Fed delays bond tapering

The Federal Reserve has decided against reducing its stimulus for the U.S. economy, saying it will maintain the pace of its bond purchases because it thinks the economy still needs the support.

The Fed says it decided to hold off on slowing the $85 billion a month in bond purchases to see more conclusive evidence that the recovery will be sustained.

In a statement after its meeting, the Fed says that the economy is growing moderately and that some indicators of labor market conditions have shown improvement. But it noted that rising mortgage rates and government spending cuts are restraining growth. Read more >>

Why Incomes Could Fall For the Next 30 Years

Every downturn in America’s economic history has been followed by a recovery. And since the 1930s, those recoveries have only taken a couple of years to materialize.

Even now, in the aftermath of a deep recession, the economy is growing and the unemployment rate is falling. But the next few decades could be uncharacteristically bleak, according to a new study.

Economists Richard Burkhauser of Cornell University and Jeff Larrimore, a staffer on the Congressional Joint Committee on Taxation, warn that demographic factors -- which have largely aided the U.S. economy in the past -- could end up pushing incomes down for the next 30 years or more. If other factors don’t force incomes up, we may be at the beginning of the longest period of economic decline in American history.

It’s well understood that incomes went up in the 1980s and 1990s but stagnated from 2000 to 2007. The median income fell sharply during the 2007-2009 recession and has yet to recover.

The new study, which will be published as part of a Russell Sage Foundation book later this year, breaks down income trends since 1979 into various causal factors, then projects how demographic changes will affect median income through 2050. The biggest factor helping to boost incomes between 1979 and 2000 was the growing percentage of women in the workforce, along with rising earnings for those women. Read more >>

Temporary jobs becoming a permanent fixture

Hiring is exploding in the one corner of the U.S. economy where few want to be hired: temporary work.

From Wal-Mart to General Motors to PepsiCo, companies are increasingly turning to temps and to a much larger universe of freelancers, contract workers and consultants. Combined, these workers number nearly 17 million people who have only tenuous ties to the companies that pay them — about 12% of everyone with a job.

Hiring is always healthy for an economy. Yet the rise in temp and contract work shows that many employers aren't willing to hire for the long run.

The number of temps has jumped more than 50% since the recession ended four years ago to nearly 2.7 million — the most on government records dating to 1990. In no other sector has hiring come close.

Driving the trend are lingering uncertainty about the economy and employers' desire for more flexibility in matching their payrolls to their revenue. Some employers have also sought to sidestep the new health care law's rule that they provide medical coverage for permanent workers. Last week, though, the Obama administration delayed that provision of the law for a year. Read more >>

15 Signs That The Quality Of Jobs In America Is Fading Fast

We Can Do It poster for Westinghouse, closely associated with Rosie the Riveter, although not a depiction of the cultural icon itself. Pictured Geraldine Doyle (1924-2010), at age 17. (Photo credit: Wikipedia)

The following are 15 signs that the quality of jobs in America is going downhill really fast...

#1 The number of part-time workers in the United States has just hit a brand new all-time high, but the number of full-time workers is still nearly 6 million below the old record that was set back in 2007.

#2 In America today, only 47 percent of adults have a full-time job.

#3 Even though the U.S. economy created nearly 200,000 jobs in June, the number of full-time jobs actually decreased.

#4 There are now 2.7 million temp workers in the United States - a new all-time high.

#5 One out of every ten jobs in the United States is now filled through a temp agency.

#6 The U.S. economy has actually lost manufacturing jobs for four consecutive months.

#7 The official unemployment rate has been at 7.5 percent or higher for 54 months in a row.  That is the longest stretch in U.S. history.

#8 According to one recent survey, 76 percent of all Americans are living paycheck to paycheck.

#9 At this point, one out of every four American workers has a job that pays $10 an hour or less.

