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.

U.S. Employment in Long-Term Downtrend

 

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 August employment report released on September 7th was not particularly good by any measure. While the month to month changes seem lackluster, the longer term picture is truly dismal.

The headline numbers indicated that 96,000 jobs were created in August and that the unemployment rate declined from 8.3% to 8.1%. The previous two months were revised down by 41,000 however. Manufacturing employment was down 15,000 from July. "Food Services and Drinking Places" was the category with the biggest gains, adding 28,000 jobs last month.

Underneath the surface, the picture wasn't mediocre, it was negative. Looking at the total number of people listed as Employed in Table A indicated that 119,000 fewer Americans had jobs in August than in July. This comes from the Household survey and receives little attention from the mainstream media. This number was negative in the July release as well. Why isn't this reported?  Well perhaps the media doesn't trust people to know whether or not they actually have a job.

What happened to employment between July and August though was minor compared to the weakening jobs picture over the last five years. It was in August 2007 that the Fed cut the discount rate, which was the beginning of its attempts to stimulate the economy. By the end of 2008, the Fed's Fund rate was at zero and a number of special programs had been implemented to handle the Credit Crisis. The first quantitative easing program had begun and a second round took place after that. In respect to jobs, the figures indicate that the Fed's efforts have been an utter failure.

In August 2007, 145,794,000 people were employed in the U.S. Last month, five years later, 142,101,000 people had jobs. So after all of the Fed's efforts and all the stimulus programs implemented by the Obama administration, there were 3,693,000 less jobs in the United States.   In his Jackson Hole Speech in August, Fed Chair Ben Bernanke stated the Fed's efforts "increased private payroll employment by more than 2 million jobs". Oh really?  Why don't those jobs show up in the government's own statistics Mr. Bernanke?

What caused the unemployment rate to be reported as lower in August than in July was a decline in the labor force. It shrank by 368,000. This is only a continuation of a multi-year trend though. In August 2007 there were 79,319,000 people not in the U.S. labor force. By last month, 88,921,000 didn't have jobs. That's an increase of 9,602,000 in five years. Yet, at the same time the employable population has grown substantially.

What about during just the Obama administration? His employment record is a big issue in the current presidential election after all. The labor force population has increased from 234,552,000 to 243,555,000 or by 9,003,000 so far during Obama's term. The current participation rate of 63.5% (low for the last few decades) would indicate that approximately 5,717,000 jobs should have been created to keep employment at a steady state. When Obama took office in January 2009, 142,099,000 Americans were employed. As of August 2012, 142,101,000 Americans were employed. There was a net increase of only 2,000 jobs. This represents a huge relative loss since the U.S. needed 5.7 million jobs just to maintain the same level of employment. More jobs would have been needed to make things better.

At his Jackson Hole speech Bernanke stated how concerned he was at the unemployment problem in the United States and that the Fed was willing to do more. Considering how little impact the Fed's high risk money-printing policies have had and how little seems to have resulted from the numerous stimulus programs that have been implemented, there is no reason to believe either will be improving the economy in the future. They are good for juicing stock prices however — at least in the short term. In the long run the gains will prove to be illusory.

Sources for the above from Table A of the August 2007,  January 2009 and August 2012 Employment Situation report from the BLS. The URLs for the websites are:
http://www.bls.gov/news.release/history/empsit_09072007.txt
http://www.bls.gov/news.release/archives/empsit_02062009.htm
http://www.bls.gov/news.release/empsit.a.htm


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.

U.S. Employment — The Spring of Discontent

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. economy created only 69,000 jobs in May 2012. The previous two months were revised down, March from 154,000 to 143,000, and the April from 115,000 to 77,000. Although the U.S. economy is not creating enough jobs for new entrants into the labor force, the BLS claimed the unemployment rate was only 8.2%.

Early in the year, the mainstream media was filled with reports of the recovering job market and a U.S. economy on the upswing. The average reported monthly job gain was 226,000 a month in the first quarter — a healthy amount if it were true. There was more than enough reason to believe it was not true however. The jobs numbers are seasonally adjusted and the winter was unusually warm meaning the usual large layoffs in industries like construction didn't take place. Nevertheless, the BLS adjusted its figures as if they had.

If the better figures in the winter were created by seasonal adjustments and not a better economy, then the spring figures should consequently be weak. This is exactly what has happened. The telltale sign can be found in the May Construction employment number — down by 28,000 last month when it should have been strong.

Almost all the job gains came from only two sources last month, Health Care and Social Services (33,000)  and Transportation and Warehousing (36,000). Health Care is the only category that consistently added jobs during the Great Recession. If the BLS numbers are projected out to the distant future, almost every American in the labor force will eventually be employed in this field.

