal, as we speak). Thus a stimulus that we didn't expect brought us an upturn in the current economy. (Thee is a lot between the lines in this paragraph, but would require a whole article to go into the details of why the current Russian and Chinese behaviors are actually a time bomb for us.)
Conclusion. So here we are, and let's summarize. The upsides have been 7 years and strong, 6 years and moderate, and 3 or 4 years and weak. The downturns have been 3 years, 4 years, and a deep 6 year recession.
So here we are, the economy is in an upswing. How much of an upswing can we expect? How good will times get? and how long will it last? What will the next recession look like?
I believe we will have about 18 months of good economy, but since we are no longer a manufacturing powerhouse, the whole thing is hollow. It is like building a bridge out over a canyon with no support. No one really knows when or how badly it will fail, we only know it will. But we can guess.
Beyond 18 months, with nothing to support the economy, the system will begin again to decapitalise. It is already extraordinarily weak, with capitalization of banks in the single digit percentages, retirement plans are only 15 to 30 percent funded (and the baby boomers retiring in droves) and most businesses so weak that an interruption of less than 48 hours will cause the business to collapse (in the financial world, this is known as mean time to belly up). In addition, we are building a new housing bubble and there is still, in addition to the official unemployment rate, about 8% of our people that are out of work but not counted as unemployed.
There are those who say we have weathered storms like this before. The truth is, no, there has never been an economic storm like the one that is ahead of us. Our nation has been sold for bread and circuses.
So yes, the next "downturn" of the economy could be complete destruction of our civilization. While this isn't necessary, it could happen if, as happened last time, the economy, the markets, and the banks all drop at once.
Friday, August 23, 2013
A return to blogging - the Economy
Well, I have been away from this blog for some time, but now I think I will post some updates on economics and a few assorted other subjects.
In the past couple of years there have been a series of financial crisis in Europe and the US, most of which have twin roots going back to the worldwide financial collapse of 2008. At least 5 countries in Europe required bail outs. The most notable were Greece (which required $10B and bondholders got stuck with bonds worth 30% of face value)and Cypress (which cause a panic that closed the banks for weeks).
In the US, Stockton California and Detroit come to mind as having declared bankruptcy, although there have been a lot of small ones too.
The "Fed," over the past several years has injected money into the world financial systems at the rate of nearly $1000B dollars a year for almost all of the past 5 years, and while there is talk of slowing down the injection of money, there is no talk of ending it. We don't know when inflation will kick in, but about 1/3 of the total US Federal budget is now made up of borrowed money. This has hidden what would have been a spiraling deflation that would have been ruinous to the country, but it is still ruinous to the nation. Most of the working class today makes about $2 an hour less than they did 5 years ago, if they have a job at all. The official unemployment rate is totally bogus, the real rate is about 20%. If you don't see that where you live, you are fortunate. Detroit is not fortunate.
This year, people learned a new word. Sequester. That is where you keep spending more and more on your entertainment budget, but in order to pretend to save money, you don't put gas in your truck (so now you can't go to work).
A word no one has learned has cropped up in certain small circles of the "learned." Catabolic collapse.
It basically refers to the tendency of a civilization to build infrastructure until it cannot sustain the effort to maintain that infrastructure.
Our financial structure is a house of cards. Monetary bubbles upon monetary bubbles. If it collapses slowly, it will simply leave multiple generations, starting with the oldest, in financial ruin. It will go from generation to generation, bankrupting millions of people until there is only the miserable poor and the very upper class.
If it collapses suddenly, it will erupt into violence and civil war with no clear cut battle lines and no winners. It will evolve into anarchy and chaos. Will we ever emerge? Many think so, most preppers think so. I don't really think so.
Well, that is all today. I will write more in the days to come.
In the past couple of years there have been a series of financial crisis in Europe and the US, most of which have twin roots going back to the worldwide financial collapse of 2008. At least 5 countries in Europe required bail outs. The most notable were Greece (which required $10B and bondholders got stuck with bonds worth 30% of face value)and Cypress (which cause a panic that closed the banks for weeks).