#10 High paying manufacturing jobs continue to be shipped overseas.  Sadly, there are fewer Americans employed in manufacturing now than there was in 1950 even though the population of the country has more than doubled since then. Read more >>

Initial Jobless Claims Soar

And the economic (downside) hits keep on coming: PMI, ISM, Non-Mfg ISM, ADP and now Initial claims - five out of five misses as the US economy slowly but surely joins the rest of the world in resuming its downward trajectory. Moments ago initial claims printed a whopping 385K, far above expectations of 353K, and far above the upwardly revised 357K (was 353K before). This was the biggest miss to expectations since November. Also, excluding the Sandy aberrations  this was the biggest two week surge in claims since April 2011.

Continuing claims also missed, printing at 3063K, above expectations of 3050K. Sure enough, the excuses begin: sequester, Easter (two states estimated which means actual number is likely even worse), weather (unclear if warm or hot), Cyprus, and generally, stuff... Just not the economy. Never the actual economy. Because it is unpossible that with $85 billion inject per month into the market economy, that things would be just getting worse and worse. Read more >>

The Chart That Proves Mainstream Media Is Lying About Unemployment

The mainstream media is absolutely giddy that the U.S. unemployment rate has hit a "four-year low" of 7.7 percent.  But is unemployment in the United States actually going down?  After all, you would think that it should be.

The Obama administration has "borrowed" more than 6 trillion dollars from future generations of Americans, interest rates have been pushed to all-time lows, and the Federal Reserve has been wildly printing more money in a desperate attempt to "stimulate" the economy.  So have those efforts been successful?

Well, according to the mainstream media, the U.S. unemployment rate is falling steadily.  Headlines all over the nation boldly declared that "236,000 jobs" were added to the economy in February, but what they didn't tell you was that the number of Americans "not in the labor force" rose by 296,000.

And that is how they are getting the unemployment rate to go down - by pretending that huge numbers of unemployed Americans don't want jobs.  Sadly, as you will see below, the truth is that the percentage of working age Americans that have a job is just 0.1% higher than it was exactly three years ago.  And we have not even come close to getting back to where we were before the last economic crisis. Read more >>

Low-wage work force grows 30% as the number of jobs shrinks

Low-wage workers in Chicago are better educated, older and rely more on that income these days to meet basic needs than 10 years ago. And there are substantially more of them. That’s according to a new report released by Chicago-based Women Employed and Action Now Institute that shows nearly one in six low-wage workers here last year held a college degree.

The report, authored by Marc Doussard, assistant professor in the University of Illinois at Urbana-Champaign’s Department of Urban and Regional Planning, defines low-wage workers as those making $12 an hour or less. The report revealed the share of payroll employees ages 18 to 64 working in low-wage jobs rose from 23.8 percent in 2011 to 31.2 percent last year. That’s a more than a 30 percent rise in the proportion of such workers.

Meanwhile the share of households with a low-wage earner that got all income from low-wage earnings rose from 45.7 percent to 56.7 percent. That’s evidence more people are relying more on those dollars to meet basic needs rather than for disposable income. Read more >>

Pessimism About Economy Grows

Two major surveys of corporate financial executives this week show a stark contrast hiring outlook but are in agreement that optimism about economic growth is dropping. The American Institute of Certified Public Accountants, which maintains an office in Durham, found only 12 percent of chief executive officers, chief financial officers and other financial executives surveyed planned to expand payrolls over the next 12 months.

On Wednesday, a survey of CFOs from Duke University and CFO Magazine found that 60 percent of companies were planning to hire. Like the Duke-CFO survey, however, the AICPA report found a drop in optimism about economic growth. Its overall CPA Outlook Index declined by two points to 67 on a scale of 0-100 with 50 considered neutral. The index dropped for the first time after two quarters of growth.

“What we're seeing is the same ‘two steps forward, one step back’ cycle we encountered last year,” said Arleen Thomas, the AICPA’s senior vice president for management accounting. “There's no question survey takers have grown more pessimistic about the U.S. economy, and with expectations muted for profit, revenue and employment growth, there appear to be few catalysts to change that view.” Read more >>

The Bad Jobs Report Just the Beginning of the Coming Nightmare

The Economic Collapse
Unemployment in America is still about at the same level as it was back at the beginning of 2012.  The tough stretch that we are going through right now is only a very small taste of the economic nightmare that is on the horizon.