As usual, comparisons with five years ago indicate that the U.S. economy is still in serious trouble. There were almost 3.7 million less people employed last month than in May 2007. At the same time, the over-16 noninstitutional population has increased by nearly 11.5 million or around 192,000 per month. Yet, the BLS claims that the U.S. labor force has grown by a little over 2.2 million or approximately 37,000 a month. There is a major disconnect between those numbers and it indicates that a lot more Americans are unemployed than the BLS headline number indicates.


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.

April 2012 Jobs, Labor Force Continues to Drop

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 BLS release the employment situation for April 2012 this morning. The report showed that 115,000 jobs were created last month and the current unemployment rate is 8.1%. The big story however was the incredible number of people leaving the U.S. labor force  — almost ten million in the last five years.

Looking at any of the macro numbers since the Great Recession began in December 2007 indicates that the employment situation in the United States is severely challenged. People are leaving the labor force in droves. The participation rate continues to fall as well. This does not happen during economic recoveries. It happens during recessions and depressions. Not only have these numbers trended in the wrong direction since the "recovery" supposedly began in mid-2009, but there has been an acceleration.

These trends are hidden because large numbers of people enter the labor force because of school graduation and immigration. When balanced against the number of people retiring, the U.S. needs to create approximately 150,000 new jobs every month to keep the employment situation steady. It has rarely met or exceeded this number in the last four years, yet the unemployment rate reported by the BLS has declined significantly. This can only happen because large numbers of people have left the labor force (a sign of economic stress).

According to Table A of the BLS employment reports, there were 78,711,000 Americans not in the labor force in April 2007. In April 2008, four months after the Great Recession began, this number had risen to 79,241,000. In April 2009 just before the supposed recovery started, 80,554,000 Americans were not in the labor force.  This loss of less than two million during a recession isn't surprising . What is surprising is what happened during the recovery.

After almost a year of recovery, the number of people not in the labor force grew to 82,614,000. This was an increase of more than two million, a number greater than the loss during the previous two years that included the recession. Then in April 2011 after another year of recovery, 85,726,000 Americans were not in the U.S. labor force — an increase of over three million in only one year. Now in April 2012, 88,419,000 were not in the labor force. This was an increase of almost three million in one year.

In the five years since April 2007, 9,708,000 Americans have left the U.S. labor force. During this period the labor force should have grown approximately 9,000,000 (60 times 150,000). The picture these numbers present are one of an economy in severe decline. Don't expect to hear this from the U.S. government however. Politicians don't get reelected by reporting bad news.


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.

Retail Sales and Employment Not as Good as First Reported

 

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 has much cheerleading in the mainstream press lately about the improving employment situation and strong 2011 holiday retail sales. Just released figures indicate it may have been much ado about nothing.

Retailers depend on the holiday season for their yearly profits. Major efforts were made in November to get people to start buying early. This worked and retail sales were up 0.4% during the month. Strong early numbers don't necessarily mean overall numbers will be greater however. It can simply mean that buying activity was frontloaded and the later numbers will then be weak. This is exactly what happened. Retail sales were up a whopping 0.1% in December (retail sales are not adjusted for inflation, the number would be negative if it had been).

Looking inside the report shows how incredibly weak the consumer is. Excluding autos, which are highly volatile, retail sales were 0.2% lower -- the first drop since May 2010. Core retail sales, which exclude autos, gasoline and building materials were down 0.1%. Even though it was the height of the holiday buying season, spending at electronic and appliance stores was down 3.9% and spending at department stores was down 0.2%. Once again, if the numbers had been adjusted for inflation they would have been even worse.

So how come U.S. consumers aren't spending more now that the employment situation is supposedly getting better?  Well, maybe it's because it isn't. The big news lately has been the declining weekly claims which have fallen below the traditional 400,000 per week that indicates recession. However, for the first week of 2012 they came in at 399,000 -- back at recession levels. This was up from the 372,000 reported the previous week (three states including mega-sized California didn't send in their claims numbers for this report).  Of course, the mainstream press blew the trumpets about the "good", but highly questionable, 372,000 number, just as it did for the 200,000 jobs that were allegedly created in December 2011.

Among these jobs were 42,000 new messenger positions. While it's more likely that 42,000 messengers were hired in December than 42,000 nuclear physicists, that doesn't mean it is believable. Messengers work in a field with declining employment. The December jobs report has been criticized as having "statistical adjustment" problems. Non-statisticians generally refer to this as lying about the numbers. Of course, the appearance of suddenly improving economic news (not to be confused with an economy that is actually improving) at the beginning of a presidential election year should not be surprising.

