Green Shoots Are Poisonous to Your Wealth 21 comments
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I remember a conversation I once had with a 20 something. I ask her about the colorful tiger on her keychain. “Is that Tony the Tiger?” I asked. Or, was it the Exxon Tiger, I thought to myself.
She politely and proudly corrected me by announcing that it was Tigger, a character from the Disney Channel 1983-1986 television series “Welcome to Pooh Corner”. I am a child of the 1950s and she is a child of the 1970s. There was no need to mention Tigger first appeared in A.A. Milne’s 1928 book “The House at Pooh Corner”. The takeaway from that exchange is one man’s Tigger is another man’s Tony the Tiger. However, they are not the same nor are all green shoots.
Everyone enamored with green shoots sightings are convinced that the dubious vegetation is proof of the Second Derivative test at work in the economy. Therefore, the market rally is real because the economy is strengthening. At best, these sighting are a false positive. At worst, I see a pause in the economy before another wave of contraction occurs. A tree branch breaking your fall 10 stories down, after falling from a 20-story rooftop does not reverse the accident; it merely delays the consequences of falling.
Before everyone became an expert in deflation economics, an additional 200,000 newly created jobs each month was necessary to keep up with population growth. This growth in jobs supported economic expansion, which in turn, allowed for market multiples expansion.
Looking at the recent employment figures from the Bureau of Labor Statistics (BLS), Monthly Data A-1/ Household Data Historical, with my population adjustment, the numbers are stunning.
Total Unemployed | New Jobs Needed per mo. | Total Jobs Needed | |
May 08 | 8,536,000 | 200,000 | 8,736,000 |
June 08 | 8,662,000 | 200,000 | 8,862,000 |
July 08 | 8,910,000 | 200,000 | 9,110,000 |
Aug. 08 | 9,550,000 | 200,000 | 9,750,000 |
Sept. 08 | 9,592,000 | 200,000 | 9,792,000 |
Oct. 08 | 10,221,000 | 200,000 | 10,421,000 |
Nov. 08 | 10,476,000 | 200,000 | 10,676,000 |
Dec. 08 | 11,108,000 | 200,000 | 11,308,000 |
Jan. 09 | 11,616,000 | 200,000 | 11,816,000 |
Feb. 09 | 12,467,000 | 200,000 | 12,667,000 |
Mar. 09 | 13,161,000 | 200,000 | 13,361,000 |
Apr. 09 | 13,724,000 | 200,000 | 13,924,000 |
May 09 | 14,511,000 | 200,000 | 14,711,000 |
Net 1 Yr. Lost Jobs | 5,975,000 | 2,600,000 | 8,575,000 |
People are seeing green shoots when in the last 12 months our economy is down 8.57 million jobs! Even if we maintain the current unemployment rate of 9.4% until the economy begin expanding again, we are still falling behind by 200,000 jobs every 30 days. We have 44 states unable to balance their budgets for the coming year, which should lead to layoff notices starting this summer, and one of the largest industries lost its largest company, General Motors (GMGMQ.PK), to bankruptcy a week ago.
I hope my analysis is too pessimistic but the numbers speak for themselves.
Disclosure: No positions
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This article has 21 comments:
When the other fundamentals actually show improvement, not just the effects of sleight-of-hand bookkeeping by financials and other manipulated government data, then I will consider employment to be really "lagging". For now, it continues to be "leading", regardless of the recent reported number.
HardToLove
Green shoots are for smoking not for investing. be cautious and critical of those who purport to see them. They probably have some shares they are dumping on you. nothing more.
Phase two of the depression is upon us and by Christmas this year the true horror will be visible as all the investment banks will have exited the markets with you all holding the bag ( as usual ).
The true tragedy IMHO of this whole situation is that so few people are willing to accept that our way of life in the WEST is changing. Those so called jobs on Friday were mostly MacDonald's hirings.
An economy does not MacDonald's make my friends. We manufacture nothing of value any more, we accept bank quarterly earnings as a sign of stability, we accept this stupid notion of green shoots as every country spirals downwards.
I am sick and tired of the " we're all good" crowd - face it and prepare your family accordingly.
BHO is the 21st Century's Jimmy Carter and has yet to feel the pain of Iran, but like Carter will.
Green shoots are yesterday's news and over the next couple months we will see plants like positive retail sales data (later this week), industrial production, durable goods, etc.
Even in the sharpest V shaped recovery, you won't see an improvement in employment for a couple months after the GDP turns positive (like in the 74 recession) and it could take years (like in 2001 recession).
Unemployment was much worse in 82-83, yet the economy still recovered BEFORE unemployment improved. This obsession with unemployment proves that bears are running out of arguments. When you won't even use coincident indicators to make your arguments anymore, that is a good sign the bear is about to die soon.
On Jun 08 09:01 AM HardToLove wrote:
> Everyone's going to holler at you about it being a "lagging indicator".
> But I think that you tables, and conclusions, carry the seeds of
> the "weeds" that will obliterate the "green shoots" near-term.<br/>
>
> When the other fundamentals actually show improvement, not just the
> effects of sleight-of-hand bookkeeping by financials and other manipulated
> government data, then I will consider employment to be really "lagging".
