Jobs, Jobs and No Jobs

Posted by Ray on October 31, 2009 under Main | 4 Comments to Read

Well, last week was the breaking point in the equity markets and there is no denying that. The GDP figures were cooked to say the least and shows that the economy, unfortunately, cannot survive on its own without massive government intervention. It also proves, to me at least, that there will be, I place a 70% probability on it, that there will be another stimulus plan by the end of 1Q10. In the upcoming week we have massive data coming out, but there are a few data points I am waiting for, the ISM report on Monday and the employment reports, ADP on Wednesday, the initial claims on Thursday and the employment report Friday. However, there are tons of other data points also being released that you should pay attention to and look beyond the headline numbers on.

On the absurd side of the reports last week was the Whitehouse’s attempt to tell us that is wasteful $787B stimulus package was working and “saved or created” 650K or 1M jobs. First, there is no way to quantify a saved job and any economist worth their salt will verify that as a factual statement. Second, they said the $283B or so tax benefit, the most painful joke of the stimulus bill, helped create more jobs because it lessened the tax burden of working Americans. How an additional $20, and I am being generous with the $20 figure, a week tax savings is saving or creating jobs is beyond me, but hey the government has its own mathematical formulas to suit its own purposes. What is so painful about that portion of the stimulus is that you need to have a job to reap the benefits of that tax savings or wait until you file, unless I do not understand the language of the bill and I am not a CPA.

I can see how bailing out GM and Chrysler would have quantifiable results in the “saving” jobs category, but outside of that there is simply no way to tell. Then we have reports coming in from the Associated Press, not FOX News mind you, that the creation of jobs figures is double counted or just false figures. Considering the last report released just a couple of weeks ago showed such different results I find it way to convenient that this report shows such stellar results, not that our government would ever be aggressive with their math figures. The other reality is that if 1M jobs were saved or created how in the world can we be shedding 530K jobs a week still?

That means we are in far worse shape than we are being told, which sounds about right to me. Not only that, but look at all the consumer sentiment numbers coming in that all show jobs are tough to find and getting harder to find. The picture is not improving and considering a 3.5% GDP print and all the rosy talk from Biden, Obama and their economists this thing, whatever we are calling it now, is over. However, if it is over and things are better, why are the people saying I can’t get work? Because it is not over and, in fact, it is getting worse at least on the jobs side of the picture which does not bode well for the economy itself.

There is so much uncertainty out there that personal spending decreased, according to the report of Friday, and disposable income is way down, according to the GDP report. Those are two key pieces of data that were completely ignored by the media, except for the spending report of Friday. All you heard about in the GDP report was how great it was and that if you subtract government stimulus we still had growth. Well, wait a minute, if you look at the consumer side of the equation and how incomes and disposable incomes are down that is very forward looking and not good. In fact, GDP is review mirror looking, but the consumer income portion is forward looking, that is why CNBC and the rest of the media ignored it. It is because there is trouble ahead, big trouble.

Corporate earnings were a factor of international growth, which may continue, but it was also a factor of a weaker currency as well. Now we are seeing a stronger dollar, so what does that mean for Intel’s earnings next quarter? I am willing to bet they will meet their EPS, but miss on their revenue if the dollar steams ahead in value, which it will if I get my continued correction I see coming. I am not picking on Intel, I love their product, but I am using them as an example as they grew their international business and their US sales dropped last quarter and they had favorable FX results, like many other firms. This could be a problem moving forward in the tech area, especially if our products get more expensive overseas.

Looking ahead to next week, Thursday’s employment report is going to be interesting, to say the least. We have had another month of straight 500K a week initial claims, but estimates say that last month only 190K will actually be unemployed, which is a joke of course and Breifing.com estimates 235k for this figure. What is important to look at is the revised figure for last month, the U-6 number and what games the BLS has played with the birth/death model, which is a guesstimate that a certain percentage of terminated workers will start their own businesses. That birth/death model has been busy this year and last year adding hundreds of thousands of phantom jobs to the report, so many in fact that the BLS quietly will add an additional 825K to all of the 2009 unemployment numbers in February of 2010, nice right? Be sure to come back here to see what they add in after the number is given and I will be more than happy to share how many phantom jobs are added to this month’s report.

My point is that with 500K+ a week  filing for initial claims, that’s 2M a people a month, and over 50% of consumers saying that finding a job is very hard and the average time to find a job is 6 months how can we only have 200K a month actually be unemployed? It is not possible and unrealistic. If this was the case we would have no need for extended unemployment benefits or emergency claims along with, there is a pending bill now in the Senate, another measure to extend benefits to about 2 years for unemployment benefits. There is no conspiracy or anything of that nature happening, they are doing it right in front of you, but they just burry the numbers in the reports which is why you need to look at the U-6 report on Thursday because that will show you what the real unemployment number is. It is definitely not 9.8 or 10%, it is a lot higher.

So, if you want to believe that 1M jobs were saved or created, believe it, hey my kids believe Santa and the tooth fairy still so there is nothing wrong with a little belief in magically creation. However, we all have to grow up and unfortunately we all learn that there is no Santa or fairy that leaves money under our pillow, we would all be toothless, and reality sets in. I know that we all have hope that President Obama will live up to his Hope and Change campaign promises, but it has been a year and guess what? There has been no change and my hope for change was killed the day he brought Larry Summers back into the Whitehouse. I saw this movie before and it did not end well the first time and I am sure the sequel will end even worse.

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Tags: Biden, BLS, bureau of labor and statistics, economic recovery plan, job creation, jobs saved, larry summers, November employment report, obama, unemployment

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