In the US, Stockton California and Detroit come to mind as having declared bankruptcy, although there have been a lot of small ones too.
The "Fed," over the past several years has injected money into the world financial systems at the rate of nearly $1000B dollars a year for almost all of the past 5 years, and while there is talk of slowing down the injection of money, there is no talk of ending it. We don't know when inflation will kick in, but about 1/3 of the total US Federal budget is now made up of borrowed money. This has hidden what would have been a spiraling deflation that would have been ruinous to the country, but it is still ruinous to the nation. Most of the working class today makes about $2 an hour less than they did 5 years ago, if they have a job at all. The official unemployment rate is totally bogus, the real rate is about 20%. If you don't see that where you live, you are fortunate. Detroit is not fortunate.
This year, people learned a new word. Sequester. That is where you keep spending more and more on your entertainment budget, but in order to pretend to save money, you don't put gas in your truck (so now you can't go to work).
A word no one has learned has cropped up in certain small circles of the "learned." Catabolic collapse.
It basically refers to the tendency of a civilization to build infrastructure until it cannot sustain the effort to maintain that infrastructure.
Our financial structure is a house of cards. Monetary bubbles upon monetary bubbles. If it collapses slowly, it will simply leave multiple generations, starting with the oldest, in financial ruin. It will go from generation to generation, bankrupting millions of people until there is only the miserable poor and the very upper class.
If it collapses suddenly, it will erupt into violence and civil war with no clear cut battle lines and no winners. It will evolve into anarchy and chaos. Will we ever emerge? Many think so, most preppers think so. I don't really think so.
Well, that is all today. I will write more in the days to come.
Friday, January 04, 2013
Treading water, or slowly sinking
This past month the labor market has been slowly sinking on most indicators. A couple of bright spots are number of hours worked and pay, and the increase in Manufacturing jobs. Over the past year, the US has, at times reached the point were it was treading water, but overall for the year it has slowly lost ground, and is slowly sinking.
For all the talk of taxes in the last minute "Fiscal Cliff" negotiations, it really is spending that is killing us. And our national debt. Despite all the bad economic news, however, I think we will continue to tread water for another year. Some time beyond that, though, I think we will probably sink.
This is a link to today's Bloomberg News report where I got the labor numbers, and some clippings I pulled from it.
payrolls-in-u-s-climbed-155-000-in-december
For all the talk of taxes in the last minute "Fiscal Cliff" negotiations, it really is spending that is killing us. And our national debt. Despite all the bad economic news, however, I think we will continue to tread water for another year. Some time beyond that, though, I think we will probably sink.
This is a link to today's Bloomberg News report where I got the labor numbers, and some clippings I pulled from it.
payrolls-in-u-s-climbed-155-000-in-december
Payrolls rose by 155,000 workers last month following a 161,000 advance in November, Labor Department figures showed today in Washington.
“By the second quarter, we could see the pace of payrolls at 175,000 to 200,000,” provided the debt-ceiling debate is resolved, said Price
Other reports today showed service industries, which account for almost 90 percent of the economy, grew in December at the fastest pace in 10 months, and demand for capital equipment such as machinery and communications gear picked up in November.
The news elsewhere was less positive. U.K. services unexpectedly shrank in December for the first time in two years, clouding the economic outlook as Britain struggles to avoid a recession, figures from Markit Economics and the Chartered Institute of Purchasing and Supply showed today in London.
For all of 2012, the economy created 1.84 million jobs, matching the gain in 2011. It’s the best back-to-back reading since 2005-2006.
Nonetheless, the increases probably don’t satisfy Federal Reserve policy makers, who last month said they will keep pumping money into the economy until the job market improves “substantially.” (200k jobs per month)
Central bankers on Dec. 12 expanded a third round of so- called quantitative easing and said they would hold their target interest rate low “at least as long” as the unemployment rate remains above 6.5 percent and inflation projections are for no more than 2.5 percent.