> For now, it continues to be "leading", regardless of the recent reported
> number.
>
> HardToLove
On Jun 08 09:15 AM mtt04 wrote:
> green shoots are nothing more than investment banks, hedge funds,
> and their ilk hoisting their leverage onto the dumbs dumbs who listen
> to them.
>
> Green shoots are for smoking not for investing. be cautious and critical
> of those who purport to see them. They probably have some shares
> they are dumping on you. nothing more.
On Jun 08 11:35 AM Pangaea wrote:
> Importantly, here's a chart of unemployment rate vs. the stock market
> for past recessions:
>
> i44.tinypic.com/260fvv...
>
> I think the author is probably right over the longer term, but the
> ECRI is forecasting a cyclical recovery beginning this summer:<br/>
>
> businesscycle.com/reso...
> businesscycle.com/news...
>
> The interesting thing is that both arguments can be correct - but
> it's a matter of timing... Think of the 2003-2007 cyclical recovery
> in the context of a larger bear market.
On Jun 08 01:18 PM lefty37 wrote:
> The economy can ONLY improve when the general public can purchase
> U.S. made goods and services. And we cannot do this unless we are
> gainfully employed. 14 million Americans unemployed according to
> our government, but the actual number is more than double this number.
On Jun 08 10:21 AM thiazole wrote:
> Green shoots are leading indicators that the economy will reverse
> in the near future - the plant is the change in the economy and the
> fruit is the last thing to come which is an improvement in employment.
>
> Green shoots are yesterday's news and over the next couple months
> we will see plants like positive retail sales data (later this week),
> industrial production, durable goods, etc.
> Even in the sharpest V shaped recovery, you won't see an improvement
> in employment for a couple months after the GDP turns positive (like
> in the 74 recession) and it could take years (like in 2001 recession).
>
> Unemployment was much worse in 82-83, yet the economy still recovered
> BEFORE unemployment improved. This obsession with unemployment proves
> that bears are running out of arguments. When you won't even use
> coincident indicators to make your arguments anymore, that is a good
> sign the bear is about to die soon.
On Jun 08 01:18 PM lefty37 wrote:
> The economy can ONLY improve when the general public can purchase
> U.S. made goods and services. And we cannot do this unless we are
> gainfully employed. 14 million Americans unemployed according to
> our government, but the actual number is more than double this number.
On Jun 08 01:37 PM CLH wrote:
> Mr Clark--you say its different this time. You dont need to say any
> more for me to disregard your message.
On Jun 08 09:22 AM mtt04 wrote:
> One more thing, read ambrose pritchard's article today at the telegraph,
> it pretty much cuts through all the financial advisor crap and analyses
> REAL NUMBERS, not "it be the bottom or could be the top" nonsense
> tht is being spouted around here.
>
> Phase two of the depression is upon us and by Christmas this year
> the true horror will be visible as all the investment banks will
> have exited the markets with you all holding the bag ( as usual ).
>
>
> The true tragedy IMHO of this whole situation is that so few people
> are willing to accept that our way of life in the WEST is changing.
> Those so called jobs on Friday were mostly MacDonald's hirings.
>
>
> An economy does not MacDonald's make my friends. We manufacture nothing
> of value any more, we accept bank quarterly earnings as a sign of
> stability, we accept this stupid notion of green shoots as every
> country spirals downwards.
>
> I am sick and tired of the " we're all good" crowd - face it and
> prepare your family accordingly.
On Jun 08 03:13 PM jeandit75 wrote:
> Maybe also the green shoots
> activists are nothing more than terrorists afterall.
On Jun 08 04:38 PM thiazole wrote:
> That has to be the most absurd thing I've every heard. 90% of the
> economy is psychological. The economy doesn't go bad to "punish
> bad behavior". If you don't understand that, then look into Krugman's
> analysis of the "Capitol Hill Babysitting Coop". It does a good
> job of explaining what you don't understand. If anyone was an economic
> terrorist, it would clearly be the pessimists who are trying to incite
> panic. The more people panic, the worse the economy will get. You
> can have all the fundamentals for a good economy and be in a never
> ending depression because of pessimistic psychology. Just look at
> Japan's economy.
Since you don't understand what is going on in Japan, here is a primer: tinyurl.com/pjdkhq
On Jun 08 05:33 PM E Thomas St. wrote:
> Yeah, if only those Japanese were more positive, then they'd be fine.
> Do you have any more shallow pop philosophy tidbits to share with
> us?
The economy needs to create at least about 125K- just to stay where we are- jobs to take care of new entrants to the job market, instead we are losing 400/500K jobs.
Work week reduction: Work week got reduced by .1 Hr - looks small but translates into 375K lost jobs.
The long term unemployment: unemployed >15 wks and >27 wks have reached new peaks.
Better than expected jobs report was sheer manipulation of Birth/Death model additions - they added 220K jobs in Amy, 694K jobs added in the last 4 months. Who are they kidding are more firms taking birth now than dying? Bankruptcy filings of 6000 a day do not suggest that, nor any other anecdotal evidence. (PPT at work)
All in all it was terrible news - no green shoots, only deadly weeds.