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.

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.

Inflation and 'Adjustments' Explain Retail Sales and Inventory Reports

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 Commerce Department just released reports on February retail sales and January inventories and business sales. As usual, the mainstream media republished the rosy view of the reports contained in government press releases. Even a cursory examination of the actual data indicates serious problems in the U.S. economy still linger and there is little if any reason to think things are getting better.

Retail sales are important because they represented 72% of U.S. GDP before the Credit Crisis. Without a continuing real increase in them, a sustainable economic recovery can't take place. Increases caused by inflation not only don't indicate recovery, but also indicate additional problems. The government's retail sales numbers are not adjusted for inflation. The place to look for inflation in the report is the gasoline sales figure, since if anything less gasoline is being purchased now than before the Credit Crisis. This number gives you a ballpark sense of whether or not the change in numbers was caused by inflation as opposed to selling more items. Year over year U.S. retail sales were up 3.9% in February. Year over year gasoline sales were up 24%. It is quite clear that inflation is behind the 'recovery' in retail sales and this is bad news.

The 'Manufacturing Trade and Inventories and Sales' report for January demonstrates the incredible impact of the government's statistical 'adjustments' can have on the numbers it publishes.  Inventories were reported as flat in January, but business sales were up 0.6%, the eighth consecutive rise. Table 2 in the report, entitled Percent Change in Sales and Inventories, tells a different story however. The change in the unadjusted numbers from December 2009 to January 2010 state that total sales were down 13.3%. This number was up 0.6% after adjustment. Sales for retailers were down 22.9% before adjustment. They were up 0.2% after adjustment. The chart can be found at: http://www.census.gov/mtis/www/mtis_current.html.

Surveys of consumer sentiment indicate the public has a very different view of the U.S. economy than the government's public relations (a term invented early in the 1900s so the word propaganda didn't have to be used) story usually reprinted without question by mainstream media outlets. The University of Michigan survey, out the same time as the retail sale and business sales and inventory reports, showed a decline in consumer sentiment in February. The 12-month outlook had a fairly sharp drop. The last Conference Board consumer survey indicated a collapse in consumer confidence. Apparently consumers are reacting to their actual experiences with the U.S. economy and not the fantasy economy that exists only in government statistical offices in Washington, D.C.

Disclosure: None

NEXT: Moody's Sovereign Debt Assurances Should Concern Investors

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.