Friday, January 9, 2009

Eonomics Reports - From Very Bad to Even Worse

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.

Our Video Related to this Blog:

The jobs report this morning was as bad as expected. The stench of economic decay emanating from the figures was unfortunately magnified by a number of other recently released economic indicators. Several days ago, Consumer Confidence for December came in at 38 - an all-time low. Yesterday, many retailers released their same store holiday sales and they were the worst in at least four decades. Lost in today's news about U.S. employment was the Wholesale Inventory report which showed a record decline in sales that blew away the previous record, set only one month ago. While the jobs report was bad enough on the surface, things are even worse than the headline numbers indicate.

The BLS reported that the U.S lost 524,000 jobs in December and the unemployment rate went up to 7.2%. Job losses for November and October were revised upward to 584,000 and 423,000 respectively. The BLS has constantly revised the monthly job losses higher in the two months following their initial release all year long (the press doesn't emphasize or even acknowledge that this takes place). Without further revisions to November and December figures, the total job losses for 2008 is 2.6 million. This figure was last exceeded in 1945, when the U.S. was transitioning from a war time to peace time economy.

In total, 11.1 million people were unemployed in December. This figure does not include part-time workers who can't find full-time work, nor discouraged workers that have just given up looking for a job (the U.S. unemployment rate would be 13.5% if both categories were included). While full-time employment is falling, part-time workers grew to 8 million from 7.3 million in November. As usual, only three categories gained jobs -government, education (which is mostly government) and health care (apparently people are becoming increasingly sick because of the economy). Even though governments at all levels in the U.S are in retrenchment mode, they have continually hired more and more workers all year long according to the BLS. If you extrapolate this trend into the long term, you will see that eventually government will employ 100% of the American labor force. For some reason this makes me suspicious.

Looking at business conditions from the wholesale perspective, an even gloomier picture emerges. Wholesale inventories (goods held by distributors who buy from manufacturers and sell to retailers) fell 0.6% in November and sales fell by a depression level 7.1%. The decline in sales shattered the old record of a 4.5% drop, which was just set in October. Wholesale inventories make up about 25 percent of all business stockpiles. They are a leading indicator of future retail business - and a double digit decline in just two months does not augur well for the economy next spring

NEXT: The January 8th Meeting of the New York Investing meetup

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.

No comments: