Lying with Statistics: the September Jobs Report

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. We have coined this term to describe the current monetary and fiscal policies of the U.S. government, which involve unprecedented money printing. This is the official blog of the New York Investing meetup.

One month before the presidential election, there was suddenly a major reversal in unemployment trends that have taken place during the entire administration of the Obama presidency. The figures indicate explosive growth is taking place in the U.S. economy and this has occurred overnight. The explanation of where this growth is coming from or how it has happened is illusive.

Unlike the previous four years, large numbers of jobs were supposedly created last month. Actually that's not exactly the case. The household survey reported 873,000 jobs were created, whereas the business survey reported 114,000 — a typical amount. In previous months, the household survey has actually indicated major job losses. The mainstream media has failed to report this. However, when a number suddenly appears that lacks credibility in the same survey, but that number is positive, it apparently is worth reporting. 

Where did these jobs come from?  It's not clear from the report. It was specifically stated that "manufacturing employment edged down in September". There was a loss of 16,000 jobs, so there is no evidence that U.S. manufacturing is on the upswing. Based on the following statement, 600,000 people were hired part-time last month: "The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) rose from 8.0 million in August to 8.6 million in September". This is a huge change. Where are these part-time workers employed and what were they hired to do? Will they be fired the day after the election?

Perhaps even more amazing is that the BLS reported that the U.S. labor force grew in September 2012 for the first time in years. From August 2007 to August 2012, the U.S. labor force shrank like it would during a depression with a total 9,602,000 people leaving it. It abruptly increased by 418,000 last month. What caused such a large number of people to suddenly influx into the labor force? GDP last quarter barely grew indicating a stagnant U.S. economy.

The number of unemployed persons, at 12.1 million, supposedly decreased by 456,000 in September. The BLS stated that the unemployment rate fell to 7.8% —  the first time it has been below 8.0% since just after President Obama took office. The continual multi-year unemployment rate of over 8.0% has been a major issue in the presidential election.

The numbers in the September employment report are quite fantastic and there is no basis for believing them. Disreputable statisticians can easily produce highly unreliable numbers. If statistics are inconsistent with the past, with each other, have no traceable explanation or seem contradictory with real world observations, they are suspicious. In the case of the September employment report all four criteria have been met. The quality of U.S. economic numbers have been decaying for the last 30 years. They seem to currently be making the transition from manipulation to outright fantasy.

Disclosure: None


Daryl Montgomery
Author: "Inflation Investing - A Guide for the 2010s"
Organizer, New York Investing meetup http://investing.meetup.com/21

This posting is editorial opinion. There is no intention to endorse the purchase or sale of any security.

July Jobs Report Shows U.S. Economic Statistics Are a Joke

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. We have coined this term to describe the current monetary and fiscal policies of the U.S. government, which involve unprecedented money printing. This is the official blog of the New York Investing meetup.

According to the Labor Department, the U.S. added 163,000 jobs in July. Also according to the Labor Department, the U.S. lost 195,000 jobs in July. So the U.S. economy is either doing OK or it's falling apart big time. Or maybe something between the two is happening. Confused? You should be.

Two separate surveys are used for the employment report. In one, they ask businesses about the amount of hiring they've done in the previous month and in the other the ask people whether or not they have a job. The amount of jobs created for the month is determined by the business survey and the unemployment rate from the survey of households. As more than one article on the July employment report pointed out today, "economists say the business survey is more reliable". So if you think you're unemployed, but an economist says you have a job, the economist is right.

The unemployment rate ticked up to 8.3% according to the household data.  The two surveys have frequently not seemed to match in the past with minimal job gains resulting in drops in the unemployment rate. The Labor Department explained that this occurred because millions of people have left the U.S. labor force since the "recovery" began in 2009 (150,000 more left in July). Even though these people are unemployed, they are not counted as unemployed and this makes the unemployment rate look better. Why millions of people would stop looking for work during a "recovery" has never been answered. Usually, this type of behavior takes place during depressions.

The Labor Department did not discuss the massive discrepancy between its two employment surveys in its press release. Instead it gave a rosy assessment of all the jobs created last month. This included 25,000 new jobs in manufacturing, even though the recent ISM Manufacturing report (a private survey) indicated U.S. manufacturing activity shrank last month.  So an industry that is losing business is hiring lots of new workers. That certainly makes a lot of sense all right.

One possible explanation for the discrepancy was that "inappropriate" statistical adjustments were made to the numbers in the business survey. While one should never rule out gross incompetence when discussing the output of the government statistical offices, a more cynical person might think that there was a purposeful effort to produce better numbers than actually exist because it's an election year. After all, those pesky downward revisions months later never get any notice from the press and the ugly truth can always be told later when no one is paying attention (and after they've voted).

Disclosure: None

Daryl Montgomery
Author: "Inflation Investing - A Guide for the 2010s"
Organizer, New York Investing meetup
http://investing.meetup.com/21

This posting is editorial opinion. There is no intention to endorse the purchase or sale of any security.

The Only Suprise for March Employment Was that it Wasn't 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. We have coined this term to describe the current monetary and fiscal policies of the U.S. government, which involve unprecedented money printing. This is the official blog of the New York Investing meetup.

According to the BLS, the U.S. created only 120,000 non-farm jobs in March. The mainstream media cited this figure as a surprise because it was well below expectations. The real surprise was that the number wasn't even worse.

Winter month employment numbers came in at the 200,000 level and this was trumpeted as evidence that the economy was finally gaining steam. There were two problems will this line of reasoning. The first is that the U.S. needs to create approximately 150,000 jobs a month for the unemployment rate to stay even (this balances the loss of people retiring with new students and legal immigrants entering the job market).  In order to put any serious dent in the massive amount of unemployment that exists the monthly number of jobs being created needs to be well over 200,000. The second problem was the unusually warm weather during the winter that magnified the impact of the seasonal adjustments.

If seasonal adjustments boosted the numbers in January and February, then lower numbers should be expected in the normally warmer spring months. The weak March number seems to be bearing this out. It is interesting to note that the Retail Trade category lost 34,000 jobs in March. This does not support the idea that retail sales have actually been strong as has been claimed, but that the numbers have instead been artificially boosted by inflation. Retail employment is prone to large swings due to seasonal factors.