If you think that things are a "disaster" right now, just wait until you see what is coming.
At the moment, 53 percent of all Americans with a bachelor's degree under the age of 25 are either unemployed or underemployed, and there are more than 100 million working age Americans that do not currently have jobs.

But this is only just the beginning. During the next major economic downturn, the unemployment rate in the United States is going to soar well up into the double digits. Many Americans will look back on 2010, 2011 and 2012 as "the good old days".

Right now, there are only small pockets of the country that are total economic hellholes. For example, Yuma, Arizona has an unemployment rate of 26 percent, and El Centro, California has an unemployment rate of 26.2 percent. In the future, those kinds of numbers are going to become the norm all over the nation.
Sadly, most Americans have no idea what is coming. Read more >>

95 Percent Of The Jobs Lost During The Recession Were Middle Class Jobs

Who is the biggest loser in the ongoing decline of the U.S. economy?  Is it the wealthy?  No, the stock market has been soaring lately and their incomes are actually going up.  Is it the poor?  Well, the poor are definitely hurting very badly, but when you don't have much to begin with you don't have much to lose. 

Unfortunately, it is the middle class that has lost the most during this economic downturn.  According to Bloomberg, 95 percent of the jobs lost during the recession were middle class jobs.  That is an absolutely astounding figure.  Yes, some executives lost their jobs during the last recession as did some minimum-wage workers.  But overwhelmingly the jobs that were lost were middle income jobs. 

Sadly, the limited number of jobs that have been added since the end of the last recession have mostly been low income jobs.  A higher percentage of Americans are working low income jobs than ever before, and the cost of living continues to rise at a very brisk pace. This is causing an erosion of the middle class unlike anything we have ever seen in American history. More...

US Needs To Generate 263,700 Jobs Monthly To Return To Pre-Depression Employment By End Of Obama Second Term

Zero Hedge
We will simply copy and paste, with the appropriate adjustments, the form text we put up after each and every NFP report calculating the number of people that have to be added by the end of a hypothetical second Obama term. Using the November boilerplate: "Every few months we rerun an analysis of how many jobs the US economy has to generate to return to the unemployment rate as of December 2007 when the Great Financial Crisis started, by the end of Obama's potential second term in November 2016.

This calculation takes into account the historical change in Payroll and includes the 90,000/month natural growth to the labor force, and extrapolates into the future. And every time we rerun this calculation, the number of jobs that has to be created to get back to baseline increases: First it was 245,500 in April, then 250,000 in June, then 254,000 in July then 261,200 in October [and finally 262,500 in November].

this number has has just risen to an all time high of 263,700. This means that unless that number of jobs is created each month for the next 5 years, America will have a higher unemployment rate in October 2016 than it did in December 2007. More...

Consumer Confidence Falls to Two-Year Low

Consumer confidence unexpectedly slumped in October to the lowest level since March 2009, when the U.S. economy was in a recession, as Americans’ outlooks for employment and incomes soured.

Limited job availability, deteriorating home values and the threat of a European debt default are weighing on sentiment. A drop in optimism helps explain concern among some companies like Levi Strauss & Co. that spending will falter during the holiday shopping season.

“Dysfunctional labor and housing markets and the turmoil in Europe all are drags on confidence,” Robert Dye, chief economist at Comerica Inc. in Dallas, said before the report. “Consumers are fundamentally constrained, and consumer spending won’t be leading the economy forward.” More...

US Needs To Generate 261,200 Jobs Per Month To Return To Pre-Depression Employment

Every few months we rerun an analysis of how many jobs the US economy has to generate to return to the unemployment rate as of December 2007 when the Great Financial Crisis started, by the end of Obama's potential second term in November 2016.

This calculation takes into account the historical change in Payroll and includes the 90,000/month natural growth to the labor force, and extrapolates into the future. And every time we rerun this calculation, the number of jobs that has to be created to get back to baseline increases: First it was 245,500 in April, then 250,000 in June, then 254,000 in July. As of today, following the just announced "beat" of meager NFP expectations, this number has has just risen to an all time high 261,200. More...