As the election season heats up, there will be a desire for the government to report that economic conditions are better than they actually are.  This does not mean the news will necessarily be good, it will just be better than it actually is. Expect the bad news to come out after the November election.  Until then, invest with caution. 

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.

U.S. Non-farmPayrolls -- The Statistical Illusion of Jobs

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 Employment Report for December 2011 was released today with a glowing press release from the BLS (Bureau of Labor Statistics).  The highlight of the report was the 42,000 courier and messengers jobs created last month and the claim that the unemployment rate fell to 8.5%

Statistics can easily be manipulated and it is not unknown for political regimes to do so in order to hold on to power (and 2012 is an election year in the U.S.). After all, it is much easier to change a number than to fix the underlying problem the number represents. Fortunately, the BLS publishes a number of statistical Tables with each monthly report that can be used to check its calculations.

When the Great Recession began in December 2007, the civilian non-institutional population of the United States was 189,993,000. At that time, the number of people in the U.S. labor force was 125,588,000. As of December 2011, the BLS states that the employment population ratio for the U.S. is 58.5% (0.585). The non-institutional population of the U.S. was reported at 193,682,000 or 3,689,000 higher than it was in December 2007. The labor force in December 2007 was 125,334,000 and multiplying the increase in the U.S. population in the intervening four years by the employment population ratio indicates that the labor force should have increased by 2,158,000 to 127,492,000.  However, the BLS reports the U.S. labor force last month was 124,114,000. More than three million people are missing from its figures.

The smaller the labor force is, the better the headline unemployment rate becomes. The BLS claims these three million plus people left the labor force and this justifies purging them from the statistics. There is a problem with their line of reasoning however. Large numbers of people only leave a labor force during periods of severe economic distress.  It does not happen during economic recovery. It does not indicate an employment situation that is improving.  Yet, the BLS produces numbers showing things are getting better when this happens. This violates the first rule of statistics -- the results must reflect reality. The BLS numbers do not.

Dividing the number of employed in December 2011 by the size of the labor force that should exist based on the population numbers produces an unemployment rate of 9.6%, not 8.5%. This is the headline number that should be reported. If the BLS wants to insist however that more than three million people have indeed left the labor force (and this has continued in the last year -- the size of the labor force in December 2011 is smaller than it was in December 2010), it should also make it clear that this indicates that there has been an ongoing recession and no economic recovery has taken place. Both can't happen at the same time, except for a brief period. Either the economic recovery story is a lie or there hasn't been a shrinking labor force. 

While mainstream economists will insist that employment is a lagging indicator (more than two years is some lag), this has only been the case in the U.S. years after statistical "improvements" were introduced in the 1980s and 1990s in how government economic numbers were determined. Before that, employment recovered with improving GDP as should be the case. If you think about it, the term jobless recovery makes as much sense as tall midget or genius moron.

The improvement in the weekly unemployment claims is also being cited as evidence of an improving jobs picture. It would be more accurate to say that it is evidence of a jobs picture than can't continue to get worse. As I have stated since at least mid-2010, the weekly claims number will regress toward the mean (move to its long-term average) because eventually there will be few workers who remain to be laid off. After being elevated for several years, the only way that weekly claims  can now increase is with a big jump in bankruptcies. This will be avoided as long as the economy holds steady.

What is keeping the U.S. economy from getting worse is the unprecedented budget deficits that the U.S. is running. If you spend an extra $1.3 trillion dollars that you don't have as the U.S. did in 2011, this will certainly stimulate the economy in the short-term since much of this money winds up in consumer pockets and they spend it.  According to the non-farm payrolls report for December, the U.S. is not exactly getting good value for this money. Unless of course, you think low-paying courier and messenger jobs should be the cornerstone of the economy.


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.

Recovery Goes Jobless in August

 

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.

More evidence that the U.S. economy is grinding to halt was provided by the August non-farm payroll numbers today. According to the BLS (the Bureau of Labor Statistics), the U.S. economy produced no additional jobs in August, the unemployment rate remained unchanged at 9.1%, and average hourly earnings declined. The June and July numbers were revised downward with 58,000 less jobs than originally reported.

Almost every category lost jobs in August except for health care and social assistance, professional and business services, and mining and logging. Health care and social assistance added 30,000 jobs. This category was the one perennial gainer during the Great Recession and its aftermath. Even though many of these jobs are government related, they are classified as private sector by the BLS. Professional and business services added 28,000 jobs. A footnote in the report states that this number includes jobs from other unspecified categories (could those be government jobs that are included to make it look like private sector employment is better than it actually is?).  Mining and logging added another 6,000 jobs.