The official unemployment rate fell to 8.2% from 8.3%. The obvious question is how can this happen if less than 150,000 jobs were created and that's the amount needed for things to remain in equilibrium? It can only occur if more people than expected leave the labor market. This happened again last month  as has been the case during the entire economic "recovery"(millions of people have left the U.S labor market since the Great Recession began). The mass exodus from the labor market creates a huge reservoir of unemployed waiting to reenter the market if conditions actually improve. This reentry could keep the unemployment rate from falling well into the decade.

People of course do not leave the labor market in droves when the economy is on an upswing. The continued shrinkage of the labor market indicates an economic downturn. Don't expect to hear that from either the U.S. government or the cheerleading mainstream media. Politicians don't get reelected by telling the public bad news.

A key question that usually goes unexamined in reporting about the jobs numbers is the high price the U.S. taxpayer and consumer will be paying in the future for the jobs being created today. The U.S. has run deficits of $1.3 trillion or more since 2009. Pumping all of that money into the economy will of course create jobs, but at what cost?  Unless there is a free lunch, that money will have to be paid back either through higher taxes or higher inflation. Both will lead to lower job creation in the coming years.

Disclosure: None

Daryl Montgomery
Author: "Inflation Investing - A Guide for the 2010s"
Organizer, New York Investing meetup
http://investing.meetup.com/21

This posting is editorial opinion. There is no intention to endorse the purchase or sale of any security.

BLS Press Release MisReports August Jobs Data

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. We have coined this term to describe the current monetary and fiscal policies of the U.S. government, which involve unprecedented money printing. This is the official blog of the New York Investing meetup.


According to the August jobs report, the U.S. lost another 54,000 jobs last month and the unemployment rate rose to 9.6%. The government claimed that the private sector added 67,000 jobs, although most of these jobs came from the Health Care and Social Assistance category and from Education, both of which are filled with jobs supported by the government. The numbers in the BLS (Bureau of Labor Statistics) press release did not agree with the Data Tables and of course made things look better than they actually were.
      
The data in the non-farm payrolls report indicated that there were 40,200 jobs created in the Health Care and Social Assistance category (the mainstream media almost always leaves off the Social Assistance part, perhaps because these are so obviously government and not private sector jobs). Interestingly the BLS (Bureau of Labor Statistics) press release only admitted to 28,000 jobs and this incorrect number was picked up in every mainstream media article. The BLS press release, which can be found at: http://www.bls.gov/news.release/pdf/empsit.pdf, stated "Employment in health care increased by 28,000 in August, with the largest gains occurring in ambulatory health care services (+17,000) and hospitals (+9,000)".  The Establishment Data Seasonally Adjusted (Table B in the report), which can be found at: http://www.bls.gov/news.release/empsit.b.htm, stated that the number of jobs in Health Care and Social Assistance increased by 40,200.

The Goods Producing Sector, which actually does include mostly private sector jobs (nationalized companies like General Motors being the exception), was dead in the water in August. The total number of jobs added was ZERO. Goods producing industries include Manufacturing, Mining and Logging, and Construction. Manufacturing lost 27,000 jobs and this contradicts the rosy picture painted by the ISM manufacturing report from two days ago that indicated U.S. manufacturing employment was skyrocketing. Construction kept the Goods Producing Sector from being negative by adding 19,000 jobs. This occurred even though new home sales recently fell to the lowest number ever recorded. Perhaps these workers are busy building castles (or more appropriately, McMansions) in the sky, so of course their work isn't immediately visible to ordinary mortals such as ourselves.

There is no evidence in the August payroll numbers of any significant non-government related hiring taking place. The first job loss number was reported three years ago in August 2007 and after over $3 trillion in deficit spending since then, the U.S. employment situation has managed to only reach a state of controlled bleeding. There were an estimated 6.6 million students graduating from school this year and eventually most of them will need a job. That implies the U.S. needs 550,000 new jobs a month to absorb former students into the labor force. People are of course always leaving the labor force as well because of retirement and for other reasons such as giving up looking for a job because none are available. It has been generally accepted for a long time that the U.S. must add at least 200,000 jobs a month to just accommodate new people looking for work.  Even after getting to that level, and we are still losing jobs not gaining them, there is then an additional 8 million jobs that have to be created to replace those lost during the Credit Crisis. So far, it's just not happening.

Disclosure: No positions.

Daryl Montgomery
Organizer, New York Investing meetup
http://investing.meetup.com/21

This posting is editorial opinion. There is no intention to endorse the purchase or sale of any security.

Some Recovery, Half a Million More Unemployed Last Week

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. We have coined this term to describe the current monetary and fiscal policies of the U.S. government, which involve unprecedented money printing. This is the official blog of the New York Investing meetup.


After more than a year of economic 'recovery', the Department of Labor reported weekly unemployment claims rose to 500,000 last week. Any number at 400,000 or higher indicates recession. The last time weekly claims were below that number was the week of July 17, 2007 - more than three years ago.

The unemployment problem has two components - not enough hiring in the private sector and too many job losses for people who have jobs. The lack of hiring can be seen in the monthly non-farm payrolls report and the too much firing shows up in the weekly unemployment claims. Not all U.S. workers are eligible to collect unemployment however so the weekly claims numbers understate the actual number of people who lost their job. Even with the understatement, unemployment looks bad enough as is.

The number of former workers collecting extended benefits rose to 4,753,456 in the week ending July 31st (the most recent data). This was up 260,105 or over 5% from the previous week. A year earlier in 2009, only 2,961,457 were in this category, which includes people unemployed for over 26 weeks. So the number of people who are long-term unemployed and have not yet exhausted their benefits has risen over 60% in the last year -a year when economic recovery was supposedly taking place.

Since November 2009, the weekly jobless claims have mostly been in the 450,000 to 500,000 range. There is no noticeable trend of improvement. This is amazing, not just because of trillions in deficit spending that the government told us would make the economy better, but over the long-term (and three years is the long-term) this number should automatically drift down. Companies have to have a certain minimal amount of employees to run their operations. As time goes on, the number of people that can be terminated drops significantly and so should weekly unemployment claims. This drop in claims wouldn't mean the economy is getting better, although the mainstream media would blast headlines claiming that was happening, it would mean that there aren't a lot of people left to fire. At this point in the cycle, since claims aren't dropping, business activity has to be continually declining to maintain the same high unemployment numbers. That's the definition of a recession, not a recovery.