US jobs report points to protracted downturn

Andre Damon
The Labor Department said Friday that the US unemployment rate rose in April, but that the economy added more jobs than had previously been expected. Behind the increase in jobs, however, is a dismal and in many ways worsening employment situation, combined with a systematic attack on wages and social programs.

The unemployment rate grew to 9 percent, up from 8.8 percent in March. The number of employees reported by businesses increased to 244,000, higher than the 185,000 that economists expected. This is still barely enough to keep up with the growth in the labor market.

The Labor Department bases its estimate of the unemployment rate on a survey of households, while the payroll figure comes from a survey of businesses. Because of this, the two do not always move together.

The 244,000 jobs created in April represent only a small portion of the jobs that were destroyed during the downturn. Since February 2010, the US economy has created 1.8 million jobs. But this figure pales in comparison with the 8.7 million jobs that were lost since the start of the recession.

Some commentators were quick to dismiss the rise in the unemployment rate as a sign that discouraged workers were once again reentering the labor force, but there is little in the report to suggest that this is the case.

The labor force participation rate held steady last month at 64.2 percent for the fourth consecutive month, down from 66 percent in 2006. The number of people out of work likewise stayed the same at 13.7 million. The U-6 unemployment rate, which includes "discouraged workers" and people working part-time for economic reasons, grew to 15.9 percent, from 15.7 percent the month before.

For some sections of the population, unemployment is rampant. One in four teenagers looking for work cannot find it, along with 16.1 percent of African-Americans and 11.8 percent of Hispanics.

The report follows a string of dismal economic news. The Commerce Department said late last month that the US economy grew by 1.8 percent in the first quarter of 2011, significantly less than the 3.4 percent growth in the fourth quarter of last year and 4.5 percent in the third quarter of last year.

Weekly initial jobless claims likewise continued to edge up. After dipping as low as 375,000 in late February, the figure shot up to 474,000 last week. This was the fourth consecutive week in which initial claims were over 400,000, generally considered a indicator of net job losses.

The housing market, meanwhile, has continued to worsen. The S&P/Case-Shiller index of home prices in 20 major cities fell by 1.1 percent in February, the latest month for which information is available, according to figures released April 26. Nationwide, home values are down by 3.3 percent over the past year. Since the beginning of the housing market downturn in 2006, over $9 trillion has been wiped out from home values. More...

Big U.S. Firms Cut Hiring, Shift Hiring Abroad

U.S. multinational corporations, the big brand-name companies that employ a fifth of all American workers, have been hiring abroad while cutting back at home, sharpening the debate over globalization's effect on the U.S. economy. The companies cut their work forces in the U.S. by 2.9 million during the 2000s while increasing employment overseas by 2.4 million, new data from the U.S. Commerce Department show. That's a big switch from the 1990s, when they added jobs everywhere: 4.4 million in the U.S. and 2.7 million abroad. More...

Long Shadows Cast Over US Economy

Image via WikipediaJim Willie
Numerous are the threats to the US Economy and US financial structures. Many are hidden threats, subtle challenges to undermine increasingly fragile support systems, planks, and cables that hold the system together.

The year 2011 will be when the system breaks in open visible fashion, when the explanations that justify it sound silly and baseless, when the entire bond world endures major crashes. All thing financial are inter-related.

Recall that in summer 2007, the professor occupying the US Federal Reserve claimed the subprime mortgage crisis was isolated. The Jackass countered with a claim that the bond market was suffering a crisis in absolute terms, where all bond markets were on the verge of fracture, perhaps globally.

In year 2008 the banking system in the Western world broke, fatally and irreparably in my view. In 2009, the solutions, the treatment, the official programs were all exaggerated for their effectiveness while banker welfare became a fixture. Neglect of the people on Main Street became policy.

In 2010, the system revealed it is still broken. The global monetary system after all rests atop the sovereign bond market. This year, it must fight off a collapse. Many are the hidden points of vulnerability. Gold & Silver will continue to be the great beneficiaries. Read more...