Year over year comparisons were even more dismal than the monthly numbers suggested. There were only 400,000 more people employed in the U.S. this August compared to August 2010 (see Household Data, Summary Table A on the BLS website for the details). This is the actual net number of new jobs created in the last year. This has averaged 33,000 a month. At the same time, the non-institutionalized civilian population has been growing at almost 150,000 per month. Yet, during this time period, the unemployment rate fell from 9.6% to 9.1%.  This has happened not because a lot of jobs were created, but because approximately 2.3 million people left the labor force.

Despite close to zero percent interest rates and the trillions of dollars of stimulus thrown at it, the U.S. economy seems incapable of producing jobs. The only thing that has prevented the reported unemployment rate from rising into the double digits is the large numbers of people exiting the labor force (they are not counted as unemployed). This doesn't happen when a real economic recovery takes place. People rush into the labor force as jobs become more plentiful. Unemployment rates also don't remain at the 9% level if the economy is doing well as has constantly been reported. Mainstream press claims to the contrary,  a "jobless recovery" just doesn't exist in the real world (nor are there tall midgets or thin obese people). Based on the jobs numbers, investors should assume that the U.S. has been in a chronic state of recession and chronic stimulus is needed to keep things from getting worse.   

Disclosure: None

Daryl Montgomery
Author: "Inflation Investing - A Guide
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.
 

September Jobs Report Indicates Economy Dead in the Water

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.


September was the 15th month with the U.S. unemployment rate was at or above 9.5%.  The underemployment rate, which includes forced part-time and some discouraged workers, rose to 17.1%. While the Great Recession supposedly ended in June 2009, well over a year later the employment figures have still failed to show any significant improvement.

Private sector hiring was tepid to say the least in September. While the BLS (Bureau of Labor Statistics) claims that there were 64,000 private sector jobs added last month, only two categories dominated hiring - 'leisure and hospitality' and 'health care and social services'. Leisure and hospitality, which includes drinking establishments, added 38,000 jobs. It is perfectly understandable why people would want to drink more considering the state of the economy.  Health care and social services (the mainstream media always leaves out the social services part), which is the only category that continually added jobs during the recession, added 32,000 jobs. Why social service jobs are counted as private sector jobs is a of course a mystery known only to the BLS. Education jobs are also counted as private sector, even though most of them are paid for with taxpayer money. Many health care jobs are of course also government funded.

Government jobs actually counted as government jobs dropped 159,000 in September. Almost half of this was accounted for by a loss of 77,000 Census positions. Considering the Census was supposedly finished months ago, this leads to the obvious question: What have these people been doing since then? Another 76,000 jobs were lost by local government. The Obama administration's February 2009 stimulus package provided a lot of funding for localities to pay for police, fireman and teachers. This funding seems to already be running out. What will happen in 2011, when the stimulus money has been completely spent?

The economic establishment has told us that the U.S. economy has had four quarters of recovery so far and we have already in the fifth. Employment hasn't shown any recovery however. Up to now, the claim have been that this is because employment is a lagging indicator (something that only showed up in the 1990s after a number of 'adjustments' had been made to how GDP and the inflation figures were calculated). The employment lag has already been several quarters and it now looks like it is heading for several years.

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.

Stock Rally in Beginning of Month Ignored Economic Reality

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 had an impressive rally the first four days of the month and this is generally a bullish indicator.  The rally took place with a backdrop of really ugly economic news however and that is not bullish. Weakness has a way of coming back to haunt the market as European bank news is demonstrating today.

U.S. economic reports for the last few months have been generally bad to awful. Nothing changed last week. While the ISM manufacturing index went up, this supposedly occurred because of a big increase in manufacturing jobs (the inflation component of the report was the actually the biggest gain, but the mainstream media somehow didn't report this negative news). This gain was not corroborated by the government's August employment report, which showed a drop in manufacturing jobs, nor by anecdotal evidence or anything else taking place on the planet earth. The stock market of course rallied strongly on the news.

The ISM non-manufacturing index, which measures the almost four times bigger service sector, didn't get nearly as much media coverage. It barely remained in positive territory. The inflation component, also the highest number in this report, was chiefly responsible for the number not going negative and indicating contraction.  Two components of the report were clearly in contraction however - exports and employment. The service sector losing jobs is a big negative for the overall U.S. economy.

Also lost in the stock buying frenzy was August car sales. They were down 21% year over year. This followed the 27% monthly drop in existing home sales in July and the 33% drop in new home sales in May. Last August was the peak of the Cash for Clunkers program. The numbers for car sales and home sales both demonstrate what happens when government incentives are no longer available in a market. While new homes sales fell to the lowest level ever recorded, August car sales were only at a 28-year low. For those who don't recall, 1982 was when the previous double-dip recession took place.