Investors should not be surprised if the weekly unemployment claims numbers start looking better soon and for the next couple of months. The U.S. employment situation is a major embarassment for the administation and there is an important election in November. This week, the president is making appearances in  five states to make the case that it was worth borrowing trillions of dollars for stimulus spending and doing so has put America 'back on the road to recovery'. The last nine months of weekly unemployment claims certainly aren't supporting this view. With a statistical adjustment here and there though, the numbers could suddenly look a whole lot better, even if the economy isn't improving at all.

Disclosure: No positions.

Daryl Montgomery
Organizer, New York Investing meetup
http://investing.meetup.com/21

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.

July Payroll Report Marks 3 Years of Job Losses

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. We have coined this term to describe the current monetary and fiscal policies of the U.S. government, which involve unprecedented money printing. This is the official blog of the New York Investing meetup.


The U.S. lost 131,000 thousand jobs in July. It has now been three years since the first job losses appeared in August 2007. Despite over three trillion dollars in government deficit spending since then, the employment situation has yet to turn around.

While job losses date back to August 2007, they didn't become consistent until 2008 and 2009.  Every month in that two-year period, except November 2009 had a decline in payrolls. Job gains were reported between January and May 2010, with payrolls increasing over 200,000 in March, April and May. The U.S. economy needs to add 200,000 jobs a month just to stay even because of new entrants into the labor force (recently the mainstream media has downgraded this long accepted number to 100,000 in an effort to make things look better). Unfortunately, most of those jobs added in the spring were part-time temporary Census positions and now those people are being fired, so job losses have returned. There was a loss of 221,000 jobs in June - revised downward from the originally reported loss of 125,000.

The BLS (Bureau of Labor Statistics) reported this month that the private sector added 71,000 jobs. Only three sectors accounted for most of these 'gains' - Health Care, Motor Vehicles, and Transportation and Warehousing. Health care and Social Assistance added 27,000 jobs. Health care has been the only sector to continually add jobs during the downturn. Government and Education were the other two categories that frequently added jobs. Education and Health Care jobs mostly come from the government or are paid through government programs and should not be considered private sector. Motor Vehicles gained 21,000 jobs through the magic of seasonal adjustments, not by actually hiring more workers. Transportation and Warehousing added 12,000 jobs.

The headline unemployment rate (U-3) for July was reported as 9.5%. This compares to 4.6% rate in August 2007. Including forced part-time workers and some discouraged workers (U-6), sometimes referred to as the underemployment rate, the July 2010 rate was 16.5%. The reported unemployment rate would have been much worse if close to a million people didn't supposedly leave the U.S. labor force in May and June of this year. This was a truly amazing finding considering as many as 6.6 million American students graduated from high school and college in those two months. While all of them didn't enter the labor force, most of them that did were without jobs when they graduated. Where are they in the statistics?

The U.S. labor situation began to deteriorate three years ago. Since that time, trillions were spent in bailouts, there has been approximately $3.5 trillion in federal deficit spending, and the Fed has kept interest rates as zero percent starting in December 2008. The public was promised over and over again that each program would make things better. The stock market has rallied on that good news over and over again. Empty promises and fantasy statistics will only work for so long however. At some point we will find out for just how long.

Disclosure: No positions.

Daryl Montgomery
Organizer, New York Investing meetup
http://investing.meetup.com/21

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.

June Employment Report: Where are the Graduating Students?

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. We have coined this term to describe the current monetary and fiscal policies of the U.S. government, which involve unprecedented money printing. This is the official blog of the New York Investing meetup.


Every May and June millions of students graduate from high school and college and enter the U.S. labor force swelling the numbers. Yet in the just released employment report for June, the BLS claimed the labor force decreased by 652,000 last month. This followed a decrease of 286,000 in May. This of course is not possible unless the U.S. economy is in the midst of a depression.

So where did the all the recent graduates go? One place most of them didn't go was to a place of employment. A survey by the National Association of Colleges and Employers found only 40% of new college graduates had a job offer before leaving school in 2010. This compares to two-thirds in pre-recession 2007.  High school graduates not going to college probably didn't do much better. The BLS lists the unemployment rate for those between 16 and 19 as 25.7%.

According to the Statistical Abstract of the United States, 3.3 million students graduated high school and another 3.3 million received college degrees in 2010. While not all of these people would have entered the labor force, it can be assumed that at least a few million did in the last two months. Nevertheless, the BLS claims that there were almost a million less people in the U.S. labor force in June than there were in April. This huge drop in participants caused the reported unemployment rate to drop to 9.5% in June since people who leave the labor force aren't counted as unemployed. The Bureau explained these disappearing participants as people who gave up looking for jobs because none were available for them - not exactly an indication of a recovering job market.

BLS figures further show that there were 301,000 less employed Americans in June than there were in May (see http://www.bls.gov/news.release/empsit.a.htm). The headline number reported a loss of only 125,000 jobs however. The BLS explained this away as a loss of 225,000 census jobs and claimed that the private sector added 83,000 jobs. If you use the 301,000 figure though, it looks like there was a loss of approximately 83,000 private sector jobs.

The insane contradictions in the BLS figures can partially be explained by 'seasonal adjustments'. This is one of the statistical tricks the bureau utilizes to try to make a sow's ear look like a silk purse. Seasonal adjustments make it possible for millions of graduating students to enter the labor force and the BLS to report that the labor force shrank while this was happening.

The employment numbers should be seen for what they are - absurd results created by gross manipulation. Many people however don't wish to believe this takes place despite all the evidence. Those are the people who really need to worry about the current state of the U.S. economy. If the labor force can decline by a million when millions or graduating students are entering it, this means it really lost maybe four or five million workers in a two-month period. That indicates that things are worse in the U.S. now than they were during the Great Depression in the 1930s.

Disclosure: None

Daryl Montgomery
Organizer, New York Investing meetup
http://investing.meetup.com/21

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.

First of the Month Indicator Gives Bear Market Signal

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. We have coined this term to describe the current monetary and fiscal policies of the U.S. government, which involve unprecedented money printing. This is the official blog of the New York Investing meetup.


It was a horrendous day in the markets on Friday June 4th. Trouble began when the euro broke support and selling then spread from Europe to North America. A disappointing U.S. jobs report added to the downward pressure and stocks sank. The small cap Russell 2000 had a mini-crash. The first four trading days of the month were down for the second month in a row, indicating we have established a bear market trading pattern.