Forget a Recession, The Empire is Crumbling

Image via WikipediaPhoenix Capital Research

I look around me and I see an Empire in Decline.

The US economy is clearly in a depression… not a recession, not a recovery, but a DEPRESSION. More than 40 million Americans (12%) are on Food stamps. Nearly one in five of us are unemployed of underemployed. Folks go to Wal-Mart at 11PM waiting for their government checks to clear at midnight so they can buy baby formula, milk and other necessities.

Three out of every five Americans are overweight. One in five are obese. Indeed, there are only two areas (one state, Colorado, and Washington DC) where obesity rates are under 20%.

Nearly three in four of us don’t get enough sleep. Almost one third of us report having trouble falling asleep EVERY night. And almost half of us report that day-time sleepiness interferes with normal activities including work.

Half of marriages end in divorce. One out of ten married couples report sleeping alone. The average American watches 28 hours of TV a week (enough to qualify for a part-time job). Two thirds of us eat dinner while watching TV, preferring the fake, sensationalized lives of others to engaging with our own families.

The TV and media are filled with foul, ungodly images of sex, violence, and hate. The most watched shows of the last decade all feature ordinary folks becoming superstars in lottery-esque competitions (American Idol, Survivor, Who Wants to be a Millionaire, etc) OR crime sagas detailing the most sordid and disgusting elements of society (CSI, Law and Order, etc) OR amoral social dramas in which notions of personal responsibility, fidelity, and common decency are unknown (Desperate Housewives, the Bachelorette, etc).

Today, brain dead, vapid human beings who have contributed nothing to society are idolized and followed as though they invented the wheel. We’ve actually got two industries devoted to presenting the illusion and reality of celebrity: Hollywood shows the photo-shopped, CGI-enhanced, scripted version, while the paparazzi and weekly glossies reveal the drug-addicted, affair-crazed, family breaking, soul-less emptiness.

Sex or violence are plastered on virtually every flat surface available. Even the check-out lines at the grocery store feature endless images of barely clothed women along with headlines sensationalizing gruesome behavior, right out in the open for children to see. And if the kid can actually read the headlines… God only knows what ideas this stuff is putting into their heads.

Financially, we’re all pretty much bust or going bust (except those on Wall Street).

New home sales in July were a RECORD low. Not record as in for the year, but the lowest since 1963. The talking heads are high fiving because sales improved in August, but failed to note that they were still DOWN 19% from August 2009 levels.

Americans two primary assets for retirement (stocks and their homes) have both been absolute disasters. Home prices are down 30%, stocks haven’t produced gains in over a decade. Every moron on TV talks about the Dow 10,000 like it’s a miracle. But when you adjust the Dow for inflation, (using the BLS’ ridiculous CPI measure) the Dow is SUB-500 in terms of purchasing power.

Our money system is controlled by an elite banking oligarchy fronted by academics who have never run a business, invented anything, or had any interaction with commerce aside from vying for tenure. Our currency is now worth less than 1/20^th of what it was a century ago. And we are ALL in debt up to our eyeballs on a personal, corporate, local, state, and federal level. More...

Welcome to the Fake, Jobless Economic Recovery

Image via Wikipedia

In the Summer of 2010
Ron Holland
Are you ready for interesting times and an exodus from the United States? A possibly apocryphal ancient Chinese curse goes "May you live in interesting times." Those words may derive from an authentic Chinese proverb: "It is better to be a dog in a peaceful time than be a man in chaos."

Either way, the message is easy to understand for anyone living in the summer of 2010. As I look over at Lucky, my golden retriever whose only concerns are when do we eat and when do we go back in the ocean to play ball, I can see the advantages of being a dog. But as a man I know it is time to defend my freedom and secure my wealth for myself and for my posterity.