Today’s report also showed hourly earnings climbed 0.3 percent on average in December for a second month to $23.73, beating the median forecast of economists surveyed by Bloomberg that called for a 0.2 percent increase. They rose 2.1 percent from December 2011, the biggest gain in a year. Additionally, the work week climbed six minutes to 34.5 hours.
Factory payrolls increased by 25,000, the most since March, today’s report showed..
Wednesday, December 12, 2012
Another Month Deeper into Recession
Another month has come and gone, and we are a little deeper in recession. Jobs in the private sector increased by less than 200k and jobs in the manufacturing sector actually decreased. Obama continues to tell us about all the millions and millions of jobs he is responsible for creating but that is just another political lie. As we slide closer to the fiscal cliff, it has become apparent that he will not negotiate to avoid going over the cliff. (And no compromise will stop it anyway, but that is another story) His supposed compromise solution had hidden in it that he could spend as much as he wants, whenever he wants, and for whatever he wants.
Yeah Right.
Tax levies are almost irrelevant in this (fiscal cliff) deal. They are a symbolic gesture, and increasing them will give the government an excuse to be even more irresponsible, but cutting them won't solve the problem either.It makes little difference if a dollar is taxed out of the economy, or if it is borrowed and never returned.
And that is where the US is. The budget will never again be balanced. That is a cliff we have already gone over (years ago, to be truthful). Now the question is only: how soon will it get bad, and how bad will it get? (and I don't really know the answers)
Spending cuts and changes to "entitlement" programs will slow the descent , but they won't stop it. Now we are only concerned with how will America look on the way down.
Will we retain our Freedoms, our Rights as given by God, our Constitutional Government? Or will we be transformed into a communist dictatorship harkening to the liberals who want to destroy us and the Islamists that want to enslave us? Will the rule o f law rule our land, or will international bankers and multinational corporations and unions run our government as a puppet as they steal all we have while operating above the law?
Fasten your seatbelts, hold on tight, keep your Bible handy and your powder dry.
It is going to be a terrifying ride down.
Yeah Right.
Tax levies are almost irrelevant in this (fiscal cliff) deal. They are a symbolic gesture, and increasing them will give the government an excuse to be even more irresponsible, but cutting them won't solve the problem either.It makes little difference if a dollar is taxed out of the economy, or if it is borrowed and never returned.
And that is where the US is. The budget will never again be balanced. That is a cliff we have already gone over (years ago, to be truthful). Now the question is only: how soon will it get bad, and how bad will it get? (and I don't really know the answers)
Spending cuts and changes to "entitlement" programs will slow the descent , but they won't stop it. Now we are only concerned with how will America look on the way down.
Will we retain our Freedoms, our Rights as given by God, our Constitutional Government? Or will we be transformed into a communist dictatorship harkening to the liberals who want to destroy us and the Islamists that want to enslave us? Will the rule o f law rule our land, or will international bankers and multinational corporations and unions run our government as a puppet as they steal all we have while operating above the law?
Fasten your seatbelts, hold on tight, keep your Bible handy and your powder dry.
It is going to be a terrifying ride down.
Sunday, October 07, 2012
unemployment - the truenumbers are dismal
Well the numbers came in and those who wish to spin them as good news are doing so. But in truth, the numbers are dismal, maybe even disastrous. There is also speculation that some of the numbers are being manipulated, as one number (800.000 people reporting new jobs) that is a total anomaly among all the rest, but it could simply be a surge in some temporary and insignificant work (700,000 new campaign workers?).
