Friday, December 5, 2008

Brother, Can You Spare a Job?

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. In addition to the term helicopter economics, we have also coined the term, helicopternomics, to describe the current monetary and fiscal policies of the U.S. government and to update the old-fashioned term wheelbarrow economics.

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The employment report was released this morning and the news can only be described as devastating. There was a loss of 533,000 jobs in November, the most this year so far. This was also the biggest drop in 34 years, when 602,000 jobs were lost in December 1974. On top of November's reduction in jobs, September and October was revised sharply downward with losses those months much worse than initially reported. Despite the large drop in jobs, the official unemployment rate rose only to 6.7% last month from 6.5% the month before. Unemployment would have been even higher if government statisticians hadn't decided that 422,000 people had left the labor force. Still, even this 'modified' figure is at a 15-year high.

The unusually low reported unemployment rate isn't the only thing in the report that should make you suspicious either. It is obvious that the government grossly and conveniently underestimated job losses before the presidential election where the state of the economy was a major issue damaging Republican electoral prospects. The September figures were the last ones reported before the election. Initially, there was a loss of 159,000 jobs, which is pretty bad, but not nearly as bad as what really happened. Right after the election, this number was revised downward to a loss of 284,000 jobs. In today's report it was revised downward further to a loss of 403,000 jobs. Total yearly jobs losses reported before the election were 760,000. Today that number is being reported as 1.9 million - a rather steep increase and much more dismal picture than voters were given just one month ago when they went to the polls.

Job losses last month were widespread, hitting factories, construction companies, financial firms, retailers, leisure and hospitality, and others industries. Nevertheless, there were job gains in government, education (mostly government as well) and health care. Every bad employment report this year has in fact shown an increase in government employment, even though many states, local governments, and school districts are severely strapped financially. If you extrapolated these increases out, you would also see that they indicate in the long-term we will all be government employees. For some reason, I have trouble finding them credible.

All in all it can be said that the deteriorating employment picture is the result of two factors. First, the U.S. economy is indeed falling apart and already in deep recession. Secondly, a lot of deterioration in the employment picture that is being reported now, has actually taken place over the last several months. The U.S. government is just admitting the truth. Of course, the past figures may be somewhat worse than even what we have been told so far.

NEXT: Tribune Bankruptcy Has it All

Daryl Montgomery
Organizer, New York Investing meetup

This posting is editorial opinion. Like all other postings for this blog, there is no intention to endorse the purchase or sale of any security.


Doctor Of Ghetto said...

It is ridiculous that the U.S. Government and the mainstream media suddenly admits to this being an actual recession, when this was going on one year ago, maybe longer.

I do not know how they think Americans are dumb-founded, because we have our own sources in knowing things, regardless if it is forshadowing, thanks to Darryl and many others.


And a dollar to brother.