The U.S. is wandering through a fake recovery, an expanding sovereign debt crisis, a stock market downturn and a double-dip real estate collapse. Meanwhile, the Swiss franc is moving to historic highs to the euro. And what does the conventional press want to tell us about? The "strong" dollar, who's to blame for the oil disaster, the newest episodes in a host of foreign and domestic political soap operas and – a fresh diversion – which politicians are telling the biggest lies about their military records.

Welcome to the Fake, Jobless Economic Recovery

Last Friday, The Feds announced that the U.S. economy has added 431,000 jobs. The boldest spokespersons tried to announce this as good news, but the details revealed that only 40,000 of the total are private-sector jobs – the kind that produce things people want and are willing to pay for. The rest are little more than assignments in make-work projects designed to buy votes and beef-up the statistics on a fake recovery.

The American financial press asks hourly, "Will the euro survive as a currency?" And every time, the question is a prelude to "Again the dollar's strength indicates it remains the world's safe-haven reserve currency." My response is, "Oh, really?" This is just more lies from Washington and Wall Street that you believe at your peril.

"Lies, damnable lies and statistics." It's an expression attributed to Benjamin Disraeli, one of my favorite British historical figures. He was prime minister twice, but in his early years he had been a stock promoter. When a boom in South American mining stocks collapsed in 1825, he lost everything, much as a later Prime Minister, Winston Churchill, did in 1929. Both Disraeli and Churchill turned to writing to repair their finances (Disraeli also married a rich widow many years his senior). Again like Churchill, Disraeli went into politics with success, and both secured loans from the Rothschild banks.

Interesting to some, though perhaps not to others. But British history over the last century is a worthwhile topic for all of us. It's a model of what happens when an empire reaches its pinnacle and then slides into decline. It's a model of what is happening to America today.

The Swiss Franc Benefits

As I've written before, the Swiss National Bank tries to keep the franc aligned with the euro, in order to protect cross-border financial relationships and trade. If the dollar goes down, usually the euro and Swiss franc both go up. If the dollar goes up, both the euro and Swiss franc go down, although not always at the same rate.

Just days ago the Swiss franc hit an all-time high verses the euro, so although both have lost some value relative to the dollar, the franc's retreat is more modest. The real challenge for the Swiss National Bank is to limit the franc's appreciation when billions of investor euros are flooding into Switzerland and bidding for the local currency. Contrary to what you'll read in the American financial press, the smart money is moving into Switzerland in big volume.

Exodus Then & Now

The establishment media have been covering the challenges to Israel's Gaza blockade with references to the excellent 1960 epic/propaganda film, Exodus. There are quite a few similarities between the British blockade of Palestine in 1947 and what Israel is doing now, including forced boarding in international waters, resistance by ship passengers, the death of Americans, a widely published film record of events and complaints of excessive use of force.

If it's presented artfully, overreaction by those in power can feed public support for the target and sometimes allows the weaker party to prevail. The image of Gandhi and his followers being imprisoned by the British for harvesting salt from the ocean supported the formation of the state of India. The story of the SS Exodus and the British Navy sending Holocaust survivors back to Germany helped bring about the establishment of Israel. Pictures of "Bull" Connor attacking civil rights protestors in Birmingham, Alabama led to the Civil Rights Act of 1964. Whether the Palestinians and their allies will succeed in playing the victim card, time will tell.

The British resistance to the 1947 Exodus demonstrated how incompetent and cruel a collapsing empire can be. While this might be news to the general public, it isn't news to freedom-loving entrepreneurs who are making plans to avoid the turmoil, taxes and terror coming from our desperate politicians in Washington.

Hence the exodus from America of productive, innovative Americans acting to get themselves and their wealth out before it is too late. This outflow of talent and wealth doesn't get much coverage in the establishment news media.

The media are too busy with the pushing and shoving in the Middle East, the sovereign debt problems in Europe, the volatility of the U.S. markets and the BP oil spill in the Gulf of Mexico. Those things are important (the oil trail from the Gulf may eventually run past my home in the U.S., which is on a coastal island). But an exodus from the Land of Immigrants is a far bigger story. Saving what is left of the American Dream calls for you to get at least your wealth outside the disaster zone of Washington incompetence, as one remarkable American is now doing. More...