Problems began in Europe with rumors of a possible default of a major French bank. Another European country, Hungary, indicated its finances were in trouble. The euro (FXE) fell below the key 1.20 level and traded as low as 1.1919 taken out the 1.1920 low in March 2006. Adding to the woes in Europe was the May employment report that came in well below expectations. Almost all the jobs added were from Census hiring and those jobs will disappear almost as quickly as they appeared. U.S. markets gapped down on the open.

Selling in U.S. stocks was almost continuous throughout the day. By the close, the Dow was down 323 points or 3.2%. The S&P 500 dropped 38 points or 3.4%. Nasdaq was worse still, losing 84 points of 3.6%. The Russell 2000 though gave up 33 points or 5.0%. The rule of thumb is a 5.0% drop in one day is a mini-crash. The Dow closed at 9932, which is the second recent close below the key 10,000 level. This one took place on Friday, so it appears as a loss of technical strength on the weakly charts, a more serious problem than if it had occurred just on the daily charts as was previously the case.

Even worse was that all four major indices were down for the first four trading days of the month. This is a typical bear market pattern. It does occasionally happen in bull market rallies though, so to be significant there needs to be two months in a row with a loss in the first four trading days. May also saw just such a loss, so the two down months in a row have now taken place. A bear market doesn't mean the market isn't going to go up again. Bear markets are known for their sharp and sudden short covering rallies. Traditionally, it means that traders should switch to shorting the rallies instead of buying the dips. Adept short-term traders can of course play the market both ways.

Classic market watchers will not consider stocks to be in a bear market until they've lost 20% of their value. Investors of course should never accept that type of loss. By the time that confirmation takes place; a lot of money is already gone from your brokerage account. So far, the Dow is down 11.5%, the S&P 500 12.5%, the Nasdaq 12.3% and the Russell 2000 15.0% from their respective peaks. Market observers agree that this is a correction because all the indices are down more than 10%.  Informing investors of how much they've lost after the fact is not particularly helpful. The idea is to avoid these events before they take place. If you check, you will see I published a number of articles warning of the sell off before it started.

Disclosure: No positions

Daryl Montgomery
Organizer, New York Investing meetup
http://investing.meetup.com/21

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.

The Good News, Bad News Jobs Report

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. We have coined this term to describe the current monetary and fiscal policies of the U.S. government, which involve unprecedented money printing. This is the official blog of the New York Investing meetup.


There was something for both bulls and bears in the April employment report. The government stated that 290,000 jobs were created last month, a solid enough number. Despite these job gains, the headline unemployment rate rose to 9.9%. If certain discouraged workers and forced part-timers were added, the unemployment rate would have been an incredibly high 17.1%.

It is of course puzzling that the unemployment rate can go up from 9.7% to 9.9% while the U.S. economy is supposedly adding 290,000 jobs. The mystery is solved according to the BLS (Bureau of Labor Statistics) by noting that 805,000 jobseekers reentered the labor market in April. Interestingly, a similar number of workers left the U.S. labor market in a one-month period between December 2009 and January 2010. Perhaps the BLS just misplaced them for four months and finally found them again? Labor force participation is one of the areas where it is easiest to fudge the numbers to make the employment statistics look better.

Seasonal 'adjustments' can also improve the numbers quite a bit as well. The economy usually adds jobs at this time of year and they are appearing right on schedule in the employment report. For an example of how seasonal adjustment works, note the employment numbers in the education category in June. There is generally a 20% reduction in education employment once the school year ends. You will see no such drop in the employment report. The BLS should perhaps give the seasonal adjustment term another name, such as 'make-believe adjustment' for instance, so the public can have better insight into how the employment numbers are created.

The BLS did at least admit that the government hired 66,000 temporary workers in April to help conduct the census. Census hiring has been going on since March 2009 and should have peaked in the last two months. Sources estimate total census-hiring in the range of 1.2 million. I have not found anything near this amount added to the government category in previous reports. However, temporary workers in the Business and Professional category have ballooned during the census hiring period. A footnote in the employment report indicates that jobs added in 'other' categories may be included in the Business and Professional category. We will have to see what happens there in a few months when almost all of the 1.2 million census workers are no longer employed.

To see if the job situation is actually improving, it is always a good idea to compare year over year figures. According to the BLS, the number of people 'not in the labor force' is over two million higher in April 2010 than it was in April 2009. This increase reduces the reported unemployment rate. The employment to population ratio is more than a percent lower today than a year earlier. The worse comparison though is for long-term unemployment (27 weeks or over). This number has grown considerably and is on its way to doubling. A year ago there were 3.7 million long-term unemployed and last month there were 6.7 million. This indicates that the unemployment rate is not just high, but a significant number of the unemployed are having trouble getting new jobs - and this will continue to be the case.

According to recent polls, just 21% of Americans consider the economy to be in good condition. The view of the average person is very different from the numbers produced by the statisticians in Washington. Even with the job increases that took place in April, there are approximately 1.5 million less people employed in the U.S. today than one year ago. When the $800 billion stimulus bill was passed in February 2009, the Obama administration claimed it would create 3.5 million additional jobs. There seems to be some inconsistency between the hype and what has actually taken place. Is it any wonder that the American people don't trust the numbers coming out of Washington?

Disclosure: None relevant.

Daryl Montgomery
Organizer, New York Investing meetup
http://investing.meetup.com/21

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.

March Employment Numbers Better Thanks to Government Hiring

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. We have coined this term to describe the current monetary and fiscal policies of the U.S. government, which involve unprecedented money printing. This is the official blog of the New York Investing meetup.


According to the latest government statistics, U.S. nonfarm payrolls increased by 162,000 in March. The headline unemployment rate was still 9.7% as was the case in January and February. The alternative unemployment rate ticked up to 16.9% however. Most hiring took place thanks to the Census, the health care industry, and the magic of seasonal adjustments - none of which indicate a recovering economy.

The U.S. census has really been the key to the better (or more accurately less awful) employment numbers for the last several months. According to the recent payroll report, the U.S. government hired 48,000 census workers in March. Hiring has been going on for approximately a year now, but has only been substantial since last fall. The Financial Times of London has reported that the government will be hiring 1.2 million workers for the 2010 Census - twice as many as were needed for the 2000 Census (think of this as a form of hidden government economic stimulus). Only a small fraction of this number has shown up in the employment figures so far, unless the hiring is being hidden in the Business and Professional category. There appears to have been about 50,000 extra temporary workers showing up there every month since last fall. A footnote indicates that this number may include workers from 'other' categories - one possibility for 'other' would be government.