Government stimulus programs didn't fix the housing and car markets, but merely made them look better. This works for a while, but reality eventually rears its ugly head. A report from Europe today said that "the continent's major banks have more potentially risky government debt on their books than was disclosed during stress tests earlier this year." This wasn't exactly a piece of information that required the skills of Sherlock Holmes to uncover. At the time of their release, the stress tests were roundly criticized as being a phony PR gambit that set the bar so low that any bank not declaring insolvency in the next week would pass. Stocks of course went up on the news back then and today they are going back down.

Economic reality will eventually be reflected in the stock market. As I have said many times however, it's not the economy that drives the stock market in the short term, but liquidity. The Fed obviously kept pushing the 'flood the financial system with liquidity' button in early September. What happens when they stop doing this? See the homes sales and car sales numbers for a hint of how stimulus withdrawal impacts a market.

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.

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.

U.S. Employment Figures Don't Add Up

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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Fed chair Ben Bernanke is up for reappointment and is experiencing some difficult times with his congressional critics. Good news has suddenly and conveniently appeared to bolster his case however, including Bank of America planning on repaying the TARP money it received from the U.S. government and then a big improvement on the non-farms payroll number released on December 3rd. According to the Bureau of Labor Statistics, there were only 11,000 jobs lost in November 2009 and the losses for the previous couple of months weren't nearly as bad as they had reported (the last time there were actual job gains in the U.S. was in December 2007). Independent private surveys don't corroborate the government's numbers.

The U.S. government figures were not completely rosy by any means. They indicate that there were major job losses in Manufacturing and Construction, a significant drop in Information and in Leisure and Hospitality jobs, and amazingly a drop in Retail jobs during the height of the holiday season. U.S. Manufacturing employment fell by 41,000 in November and has declined by an eye-popping 2.1 million since the recession began in December 2007. Construction jobs fell by 27,000. There was also a loss of 17,000 jobs in the Information industries (half of that in telecommunications). Leisure and Hospitality lost 11,000 jobs. Jobs in retail declined by 15,000. You would not know this from reading the BLS press release however, unless you looked at the data attached to the bottom of it. The copy did not mention that there was a job loss in retail, but instead stated "there was little change in wholesale and retail employment".

So where did the job gains come from? Three categories had increases in employment -Professional and Business Services, Education and Health Services and Government. Professional and Business Services was the big gainer adding 86,000 jobs. However, 52,000 of those jobs were part-time. Education and Health Services added 40,000 jobs with 21,000 of these jobs coming from Health Care and presumably 19,000 from Education (which is not known for hiring people in November). Government added 7,000 jobs. The two consistent job producers since the recession began two years ago have been the Government and Health Care categories, with Education also frequently adding jobs (many health care and education jobs are government related).

The BLS claimed that unemployment fell from 10.2% to 10.0% in November. How can the unemployment rate fall when there are job losses? People have to leave the labor force. Barring a sudden population decrease of working age individuals, workers have to get so discouraged form the bad employment situation that they just give up looking. According to the BLS, 2.3 million people are marginally attached to the labor force and are not counted as unemployed because they did not look for a job in the previous four weeks. Another 9.2 million are working part-time even though they want full-time employment. The alternative unemployment rate which includes discouraged workers and involuntary part-time workers was reported by the BLS as 17.2%.

A check on U.S. government employment figures can be gotten from the ISM (Institute of Supply Management) Services and Manufacturing Indices, both of which survey employment as well as a number of other factors which indicate economic growth or lack thereof. The Services Index was released just yesterday and employment came in at 41.6 (under 50 means contraction). Employment in the services sector has been in decline for the last 19 months and dropped from October to November according to the ISM. All the job gains in the government employment report supposedly came from the service sector. There is a major contradiction here.

The November non-farms payroll figures are another government release indicating the U.S. economy is getting better. This one doesn't add up either. Healthy economies don't have major job losses in manufacturing and construction. Nor are jobs lost in retail during the holiday season (they are during depressions, but certainly not if the economy is improving). The big job gains were part-time, not permanent. The unemployment rate is improving because workers are so discouraged that they are leaving the labor force, not because jobs are being added. This doesn't happen if the economy is getting better either. Furthermore private surveys don't support the governments numbers. Investors should be wary. While markets can be fooled in the short-term, in the long-term they trade on reality.

Disclosure: None.

NEXT: Gold in Technical Correction as Dollar Rallies

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.

