U.S. Employment Still at Recession Levels in September

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 non-farm payrolls report for September indicated the U.S. economy added 103,000 jobs last month. Mainstream media immediately jumped on the number as proof the U.S. is not in a recession. It indicates no such thing.

While it seems reasonable to assume that employment can't increase at the begging of a recession, this did not happen in December 2007 when the Great Recession began. Total U.S. non-farm payroll employment actually peaked in January 2008 at 137,996,000. It then declined until hitting a low point of 129,246,000 in February 2010, many months after the recession supposedly bottomed in June 2009. Total employment in September 2011 was only 131,334,000, not even remotely close to levels four years earlier. These figures can be viewed at: http://research.stlouisfed.org/fred2/data/PAYEMS.txt.

The internals of the employment situation for September were not encouraging either. In their press release, the BLS admitted right up front that the end of a strike by the Communication Workers union added 45,000 jobs to the 103,000 total. This leaves only 58,000 jobs being created during the month. More than that amount came from only two sources -- health care and construction. The largest increase in jobs was 41,000 and they were created in the "health care and social assistance" category. Like education, many of these jobs are funded by the government either directly or indirectly, yet they are counted as private sector jobs. The government promulgates this fantasy and the mainstream media mindlessly repeats it.

Another 26,000 jobs somehow came from construction. At least the BLS didn't claim they came from the struggling residential real estate market. Almost all of these new jobs came from the heavy and civil construction category. Perhaps the federal government is building another Hoover Dam and forgot to mention it to the public? This is sort of an eyebrow raising number to say the least.

So in September 2011, there were 6,649,000 less employed people in the U.S. than when the Great Recession began in 2007. This is after over two years of supposed recovery. Based on the recent net increases in the labor force, the U.S. needs to create approximately 150,000 new jobs a month for the employment situation to just hold steady. To reduce the official unemployment rate of 9.1% would require adding a much larger number of jobs every month. This is not happening. As for whether or not the U.S. is in a recession, an unemployment rate of 9.1% has always indicated a recession in the past. Is there any reason to think "things are different" this time around?

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 January 8th Meeting of the New York Investing meetup

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 New York Investing meetup monthly meeting on January 8th had a record turnout of 200 people. The first talk was our view for the stock market in 2009. This was followed up by an excellent talk by Jeff Glenn on manipulation in the gold and silver markets. The final talk was on the latest scandals, including Madoff, Dryer, and Saytam compter, recent economic figures and then a review of some Saint Louis Fed charts that clearly show the financial sytem is in serious trouble.

While the indicators for the U.S. stock market were highly negative in the beginning of 2008, they were essentially neutral for 2009. A comparison was made of the charts for the major stock indices at the beginning of 2008 and 2009. In 2008 there was a large drop, while in 2009 almost everything went sideways. One way of interpreting this is that the market will move in an overall sideways pattern this year, albeit with possible big moves up and down. This does not mean the market can't go lower, it most certainly can. Our long term prediction is that it will. The Dow still has not hit major support at 7200 and this could happen even in the earlier part of this year. Lower lows are also possible. A flat market for the year can include the scenario of significant selling and recovery toward the opening price at the end of the year.

Jeff Glenn's talk on gold and silver manipulation helped clarify how central governments try to control the price of gold and silver through leasing. How much gold the U.S. actually owns is not really known, since there has been no audit since 1955. A lot of government action seems to take place with precious metals, but there is little transparency. Investors should ask themselves, "Why the need for secrecy?" Jeff also stated that he thought it very possible that gold could skyrocket one day because of a sudden revaluation by the government. I agree that this is indeed a realistic possibility. You will need to own gold and silver before this day arrives if it does occur.

The final talk was on the Madoff scandal and how incredible it was the SEC missed this obvious scam that seems to have gone on for decades. We also reviewed the accusations of major security fraud against Drier, the head of one of the largest New York law firms, and how Satyam Com hid its declining sales by lying about it cash holdings (something that is almost impossible to do because it requires multiple parties outside the company to be involved with the fraud). After that we warned the employment report and the GDP figures this month would be ugly. We wrapped up by showing updated charts on the Monetary Base and Banking Reserves from the St. Louis Fed.

Our next general meeting will be February 3rd and we will be having a guest lecture on investing in art.

NEXT: The U.S. Trade Deficit - There's Good News and Bad News

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.

East Meets West, The Triumph of Communo-Capitalism

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:

China lowered its interest rates last night for the fourth time since September. It's not yet close to zero interest rates like the U.S. and Japan, but will be be continuing to approach that level next year as will Great Britain. In China the government directly owns the banks and meddles in banking policy. While in the U.S. and Britain, it would be more appropriate to say that the banks own the government, or at least the central bank, and can directly meddle in the government policy that impacts them. In the end is there that much difference? The result is a financial system rife with corruption that engages in economically absurd behavior, which the government then has to bail out.

Final figures for third quarter GDP have just been released for the U.K. and the U.S. According to the official figures (take these with a big grain of salt and assume the reality is worse), the U.K. economy declined by 0.6% and the U.S. economy by 0.5% annualized last quarter. In the U.K. this is the biggest decline since the recession of the early 90s and in response the central bank has dropped interest rates to the lowest level since 1951. For the fourth quarter, a decline around 1.0% is expected in the U.K, while in the U.S. the consensus forecast is the economy will fall off a cliff with at least a 6.0% annualized drop - something worthy of a depression. As a reminder, both Federal Reserve chair Ben Bernanke and Treasury Secretary Paulson testified to congress in September that if the $700 billion Wall Street welfare bill, better known as TARP, wasn't passed, the U.S would face a severe recession. At the time, New York Investing said a severe recession was inevitable no matter what.

TARP is an example of fiscal profligacy, and while it is one of the worst examples, it is by no means the only one. Supporting all of the government's spending is the Fed's out of control money printing, which even mainstream economists are now starting to mention (better late than never I guess). Charts from the St. Louis Fed that New York Investing first showed in October are now getting some press attention. One of these charts, the U.S. Monetary Base shows an 86% increase during 2008, but around a 1000% increase annualized in the last 3 months. Another chart, Adjusted Reserves, shows this indicator exploding from $100 billion to $700 billion since mid-September. These charts (and around a dozen others) are so damaging that I am expecting they the numbers will either be 'adjusted' in the future or the Fed will stop making them available altogether as it did with M3 a few years ago.

While deflation is the headline issue today (based on very little reality), some economists are starting to point out that the Fed and the rest of the world's money printing central banks are going to have a lot of trouble draining all of this liquidity once there is economic recovery. History indicates that this indeed does not happen, but a hyperinflationary spiral is much more likely. This is just starting to dawn on some mainstream economists (but by no means all). The New York Investing meetup laid out this scenario in its September 2007 (yes, 2007) meeting -and so far events seem to be unfolding as predicted.

NEXT: Changes in Wall Street Firms That Led to the Credit Crisis

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.