The seriousness of the unemployment picture and how bad the economy actually is can be seen in the number of long-term unemployed (those without jobs for more than six months). This number increased by 414,000 in March to 6.5 million. Of the unemployed, 44.1% are now long-term unemployed. This number is much worse than in any other recession in entire post-War period. Another 9.1 million people are working part-time because they can't get full-time employment. Another 2.3 million workers are considered marginally attached to the labor force and not counted as unemployed because they didn't look for work in the last four weeks, but did do so during the last year.

So what made the 162,000 job gains possible in March? In addition to 48,000 jobs officially listed from the census, there were another 40,000 temporary help service jobs. Health care was the next biggest gainer with 37,000 jobs. Health care has been the only industry to consistently add jobs since the recession began in December 2007. It is not an economically sensitive industry. Leisure and hospitality added another 22,000 jobs, manufacturing 17,000 and construction 15,000. Seasonal adjustments, the government statistician's tool for turning a sow's ear into a silk purse, should be considered the source of extra employment in these industries. When I saw the figures, I wondered if the extra construction workers had been hired to build castles in the sky. To be fair, a case could be made that manufacturing and construction are gaining jobs now simply because there couldn't be any more unemployment in the short-term in those industries, both of which have been devastated during the recession.

Despite all the negative aspects to the employment report, including average hourly earnings falling 0.1%, the mainstream media trumpeted it as more evidence that 'happy days are here again' (the title of a song from the Great Depression). Coverage was filled with statements such as, "The increase is the latest sign that the economic recovery is sustainable and healing in the job market is beginning." Government hiring of census workers and more health care jobs (many of which are also government related) does not indicate a sustainable economic recovery. Instead, it indicates sustainable government spending to try to make a recovery look like it is taking place.

Disclosure: Not relevant.

NEXT: Don't Confuse Inflation With Economic Growth

Daryl Montgomery
Organizer, New York Investing meetup
http://investing.meetup.com/21

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.

Stocks Experience Irrational Exuberance on Employment Report

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. We have coined this term to describe the current monetary and fiscal policies of the U.S. government, which involve unprecedented money printing. This is the official blog of the New York Investing meetup.


U.S. stocks rallied strongly on Friday because of the February employment report. In what could only be described as the latest episode of the emperor has no clothes or more appropriately the emperor's people have no jobs, the Dow Jones was up 122 points (1.2%), the S&P 500 up 16 points (1.4%), the Nasdaq up 34 points (1.5%) and the small-cap Russell 2000 up 14 points (2.1%). Oil rallied close to 2% and gold was flat on the day. Bonds sold off. One major media outlet after another trumpeted the reported loss of 36,000 jobs as good news in their Friday and weekend coverage, as did the politicos in Washington. Wall Street was jubilant.

The media clearly wants to tell the story of a recovering economy and will be doing so even if there isn't any evidence to back that viewpoint up. The story of course is coming directly from the U.S. government during a congressional election year. The government writes detailed press releases for each economic report and in those it presents the rosiest scenario possible. It is not going to go out of its way to point out any bad news, but spins the story to make our political leaders look good. Analyzing the numerous detailed and at times poorly laid out charts in the economic reports is a time consuming and difficult process, but is the only way to find out what is really going on.  For those who are interested, the next time there is a major economic news release, look at the time stamp (the moment of publication) on the articles from the major news services. I have seen time stamps of 8:30AM for a news release that took place at 8:30AM. This is merely a reprint of the government's best of all possible worlds press release. This is the only news that most media outlets report.

Looking at the details and footnotes of February's employment report painted an ugly picture of the U.S. job situation. In addition to the 1.2 million census workers that seem to have been placed in the Business and Professional Services category over the last several months, instead of the Government category where they belong, the seasonal adjustments were substantial and made the headline numbers much better than the real numbers. The actual unemployment rate (known as U-3 in the report) was 10.4%, but this became the reported 9.7% through the magic of adjustment. The unemployment rate that takes into account forced part timers and some discouraged workers (known as U-6 in the report) was actually 17.9%, but this became a still whopping 16.8% for seasonal reasons. Does this sound like good news?

For those who want to see the numbers themselves, Table A-15 (yes, there are a lot of tables) of the February Non-Farm Payrolls report can be found at: http://www.bls.gov/news.release/empsit.t15.htm.

The snowstorms in the East during February were specifically used to imply that the employment numbers were actually much better than they appeared. The BLS in its press release said it couldn't calculate their impact (as if it has never snowed in the United States previously). The spin coming from Wall Street was that there must have been huge job losses, which could have taken place in construction, and this meant the 36,000 job loss number would have been a gain otherwise. This is completely implausible. It could only have happened if there were a lot of workers that were going to be working during that time (there weren't, construction employment has fallen severely over the last two years) and couldn't because of the weather and that the numbers didn't already account for this problem through seasonal adjustments (they did). Furthermore, snow removal is frequently done by temporarily employed workers and this would have added substantially to the employment numbers, not subtracted from them. Moreover, it is unlikely anyone fell off the employment rolls as far as the government was concerned because of the snowstorms. Any regular worker who got paid for at least one-hour during the two-week survey period was considered to be employed.

Job losses in the U.S. have been a regular occurrence for the last couple of years. The only exception recently was in November 2009, when the numbers became positive because of after the fact adjustments. While job losses are bad, small job gains are also bad. The U.S. needs to create up to 200,000 additional jobs each year to employ people entering the labor force. Things will really have turned around when that happen and the jobs are from private industry and not the government. Wall Street's reaction to the February employment report indicates more than snow was being shoveled recently.

Disclosure: None

NEXT: Watch What China Does and Not What It Says

Daryl Montgomery
Organizer, New York Investing meetup
http://investing.meetup.com/21

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.

Census Hiring Used to Manipulate U.S. Employment Numbers

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. We have coined this term to describe the current monetary and fiscal policies of the U.S. government, which involve unprecedented money printing. This is the official blog of the New York Investing meetup.


According to the Financial Times, the U.S. is hiring 1.2 million census workers for the 2010 national head count that starts in April - twice as many as were needed for the 2000 census. While census workers are government employees, they do not appear to be showing up under the government category in the monthly non-farm payrolls employment report (hiring began by March 2009). The Bureau of Labor Statistics appears to be counting these temporary jobs in the Business and Professional Services category. As a consequence, the employment numbers make the U.S. economy look much better than it really is.