Double Dip in Action: -2% U.S. GDP in Q3

seekingalpha.com

Do you hear a grinding sound? Listen a little harder. That sound is the brakes being applied to the U.S. economy.

The current price action in commodities markets (as highlighted in my commentary yesterday, “Commodities Growling Like a Bear”) is very much reflective of this braking process. How do we measure the slowing? Where can we gain evidence? Let’s turn to Rick Davis’ fabulous work at Consumer Metrics Institute.

Recall that Rick has not only been way out in front with his calls on the growth of the U.S. economy, but also very accurate especially given that he is projecting GDP a full 4 months prior to its official release. Rick is already on record with his call of -1.5% GDPfor the 2nd quarter 2010. What does Rick see for the 3rd quarter?

May 30, 2010 – BEA Lowers 1st Quarter GDP Estimate as the Consumer Metrics Institute Previews 3rd Quarter GDP:

On May 27th the BEA released its first revision to its 1st Quarter 2010 GDP growth rate measurement, lowering the number from a 3.2% annualized growth rate to 3.0% annualized growth. One day later the Consumer Metrics Institute’s ‘Daily Growth Index’ was signalling what we should expect the BEA’s measurement of the 3rd Quarter 2010 GDP growth rate to be: contracting at about a 2.0% rate.

The prior BEA estimate of 1st Quarter 2010 GDP growth trailed our ‘Daily Growth Index’ by 127 days, and because of the rapid rate that the economy was cooling when the measurements were being made the newly adjusted estimate is now trailing our ‘Daily Growth Index’ by 125 days. Since the 3rd Quarter of 2010 ends 125 days after May 28th (when our ‘Daily Growth Index’ was recording a ‘growth’ rate of -1.99%), if the BEA estimates continue to trail our ‘Daily Growth Index’ in a consistent manner we should expect that the 3rd Quarter’s GDP ‘growth’ rate will be in the -2.0% neighborhood. (Click to enlarge)

Several things were interesting about the BEA announcement, which seems to have been largely ignored by the equity markets on a day when the Dow Industrials were up over 280 points. Not only was the total growth rate revised downward by .2%, but the impact of inventory building was adjusted upward from 1.57% to 1.64%, meaning that the end growth rate of consumer demand (net of inventory build-ups) was dropped from about 1.63% to something closer to 1.36% — a 17% reduction that was hardly worthy of a 280 point rally in the markets. Perhaps the U.S. equity markets should obsess less about Greece and Spain and pay more attention to what is happening with consumers in their own domestic economy.

Since we first reported that our "trailing quarter" had slipped into contraction on January 15th, we have charted how the current 2010 version of the consumer contraction event compares with prior similar events in 2006 and 2008. The current event is significantly different; while it is not as severe as the 2008 contraction, it has already lasted longer without forming a clearly defined bottom. We know that if the GDP mirrors consumer activities (as at least 70% of it should, net of inventory adjustments), both the 2nd and 3rd quarters of 2010 should be contracting at a level of between 1% and 2%. If this isn’t a classic "W" shaped "double dip," it is at least the downward glide of a plane with sputtering engines.

From our perspective the ‘economy’ lives where the consumer spends; everything else is merely the consequence of the downstream flow of commerce from the initial consumer "demand." For this reason the official GDP measurements poorly reflect what is happening in the real-time economy, because they merely capture backward-looking factory production levels far downstream, as augmented by governmental redistribution of earlier tax collections and new public debt. Even John Maynard Keynes would have had to admit that governmental stimulus has to ultimately cause increases in aggregate consumer demand for a real recovery to be happening. We simply aren’t seeing that yet.

What is around the bend as we navigate the economic landscape? A double dip on our economic trail. Thanks to Rick Davis and the Consumer Metrics Institute for his fabulous work.