A gain of 144,000 jobs last month, even when coupled with the adjustments recently made to jobs data still amounts to a slowly sinking economy. (Those adjustments did add about 80,000 more jobs in the previous two months and almost 400,000 jobs in the past year, but that is still a slow, sinking rate)
Even worse is manufacturing, which lost 16,000 jobs in the past month, adding to the losses the previous month. This means we are, in truth, negative balance for the year. Remember, in July 2010, when this had just begun to be known as "The Great Recession," I said we needed an increase of 40,000 manufacturing jobs a month to get out of the recession. I later revised this down to 20,000 manufacturing jobs a month, but that is just the break even point. In those days I thought the economy would turn around in 2 to 5 years. I no longer think it will. Maybe not ever.
I had begun to realize this recession may really spell the end for the US as the worlds foremost superpower last July. That was when I wrote:
US manufacturing jobs data:
http://www.bloomberg.com/quote/USMMMNCH:IND
http://www.industryweek.com/labor-employment-policy/manufacturing-employment-dips-september
Manufacturing employment fell by 16,000 in September, the second month in a row employment
in the sector dropped.
http://www.bloomberg.com/news/2012-10-05/surveys-offer-differing-views-on-size-of-job-market-gains.html
Employers added 114,000 workers to payrolls last month, the fewest since June, according
to the Labor Department’s survey of employers released in Washington today. A separate
poll of households showed hiring surged by 873,000, the biggest gain since June 1983
excluding annual Census population adjustments. The surge helped push down the jobless
rate to 7.8 percent, the lowest since President Barack Obama took office in January 2009.
http://www.denverpost.com/commented/ci_21704942?source=commented-
WASHINGTON—The U.S. unemployment rate fell to 7.8 percent last month, dropping below 8
percent for the first time in nearly four years and giving President Barack Obama a
potential boost with the election a month away.
The rate dropped from 8.1 percent because the number of people who were employed according
to a government survey soared by 873,000—the biggest monthly jump since 2003.
The job market has been improving, sluggishly but steadily. Jobs have been added for 24
straight months. There are now 325,000 more than when Obama took office.
Still, many of the jobs the economy added last month were part time. The number of people
with part-time jobs who wanted full-time work rose 7.5 percent to 8.6 million, the most
since February 2009.
But overall, Friday's report dispelled some fears about the job market. Average wages
rose. And more people started looking for work.
The jump in the number of employed Americans that the government reported comes from a
survey of 60,000 households that determines the unemployment rate. The government asks a
series of questions, by phone or in person. They include:
Do you own a business? Did you work for pay? If not, did you provide unpaid work for a
family business or farm? (Those who did are considered employed.)
Afterward, the survey participants are asked whether they had a job and, if so, whether it
was full or part time. The government's definition of unemployed is someone who's out of
work and has actively looked for a job in the past four weeks.
http://www.moneynews.com/Economy/Job-Growth-labor-payrolls/2012/09/27/id/457810
The U.S. economy likely created 386,000 more jobs in the 12 months through March than
previously estimated, the Labor Department said
A breakdown by industry sector showed 453,000 more total private sector jobs were created
than initially thought, including 145,000 more jobs in the trade, transportation, and
utilities category, plus 85,000 more in construction.
In contrast, the benchmark revision lowered the estimate for job creation in the
government sector by 65,000, while it found that 25,000 fewer manufacturing jobs had been
generated over the 12 month period than previously thought.
A gain of 144,000 jobs last month, even when coupled with the adjustments recently made to jobs data still amounts to a slowly sinking economy. (Those adjustments did add about 80,000 more jobs in the previous two months and almost 400,000 jobs in the past year, but that is still a slow, sinking rate)
Even worse is manufacturing, which lost 16,000 jobs in the past month, adding to the losses the previous month. This means we are, in truth, negative balance for the year. Remember, in July 2010, when this had just begun to be known as "The Great Recession," I said we needed an increase of 40,000 manufacturing jobs a month to get out of the recession. I later revised this down to 20,000 manufacturing jobs a month, but that is just the break even point. In those days I thought the economy would turn around in 2 to 5 years. I no longer think it will. Maybe not ever.