The March employment report indicates that the U.S. lost 36,000 jobs in February and the unemployment rate was 9.7% if certain discouraged and forced part-time workers are not counted (unemployment would be 16.8% if they were included in the numbers). Any job loss indicates an extremely weak economy, but so does a small job gain. Since new workers are always entering the labor force, the total number of jobs available needs to continually increase, by as much as 200,000 a month by some estimates, in order to maintain employment stability. A lesser number should lead to a higher unemployment rate. Nevertheless, unemployment held steady in February and actually dropped significantly in January when 26,000 jobs were lost. Interesting, to say the least. Apparently two plus two doesn't always equal four.

Examination of the detailed numbers within the monthly employment reports reveals that the lower rate of job losses in the last several months can be attributed to the hiring of large numbers of temporary workers in the Business and Professional Services category. In February, a net 47,500 such workers were hired, in January it was a net 50,200 and in December 2009 a net 49,700.  The numbers are remarkably even and that makes them look like part of some planned operation.  A footnote indicates that these temp workers include hiring in 'other' industries not shown separately. At the same time, government jobs supposedly decreased by 18,000 in February and decreased by 26,000 in December 2009. If the 1.2 million census workers were being included in the government employment figures, this would indicate massive lay offs have been taking place elsewhere in the government. Surprisingly, it doesn't seem that any such lay offs occurred. So where are the census workers in the U.S. employment reports?

Everyone knows that increases in government jobs don't indicate a recovering economy. It is also common practice for businesses to hire temporary workers in the early stages of a recovery and then permanent workers later on. If the federal government's statistical operatives placed temporary census workers in the Business and Professional employment category, it would certainly make the U.S. employment picture look much better than it really is. Regardless of where the census workers are being hidden in the statistics, their jobs are temporary and should completely disappear by the fall. U.S unemployment will increase by 1.2 million when that happens. It's not clear where the U.S. will get the jobs to make up for the loss.

Disclosure: None

NEXT: Stocks Experience Irrational Exuberance on Employment Report

Daryl Montgomery
Organizer, New York Investing meetup
http://investing.meetup.com/21

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.

U.S. Employment Report: 617,000 Extra Unemployed in 2009

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. We have coined this term to describe the current monetary and fiscal policies of the U.S. government, which involve unprecedented money printing. This is the official blog of the New York Investing meetup.


The Bureau of Labor Statistics (BLS) just revised its figures for 2009 and these now show that there was an extra 617,000 jobs lost in the U.S. economy last year. This works out to 51,000 more jobs lost on average per month than the U.S. government reported. Since there is no reason as of yet to think the Bureau is doing a better job in 2010, investors might want to subtract this number from future employment reports to get a more accurate read of what is really going on in the U.S. labor market.

The numbers being reported are bad enough as is. January Non-Farm Payrolls showed a loss of 20,000 jobs (perhaps that should be minus 71,000). According to the Bureau's recent numbers, jobs have been lost every month since the recession began in December 2007, except for last November. While the job losses for the other eleven months of 2009 were revised to show a greater loss of 38,000 to 101,000 jobs, November was inexplicably adjusted upward by 60,000. One major media outlet emphasized this one positive number while neglecting to mention that December had an extra loss of 65,000 jobs, which more than offset the increase in November.  Something similar happened in the December 2009 employment report where an extra 15,000 jobs appeared in November, but at the same time 16,000 jobs disappeared in October. Some might find this activity an indication of manipulation.

With today's revisions for 2009, the U.S. government now admits that 8.4 million jobs were lost during the recession. Even though there was more than an extra 600,000 people who lost jobs in 2009 than was previously acknowledged, the BLS reported that the total number of unemployed decreased and that the unemployment rate fell from 10.0% in December to 9.7% in January.  The BLS specifically stated that the "number of persons unemployed due to job loss decreased by 378,000 to 9.3 million". They further stated, "In January, the civilian labor force participation rate was little changed". Those who took first grade arithmetic might be puzzled by these highly inconsistent numbers and statements.

The key to how well the U.S. economy is doing is how many jobs are being created in the private sector. To get a ballpark figure, investors should not just subtract the 51,000 job error rate from the BLS monthly numbers, but also the number of jobs that the government has created - reported as 33,000 in January. This would indicate that the private sector lost 104,000 jobs last month. It has been more than two years since the recession began and the U.S. economy is still bleeding jobs, although the government is doing its best to hide the true extent of the problem. To actually reduce unemployment, the U.S. economy will have to add 200,000 or more jobs a month to compensate for new entrants into the labor force and the return of discouraged workers. There is no reason to believe that this will be happening anytime soon.

Disclosure: None

NEXT: U.S. Consumer Credit - Being Held Up by Government Loans

Daryl Montgomery
Organizer,New York Investing meetup
http://investing.meetup.com/21

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.

2009 Retail Sales Deconstructed

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. We have coined this term to describe the current monetary and fiscal policies of the U.S. government, which involve unprecedented money printing. This is the official blog of the New York Investing meetup.


U.S. retail sales for December 2009 were down 0.3%. News outlets reported this as a surprising turn of events. While I am tempted to agree with that viewpoint, it is only because there is enough inflation in the system to make retail sales look better. The retail numbers are not adjusted for price increases and this should always be kept in mind when viewing them. Higher retail numbers don't necessarily mean a better economy.

The Commerce Department reported retail sales were up 5.4% year over year. It would have been almost impossible for them to be lower, since December 2008 was when the Credit Crisis was close to its worse point. Nevertheless, three major retail categories - Electronic and Appliance Stores, Building Materials and Garden Equipment and Supplies, and Furniture and Home Furnishings - had lower sales in December 2009 than they did a year earlier. These three retail sectors are dependent on the health of the real estate market. 

So what went up to improve the numbers?  Gasoline sales rose 34% year over year and by themselves accounted for almost 50% of the total increase in the raw numbers.  This is pure inflation. It is not likely that actual gasoline use is up, especially with the Cash for Clunkers program having subsidized more fuel-efficient vehicles for American motorists.  Sales for Motor Vehicle and Parts Dealers were up 6% from 2008 and this accounted for another 19% of the increase in the yearly total. Government bailouts and stimulus programs are responsible for this increase. If you removed the inflation factor, and gasoline sales represent  only some of the inflation that might be in the numbers, and government programs that directly created higher sales, how much improvement would there have been?  Not much and there may have been none at all - so much for economic recovery.