Unemployment Rises as Car Sales Collapse

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 U.S. jobs report this morning didn't indicate an economic recovery, it looked more like an economy mired in severe recession - and this is after more than $4 trillion dollars spent on bailouts and stimulus so far. The latest government stimulus program that was supposed to be saving the economy (as were all the others), Cash for Clunkers, seems to have had no residual effect on the auto industry. Data out yesterday indicate that sales fell right back to the worse levels of the recession the moment the program ended. The ISM Manufacturing report yesterday showed a drop in U.S. manufacturing activity from August to September. There is still some glow from the Clunkers program however and a bigger drop will likely be seen next month. If this is economic recovery, who needs a deep recession?

The jobs report can only be described as ugly all around. While the headline unemployment rate rose to 9.8%, the alternative measure which includes discouraged workers and forced part-timers reached 17.0% (that's the U.S. government's official number). Hours worked dropped to an all time low. The number or workers unemployed for over 6 months is also at a record. The number of job losses for July and August were revised upward by 13,000. The government further stated it might raise the total number of unemployed in its year end revision. The number of job losses this month was 263,000. Economists, almost all of whom think the recession is over, had expected only 180,000. Nothing, and I mean nothing, in the employment numbers indicates a recovering economy.

Auto sales in August and September illustrate quite clearly the impotence of government stimulus in reviving an economy with major structural weakness (Japan in the 1990s and 2000s had one stimulus program after another and is still recessionary). U.S. auto sales reached about the 14 million annual rate in August. The Clunker program ended on August 31st. September auto sales now look like they will be a bit over 9 million at an annual rate. This is as low as the lowest sales figures recorded last February and April. So once the stimulus was removed auto sales slipped right back to the bottom. Economic 'recovery' that only takes place if there is government stimulus is no recovery whatsoever.

The ISM manufacturing index was still above 50 (the point that divides expansion and contraction) this month, even though it fell from August. The index declined 18 months in a row before last month. Cash for Clunkers juiced up the numbers considerably in August. They could easily fall back into negative territory in October. Production, new orders, exports, and employment were all down in September. The item in the report that is expanding most rapidly? It's prices paid, which is a measure of inflation.

While continued massive government stimulus will not revive a structurally damaged economy, it can be very effective in creating out of control inflation. The more the economy doesn't budge, the more stimulus the government implements. In the current state of affairs in the U.S. that also means more money printing (the Japanese did not have to resort to this). Gold closed at $1004.30 today in New York - above its key breakout level of $1003.50. Some years from now, we will probably look back and wonder how gold could ever have been so cheap.

NEXT: Recovery? Don't Bank on It

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.

If You Ignore the Facts, Things Are Good

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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We are going to see a lot of new economic data in the next few days, including the monthly jobs report tomorrow. How the market reacts in the first four trading days of the quarter can give us a lot of insight on where stock and commodity prices will be heading in the next few months. The Consumer Spending report was already out this morning and spending for August was up 1.3%, the biggest gain since October 2001. The rosy numbers were due to the Cash for Clunkers program which ended August 31st... so don't expect September's numbers to look as good. The ISM Manufacturing report for September will be out later this morning and might provide more insight into the post Cash for Clunkers era, although the October report next month will be more revealing.

Weekly jobs claims surged upward to 551,000 this morning. The big rise was a surprise to economists and other people who's expectations are based on fantasy. Any number at or above 400,000 indicates the economy is in recession, 551,000 indicates a somewhat severe recession. A healthy economy has weekly claims at the 300,000 level. The idea that the economy can be recovering while unemployment gets worse is absurd and merely reflects how manipulated U.S. GDP figures are. The government can also 'statistically adjust' the jobs report as well. Watch to see how many people left the labor market in tomorrow's report. This is the fudge factor that the government uses to keep the reported unemployment rate from getting too high.

While all the money pumping the Fed has done in the last year has had only temporary and limited impact on the economy so far, it has certainly revved up the stock market. Last quarter was the best quarter for U.S. stocks since the fourth quarter of 2008 - the beginning of the tech bubble blow off that lasted until the beginning of 2000 and was followed by a Depression level drop in stock prices. The last six months have been the best two quarters for U.S. stocks since March 1987. Five months later U.S. stocks dropped 40% in only a few days. That was also at beginning of a bubble blow off. Only a handful of stocks survived the 1987 crash unscathed - most of them were gold miners. So far history seems to be repeating itself vis-a-vis money pumping and stock price behavior.

The IMF (International Monetary Fund) released revisions to its GDP predictions this morning. It now expects global GDP to decline only 1.1% this year, instead of 1.4% and for GDP to increase by 3.1% next year, instead of by 2.5%. While the report had the usual cheer leading bullish tone, a remark made at the press conference inadvertently revealed the truth. The IMF spokesman stated that the report "should not fool governments into thinking the crisis is over". Apparently they wanted to make it clear that their report was only intended to fool the public. The IMF also stated that the pattern of global demand needs to be rebalanced and this could not happen at current exchange rates and that countries with huge export surpluses needed to revalue their currencies upward. Doesn't that imply that countries with huge export deficits like the U.S. will see their currencies revalued lower? So much for that good news.