I had begun to realize this recession may really spell the end for the US as the worlds foremost superpower last July. That was when I wrote:
just over a year after we elected a new government, bent on breaking out of that malaise, 67% of the people are blaming that new crop of congressmen, just elected, for the problems they are trying to solve.I began to suspect then, and believe more so now, that the US will for the foreseeable future remain in a decline. Whether this is a slow decline, or a rapid decline is the only question.
What this really amounts to is that the public has gotten the first glimpse of the fact that they will have to make some sacrifices to return our nation to a path of prosperity, and they don't want any of it.
Some years ago, I said the American public, having tired of freedom and prosperity, have elected a government that will leave them impoverished and enslaved. Now it looks like they are happy being impoverished and enslaved. At least then they don't have to do the hard work and make the sacrifices that are required for freedom and prosperity.
US manufacturing jobs data:
http://www.bloomberg.com/quote/USMMMNCH:IND
http://www.industryweek.com/labor-employment-policy/manufacturing-employment-dips-september
Manufacturing employment fell by 16,000 in September, the second month in a row employment
in the sector dropped.
http://www.bloomberg.com/news/2012-10-05/surveys-offer-differing-views-on-size-of-job-market-gains.html
Employers added 114,000 workers to payrolls last month, the fewest since June, according
to the Labor Department’s survey of employers released in Washington today. A separate
poll of households showed hiring surged by 873,000, the biggest gain since June 1983
excluding annual Census population adjustments. The surge helped push down the jobless
rate to 7.8 percent, the lowest since President Barack Obama took office in January 2009.
http://www.denverpost.com/commented/ci_21704942?source=commented-
WASHINGTON—The U.S. unemployment rate fell to 7.8 percent last month, dropping below 8
percent for the first time in nearly four years and giving President Barack Obama a
potential boost with the election a month away.
The rate dropped from 8.1 percent because the number of people who were employed according
to a government survey soared by 873,000—the biggest monthly jump since 2003.
The job market has been improving, sluggishly but steadily. Jobs have been added for 24
straight months. There are now 325,000 more than when Obama took office.
Still, many of the jobs the economy added last month were part time. The number of people
with part-time jobs who wanted full-time work rose 7.5 percent to 8.6 million, the most
since February 2009.
But overall, Friday's report dispelled some fears about the job market. Average wages
rose. And more people started looking for work.
The jump in the number of employed Americans that the government reported comes from a
survey of 60,000 households that determines the unemployment rate. The government asks a
series of questions, by phone or in person. They include:
Do you own a business? Did you work for pay? If not, did you provide unpaid work for a
family business or farm? (Those who did are considered employed.)
Afterward, the survey participants are asked whether they had a job and, if so, whether it
was full or part time. The government's definition of unemployed is someone who's out of
work and has actively looked for a job in the past four weeks.
http://www.moneynews.com/Economy/Job-Growth-labor-payrolls/2012/09/27/id/457810
The U.S. economy likely created 386,000 more jobs in the 12 months through March than
previously estimated, the Labor Department said
A breakdown by industry sector showed 453,000 more total private sector jobs were created
than initially thought, including 145,000 more jobs in the trade, transportation, and
utilities category, plus 85,000 more in construction.
In contrast, the benchmark revision lowered the estimate for job creation in the
government sector by 65,000, while it found that 25,000 fewer manufacturing jobs had been
generated over the 12 month period than previously thought.
Monday, October 01, 2012
Markets are up, the Economy down
This is the latest trend in the economic world, and not too many are talking about it. With the open ended QE3, our market numbers are looking better, but the reality is that the economy isn't improving, just the money, whether it is in dollars or euro's, is worth less.
The jobs report was pretty abysmal at the beginning of this month, and I will bet it isn't too good this friday, either. We shall see.
The jobs report was pretty abysmal at the beginning of this month, and I will bet it isn't too good this friday, either. We shall see.
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