There was one other important piece of information in the report for December that has significant ramifications. Sales at non-store retailers were up over 10% in 2009. Shifting of buying to the Internet is a strong negative for retailers doing business in physical stores, which are still struggling because of the economic downturn. This indicates that commercial lending, currently one of the major weak points in the U.S. banking system, will be even more troubled than it would have been from just the recession alone. Investors should assume more bailout money will be needed and this problem will go on longer than anticipated. However, as the retail sales report shows, government money can prop up an ailing sector of the economy, can make the economic numbers look better, and can create inflation, but it can't necessarily buy a recovery.

Disclosure: Not applicable.

NEXT: Toothless CFTC Tries to Bite Gold and Silver

Daryl Montgomery
Organizer,New York Investing meetup
http://investing.meetup.com/21

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.

'Recovery' Leads to Double Digit Unemployment

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. We have coined this term to describe the current monetary and fiscal policies of the U.S. government, which involve unprecedented money printing. This is the official blog of the New York Investing meetup.

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Just as the mainstream media has lulled the public into thinking we were on a one-way trip to economic happy land, today's U.S Employment Report throws cold water on the whole enterprise. The headline unemployment number came in at 10.2%. October was the first month in 26 years that U.S. unemployment has exceeded 10%. The alternative government unemployment figure, which includes discouraged workers and people who are forced to work part-time, rose to 17.5%. People, such as John Williams from ShadowStats, who adjust the government figures for more realistic numbers, generally add about 3% to that number to get the actual unemployment rate.

There was very little good news in the report. October was the 22nd month in a row that U.S. employment fell. There were large job losses in manufacturing, construction and retail. Retail losing jobs at the beginning of the big holiday selling season tells you just how bad things are. The average workweek is at a record low. The percentage of workers unemployed for over 6 months is at a record high. The labor force participation rate fell and the unemployment rate would have been even higher than 10.2% if this hadn't happened. The good news was that the numbers in August and September were slightly better than originally reported and that temp agencies added 34,000 jobs.

As usual mainstream economists underestimated how bad the report would be. Expectations were for a drop of 150,000 jobs and an unemployment rate of 10.0%. The 190,000 job loss reported is from the payroll survey by the way - and that is the one that is always reported by the media (and the one that shows that the employment situation is better of course). There is a separate household survey (which is a random sample, unlike the payroll survey) and that indicated a loss of 589,000 jobs in October. The government did state that total U.S. unemployment rose by that amount to 15.7 million.

The market reaction to the report was that stock futures, oil and gold dropped (gold had been as high as $1098 in early morning trading). In the long-term, this only means more money pumping, money printing, and dollar pimping by the Federal Reserve. This can only be bullish for gold and the rest of the inflation trade. There is no way that it is politically tenable for the Fed to raise interest rates until the employment picture improves. It is going to be in an increasingly uncomfortable position next year when inflation starts rising, yet unemployment remains high.

NEXT: Market Keeps Going as Stimulus Keeps Flowing

Daryl Montgomery
Organizer,New York Investing meetup
http://investing.meetup.com/21

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 Recovery in Jobs

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 Jobs Report was out this morning and it contained little evidence that an economic recovery was taking place with a loss of 216,000 jobs in August. The headline unemployment rate jumped to 9.7% (a 26-year high), while the alternate figure which includes discouraged and involuntary part-time workers rose to 16.8% (the highest since this number has been published). This was the 20th month in a row that there has been a loss of jobs. U.S. employment in the private sector is now lower than it was in 1999.

Revisions in June and July's numbers indicate an extra 49,000 jobs were lost in those months. It is quite likely downward revisions will take place for the August number as well, which is based on a survey of businesses. The separate household survey (which is much more accurate because it is a large random sample) indicated that 392,000 jobs were lost in August and unemployment rose by 466,000. The only industry group in the private sector to add jobs in August was health care. It has consistently added jobs during the entire Credit Crisis.

Weekly claims to collect unemployment insurance came in at 570,000 this week. This is still well above the 400,000 level that indicates a recessionary economy. A true economic recovery would lower this number well below 400,000 and keep it there. Many American workers are not eligible for unemployment, so when they become unemployed they don't show up in the weekly claims or total numbers receiving jobless benefits. That number has reached 6.23 million and while rising lately has had some dips because a number of unemployed have exhausted their benefits and are no longer included.

As bleak as these figures are, the mainstream media managed to put a positive spin on them because the total job losses came in slightly better than expectations (the unemployment rate was worse though). News articles for some time have indicated that a 'jobless recovery' would be taking place. A jobless recovery is an oxymoron and there is no such thing. This only first appeared after the early 1990s recession was supposedly over. It appeared again in the early 2000s. Why at these times and not before? The government started making major statistical 'improvements' to the GDP numbers and related figures in the 1980s and followed up with more in the 1990s. After this was done, it was possible for the economic statistics to have a recovery despite what was happening in the real world. Only when employment starts increasing and job gains become consistent will the recession actually be over.

NEXT: Gold Breaks $1000

Daryl Montgomery
Organizer,New York Investing meetup
http://investing.meetup.com/21

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.

So Far, So Bad

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 stock market is tanking today. A sell off the last trading day before July 4th is statistically unlikely and should be considered bearish in and of itself. We will have to wait until the close next Tuesday to see if the first four trading days of the quarter were net down and are also providing a bear signal. Stocks started off strong on Wednesday, but faded as the day progressed. The Dow was up only 57 points at the end, but managed to close above its 200-day moving average for only the second time in almost three weeks. Volume was unusually low for the first day of a quarter. The Dow is below both its 200-day and 50-day as I write this and a close below both key levels at the end of a week can only be interpreted as negative.

The monthly employment report was released this morning and set the tone for trading. A loss of 325,000 jobs was predicted by analysts, but the number came in way above expectations at 467,000. The official unemployment rate was 9.5%. If discouraged and involuntary part-time workers are factored in, unemployment would have been 16.5%. Only education and health care were supposedly hiring last month.

While bad economic news is negative for a currency, somehow the U.S. dollar went up on this news. The mainstream media has indeed been reporting the dollar rise and explaining it as safe haven buying. If you are puzzled by this, you should be, especially since gold is going down at the same time. No one in their right mind would load up on a currency with a weak economy as a safe haven play. It is more likely the invisible hand of the U.S. Treasury lifting the dollar today. Don't expect the media to ever report that though.