NEXT: Unemployment Rises as Car Sales Collapse

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.

Non-Farm Payrolls and Its 'Statistical Quirks'

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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When deciding how credible this mornings jobs reports is, you only have to look at one number. According to the Bureau of Labor Statistics, employment in the auto industry went UP by 28,000 last month. Nobody believes this, and I mean nobody, not even the biggest government boot licking financial reporters. Even the mainstream media cautioned that this could be a 'statistical quirk', the polite term in the numbers industry for lying. You should assume that finding one 'statistical quirk' in a report is similar to finding one roach in your apartment. In both cases, there's a lot more that you're not seeing.

The headline number for the report was a loss of 247,000 jobs, which is bad enough as is. July was the 19th consecutive month for job losses. Since the recession has began in December 2007, the government admits that 6.7 million jobs have been lost. Goods-producing industries shed 128,000 jobs, and service-producing industries cut 119,000 jobs, including 44,000 in retail and 38,000 in professional and business services. Unemployment in retail (the largest individual private sector employer) seems to be accelerating. After the 'robust' auto industry gains, health care was the biggest job gainer. Government also added about 7 thousand jobs, but this information was left out of the BLS press release even though it is always reported (when information that has always been available suddenly disappears watch out).

According to the government, the unemployment rate declined to 9.4% (actually 16.3% if you include discouraged workers and involuntary temp workers). You may ask how is it possible for there to be a significant job loss and for unemployment to improve at the same time (could it be another 'statistical quirk')? It's simple - 422,000 people 'conveniently' left the labor force. Even though the O'bama, Bernanke, and Geithner and the BLS in its press release tell us that the economy is improving, large numbers of people are giving up looking for jobs because they think there is no chance of finding one. Somehow, I don't think both of these contradictory views are possible. One of them seems to be a lie - pardon me, I meant 'statistical quirk'.

If you listen carefully to what Obama and Bernanke have been saying for the last several months, you will notice that 'things are getting less worse' is the gist of their statements. The Obama litany is: the financial meltdown has ended (which happened during the Bush administration, but he still takes credit for it), the rate of job loss is slowing, and the stock market is doing better. Bernanke also concentrates on the stock market is getting better theme (and I am sure this is not taking place without some government assistance). The recession is indeed getting 'less worse', although not as much as the government claims. There is also a huge gaping chasm between getting less worse and getting better. However, the government may be able to solve this problem in the future with bigger 'statistical quirks'.

NEXT: The Smoking Gun of the Economic Recovery Scam

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.

U.S Unemployment Reaches 15%

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:

Just because you don't have a job in the U.S. doesn't mean the government considers you unemployed. The monthly Jobs Report was released today and the headline number was an unemployment rate of 8.1%. This is however the rosiest possible interpretation of the U.S. employment picture. While 12.5 million people were counted as unemployed, there were an additional 2.1 million 'marginally attached' workers (also known as discouraged workers) - people who looked for a job within the the last twelve months, but not in the last four weeks. These people are not considered to be unemployed. A much larger 8.6 million workers worked part time last month and are considered fully employed even though they may have worked as little as an hour a week and wanted to work full-time. If you consider the discouraged workers and involuntary part-time workers as unemployed, the U.S. unemployment rate is actually 15.0%.

This 15% is calculated using the government's own numbers. This is more than enough reason to think things might be even worse than what the government is telling us. Every employment report since the Credit Crisis began in the fall of 2007 has had two downward revisions after the initial numbers were released and these have frequently been substantial. As an example, December 2008 jobs losses were initially reported at 524,000. That was revised to 577,000 last month and in the current Jobs Report the losses have now been updated to 681,000. An additional loss of 151,000 jobs for January and December combined showed up in today's report for February employment. You should expect that the January numbers will be revised downward again next month (the numbers are revised for two months). The 651,000 loss reported today will almost certainly be larger in the April and May reports.

Looking inside the figures you would also note that three categories have gained jobs every month since the Credit Crisis began - health care, education, and government. Most education and many health care jobs are of course government related. While it is possible that employment in health care is increasing, considering the poor fiscal condition of state, local and the national government in the U.S., it is quite incredible that more and more people are working in education and directly for the government. Where is the money coming from to pay for these workers and what are they being hired to do?