Here's Why The Real Jobs Loss Number Was 5x Worse Than What The BLS Reported

businessinsider.com

TrimTabs employment analysis, which uses real-time daily income tax deposits from all U.S. taxpayers to compute employment growth, estimated that the U.S. economy shed 104,000 jobs in January. Meanwhile, the Bureau of Labor Statistics (BLS) reported the U.S. economy lost 20,000 jobs. We believe the BLS has underestimated January’s results due to problems inherent in their survey techniques.

In addition to their regular report, the BLS published benchmark revisions to their employment estimates derived from an actual payroll count for March 2009. As a result, job losses from April 2008 through March 2009 were revised up a whopping 930,000, or 23% from their earlier revisions. In addition, the BLS revised their job loss estimates for 2009 up 617,000, or 14.8%.

While the BLS originally reported job losses of 4.2 million in 2009, TrimTabs reported 5.3 million, a difference of more than a million lost jobs. We consistently reported that based on real-time tax data, job losses were much higher than the BLS was reporting. This past January, the BLS revised their job loss estimate to 4.8 million, an increase of almost 600,000 lost jobs. The new total brought the BLS’ revised estimates much closer to TrimTabs’ original estimate based on real-time tax data.

Since July 2009, TrimTabs estimates and the BLS estimates have diverged again. While the tax data points to a weak job market, the BLS estimates point to a steadily improving job market. We believe the job market is much worse than the BLS is reporting and that in January 2011, when the BLS revises their estimates for 2010, their April 2009 through December 2009 results will move much closer to TrimTabs’ results.

The BLS has seriously underreported job losses for the past two years due to their flawed methodology. TrimTabs has identified the following four problems:

1. The BLS employment estimate is based on a survey, and not on an actual count of employees. While the BLS survey is large and supposedly designed to capture the complex nature of the employment market, it is still a survey and therefore subject to error. TrimTabs believes that rapid changes in an employment cycle cannot be captured by surveys.

2. Several times a year, the BLS applies enormous seasonal adjustments to their survey results to account for seasonal fluctuations in the job market. For example, this January, the BLS added 1.92 million jobs to their survey results to report a job loss of 20,000 to account for the layoff of retail holiday workers. In our opinion, the sheer magnitude of the seasonal adjustment which dwarfs the monthly result renders this month’s job loss estimate meaningless.

3. At the time of the first release, only 40% to 60% of the BLS survey is complete and is subject to large revisions over the next two months.

4. The BLS applies a mysterious “birth/death” adjustment to their survey results to account for business openings and closings. While the payroll data was adjusted substantially, the “birth/death” adjustments were left unchanged. In 2008 and 2009, the BLS’ “birth/death” adjustment added 904,000 and 882,000 jobs, respectively, for a total of 1.79 million. By way of comparison, in 2006 and 2007, the BLS’ “birth/death” adjustment added 964,000 and 1.13 million jobs, respectively. We find it highly unlikely that in 2008 and 2009, during the worst recession since the 1930’s, more businesses opened than closed netting 1.79 million jobs.

In our opinion, flawed BLS survey results, month-after-month, do the public a huge disservice. While its results point to a slowly recovering economy, TrimTabs’ results point to a dangerously weak economy.

A comparison of TrimTabs’ employment results versus the BLS’ results from January 2008 through January 2010 is summarized below.

Source: TrimTabs Investment Research – www.trimtabs.com and Bureau of Labor Statistics – www.bls.com

Several other employment related statistics support Trimtabs’ conclusion that the labor market is weaker than what the BLS is reporting:

· Real-Time tax withholding data shows that wages and salaries declined an adjusted 1.0% y-o-y. In January 2009, wages and salaries declined 5.0%. If the labor market were improving, we would expect a positive year-over-year growth rate. The fact that tax withholding data is still declining year-over-year suggests that the labor market is still contracting.

· The Monster Employment Index declined further in January, falling 0.9%.

· The TrimTabs Online Jobs Index reported slightly higher job availability in January but remains at a low level.

· Advanced Data Processing reported a job loss of 22,000.

· Weekly unemployment claims edged up in the past month, rising 10.2% since the beginning of January.

· In January, a whopping 11.5 million people were collecting some form of unemployment insurance, up 27.8%, from 9.0 million in November.