All the major U.S. stock indices are down over 2% in afternoon trading. Oil is performing even worse. The commodity hit a low of $66.54 in today's trading and was just over 67 at the close of NYMEX trading. Natural gas futures are barely down, although UNG is dropping big time. The cause of the disconnect is not clear. The reason for any drop whatsoever is even less clear, since the storage report this morning was very bullish. Analysts expected a build up of 82 billion cubic feet, but the increase was only 70 billion.

I guess we will just have to wait until next week to see how things play out.

NEXT: Does Money Printing Cause Deflation or Inflation?

Daryl Montgomery
Organizer,New York Investing meetup
http://investing.meetup.com/21




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.

Oil storage, Stocks and States

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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U.S. Stocks opened strongly this morning. How they close and on what volume will be significant. The economic news, although negative is being reported in a positive light this morning. The fiscal crisis in California, and a number of other states, is being mostly ignored. It's likely everyone is assuming they will find some way to carry on. The oil storage report this week was a repeat of last weeks.

Yesterday, the Dow once again closed below its 200-day moving average. Intraday, it fell below the 50-day, but managed to rise to close above it. So far today, it is well above it for only the second time in the last two weeks. China hit a new yearly high last night and European stocks were up nicely today, especially commodity plays linked to Chinese growth prospects. Japan, Australia and New Zealand were down, although the rest of Asia was up. Gold has traded up nicely and silver decently today. The trade-weighted dollar is weak, last trading at 79.69, still just above its break down level of 78.33.

Oil peaked today in mid-day European trading, where it reached at least 71.50. Selling came in strongly after the storage report. Crude supplies were down another 3.7 million barrels last week. In the last two months they have dropped sharply. Gasoline and distillates were both up however, gasoline by 2.3 million barrels and distillates by 2.9 million barrels. Even if oil in storage is in short supply, it won't matter for awhile because there is more than enough gasoline, diesel and heating oil around at the moment. The last quote I saw for oil was 69.35.

In economic news, the ISM Manufacturing report came in at 44.8, better than last months 42.8. Any number below 50 indicates that manufacturing activity is contracting. Nevertheless the mainstream media reported big improvements in manufacturing data. This was the 17th month in a row that the manufacturing sector of the U.S. economy has shrunk. Housing data today was contradictory. The government reported that its home purchase index was down 21.9% year over year based on mortgage applications. The less reliable real estate PR organization NAR reported that pending home sales were up however based on signed contracts. Guess which news item got the most attention from the media.

NEXT: So far, so Bad

Daryl Montgomery
Organizer,New York Investing meetup
http://investing.meetup.com/21

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.

Market Behavior Next Few Days Critical

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:

Healthy markets go up in the first four trading days of the month. This is even more of a truism when the month begins a new quarter. The quarter that begins on July 1 is also the beginning of the half year. Only the first trading days of the year in January are more critical in determining market direction. This January the market was basically flat, so the investing intent of the big players was indeterminate. The first few days of April saw heavy buying in an up market, confirming the rally that began in early March. The next few trading days should provide valuable information on whether or not the big players will keep supporting the current rally. If they don't, it's in trouble.

Yesterday was an up day with the Dow closing above its 200-day moving average for the first time in two weeks. Trading volume was anemic however, coming in well below average. Moves on low volume shouldn't be trusted. In the oil space, DXO also traded and closed above its 200-day moving average for the first time in months. Volume was also anemic. In contrast the Nasdaq has held above its 200-day for quite awhile now and unlike the Dow, its 50-day is also above the 200-day creating a bull pattern. The volume patterns for Nasdaq are also fairly bullish.

What isn't bullish are the technical indicators. The Nasdaq could easily hit a new high for the current rally in the next few days. If this takes place on low volume watch out. The technicals will not be hitting new highs creating negative divergences and possibly double negative divergences (a very bearish pattern). This would be particularly problematical if the new high was on July 3rd. The trading day before July 4th is almost always an up day, even in the worst of markets. Even in 2002, the Nasdaq was up 100 points that day. The volume was almost non-existent though, since the day before July 4th usually has the second lowest trading volume of the year (only the day after Thanksgiving is lower). In 2002, the big rally on the day before July 4th was followed by one of the ugliest sell offs ever. So a big rally that day indicates little about future market direction.

If the market rallies on Wednesday and next Monday and the volume picks up to above average levels, the market is acting in a healthy manner and the big players are still bullish. If it sells off on those days, but manages to rally on Thursday, this is a bearish pattern. Any drop on Thursday should be considered mega bearish. The monthly employment report will be released this Thursday instead of Friday this month, so watch for market reaction. The next few days should be interesting to say the least.

NEXT: Oil Storage, Stocks, and States

Daryl Montgomery
Organizer,New York Investing meetup
http://investing.meetup.com/21


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.

Monthly Employment Report and the Market's Reaction

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 monthly Employment Report was released this morning and according to the U.S. government payrolls dropped by 345,000. While this number would have been considered highly negative before the recession began, it was the lowest since last September and this was the fourth decrease in as many months. While job losses were less than expected, the headline unemployment rate came in above expectations at 9.4%. It was up from 8.9% last month. A more realistic number, which takes into account discouraged workers, indicates that the unemployment rate was actually 16.4%.

While you should look at U.S. government employment statistics with a jaundiced eye, the current report does seem to indicate that a sea change has taken place. For the first time since the Credit Crisis began, job losses for the previous two months were revised downward instead of upward. The March numbers originally came in at 699,000, but are now 652,000 and April was 539,000 and is now 504,000. It looks like job losses peaked in January at 741,000. This was the most since 1949. This was also the first report in a long time where government jobs didn't supposedly increase. According to the report, education, health care, and leisure and hospitality added jobs in May.

U.S. stock futures immediately went up after the report was released and bonds fell with interest rates on the 10-year rising 18 basis points (a basis point is a hundredth of a percent). Oil shot above 70, getting at least as high as 70.32, but then lost its gains (70 is an important resistance point). The U.S. dollar went down and so did gold and silver (they should have moved in opposite directions).

At this point it looks like the worse declines of the recession, already the longest in post war history, are over. This doesn't mean that the recession is over, just that things are getting worse at a slower rate. When the jobs numbers start to actually show increases in employment month after month, that is how you will know the recession has finally ended - and that looks like it is still many months away.

NEXT: The U.S. Dollar, Gold, and Oil

Daryl Montgomery
Organizer,New York Investing meetup
http://investing.meetup.com/21


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.