In the 1930s Great Depression, U.S. unemployment is believed to have peaked around the 25% level (approximately the same rate that was reached because of the hyperinflation in Weimar Germany in the 1920s) . This is just a rough estimate because the data gathering infrastructure that exists today, didn't exist back then. If you see the alternative unemployment numbers reach 20% or so, it would be reasonable to assume that current economic conditions are as approximately bad as they were in the 1930s.

NEXT: Stocks Look for Bottom, Oil Rallies

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 Doesn't Believe Retail Sales Report

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:

As we have reported in this blog many times, the U.S. government has been blatantly manipulating its economic reports for years now. Nevertheless, the market generally believes them despite their internal inconsistency or the existence of other information that is strongly contradictory. This willingness to believe seems to have broken down today with the release of the Retail Sales Report for January. The numbers were good and way above expectations. Instead of rallying as it should have, the stock market tanked.

According to the government statisticians, retail sales rose 1% in January. The forecast among economists (who can't be trusted either) was for a drop of 0.8%. Perhaps this discrepancy was just too great for the market to buy it. The report furthermore had a big gain in apparel purchases, even though same store sales data for clothing chains showed a big decline. A number of retail industry watchers commented on this discrepancy and other anecdotal evidence that seemed to contradict the government's view. There seemed to be a consensus that the numbers would just be revised downward next month.

Looking inside the report, this is indeed what happened for December's numbers. Originally reported down 2.6% (not 2.7% as most media stories stated), the drop for December is now an even more horrendous 3.0%. The January rise of 1.0% would be from this lower number, or only up 0.6% above the number first reported. The news media always fails to point this out and this leaves a gaping loophole for creating good news where none exists. The real numbers, which are much worse, only come out a month or two later and the media pays little attention to them. There have been cases in other government reports where the revisions downward were so significant that even though there was a 'rise' in the numbers for the current month, the total was actually lower than the first number reported the month before. So even though the numbers are actually declining, they were reported as going up. This does not appear to be the case for the January Retail Report however. The good numbers seem to rely more on the falsification of the figures.

There was one another oddity in this Retail Sales Report as well and that is how it was covered by the news services. Articles were unusually short and details limited - this immediately made me suspicious of course. I had to search to find more extensive coverage (filled with negative commentary from everyone interviewed) and this has not happened before. It will be interesting to see if the new scepticism on the market's part spreads to the even more absurd inflation, jobs, and GDP reports. If it does, when the economic news actually does become better, no one will believe it.

NEXT: Deepening Global Recession Means More 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.

Short Term, the Market is Looking Better

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:

While nothing has changed in the long term outlook for the U.S. stock market, the shorter term picture brightened from a technical perspective somewhat on Friday. Bear market rallies can come out of nowhere and can be highly profitable. They should not be avoided as is currently being advised by the never-made-a-dime-trading 'pundits' who are now pompously announcing 'the long-term trend hasn't changed'. This would be hard to argue with. However it is in the short term that you make quick money.

Examining many charts, you will find a common pattern of almost vertical drops without much or any relief rallies. These drops have gone on for 6 months or more (a common maximum period for selling). The trend has gone sideways for the last two months or so. If you look at moving averages you will see that they have become bunched together on the daily charts. Even looking at these charts for a brief period, it is sometimes impossible to differentiate the 10-day, 20-day, 30-day, etc. moving averages. Bollinger Bands have become very narrow. The tight moving averages and narrow Bollinger Bands frequently precede trend changes.

The Nasdaq is leading the other U.S. stock indices. On Thursday it closed above its bundle of moving averages on the daily chart and then rallied strongly on Friday to the top of its Bollinger Band. Similar behavior took place in early January and Nasdaq traded above the Bollinger Band for one day. That breakout failed however. While the RSI and MACD looked good at that time, the down trend pattern of the DMI was not quite resolved at that point. Things look better now and the moving averages are more tightly intertwined . There is still no guarantee of a rally yet though. The price needs to either ride upward with a rising Bollinger Band or jump above it. The moving averages need to start rising with the 10-day on top, the 20-day just underneath it, the 30-day just underneath that, etc. When the moving averages are all together as they are now even a short rally will start to create this pattern.

The other thing to pay attention to is that there were two major pieces of bad economic news lately - the GDP report and the Jobs Report. The Market rallied both days. When the market does this, the bad news has already been priced in. This doesn't necessarily mean a big rally is coming, but the downside risk during those times is actually relatively low and the upside potential is very high. In addition to the tech stock laden Nasdaq, oil, coal, and non-precious metals are starting to look interesting. The first thing you should be looking for before buying is a close above the 50-day moving average. You also always need to keep in mind that you need to take your profits when you get them.

NEXT: The Slippery Slope of Oil Media Coverage

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.

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.

Our Video Related to this Blog:

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
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.