Job Losses Signaling Recession Isn't Over 20 comments
July 02, 2009
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The market is disappointed today, presumably because job losses were reported to be about 100,000 more than expected. But today's jobs number (-467K) was almost exactly what you would have expected given the ADP employment report (-473K) released yesterday. These are all pretty minor things, actually, since the payroll number that everyone focuses on can be and most likely will be changed by hundreds of thousands several times over the next few years, as better data come in. In other words, a "miss" relative to expectations of 100K is nothing to get excited about.
The thing to focus on instead is the context of the number and the trends in other numbers. Unemployment claims haven't risen for the past 5 months, so we know that the job situation is not deteriorating. The Challenger data (see yesterday's post) shows tremendous improvement in one segment of the jobs market. Job losses have clearly decelerated no matter what number you look at—we've seen the worst, and now the issue is how fast things will improve.
As this chart shows (click to enlarge), jobs don't usually turn positive until well after the end of a recession. So today's numbers are not at all inconsistent with the end of the recession having been in, say, May. In any event, given the non-stimulating nature of the Obama "stimulus" plan (which explicitly rejected the stimulus most likely to stimulate the economy, i.e., tax cuts), this recovery is likely to be quite modest. It's going to be another "jobless recovery" for awhile. But I still think the economy is on the mend. It will probably take a year or so before we start seeing meaningful gains in employment.
Interesting factoid: based on the household survey, 95.4% of the jobs that existed at the peak of the business cycle in early 2008 are still around today. There's been a lot of shuffling going on beneath the surface, but on net, job losses have been less than 5%.
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Here is the issue:
Now all of that might make some sense if we had been spending Stimulus l but so
far official estimates put the money out the door at about 10% of what’s been
appropriated. That of course leads one to the conclusion that maybe we need to
rethink the whole thing. If it’s that hard for the government to spend money then
perhaps we just need to put it in the hands of people that know how to go about
doing that. I’m referring to the American consumer, of course.
Check out more of this thought at theoxengroup.com
David Ristau
President, The Oxen Group
On Jul 02 04:27 PM Stone Fox Capital wrote:
> good points. The worst has been seen. I'd probably go with July being
> the end of the recession based on the numbers. But its definitely
> coming to an end. Amazes me that so many people focus at lagging
> data.
President Term Beg Jobs End Jobs Ann % Chg
Roosevelt 1933-1945 25,700 41,903 4.37%
Kennedy/Johnson 1961-1969 53,683 69,438 3.25%
Carter 1977-1981 80,692 91,031 3.10%
Clinton 1993-2001 109,725 132,469 2.45%
Truman 1945-1953 41,903 50,145 2.40%
Nixon/Ford 1969-1977 69,438 80,692 1.95%
Reagan 1981-1989 91,031 107,133 1.85%
Eisenhower 1953-1961 50,145 53,683 0.90%
H. W. Bush 1989-1993 107,133 109,725 0.60%
"W" Bush 2001-2008 132,469 134,580 0.20%
Hoover 1929-1933 32,100 25,700 -9.00%
All democrats created more jobs than all republicans. Reagan cut taxes, however he also gave us a huge boost in defense spending and the largest deficits since WWII. Even so, job increases were a measly 1.85% a year. Our worst president on the jobs front (since Hoover) is the one we just got rid of. Bush! 0.2%!! And the largest spending increase in history which, it can be argued, was responsible for keeping millions employed, rather than the tax cuts advocates seem to praise so much. Tax cuts are a knee-jerk conservative reaction to every economic problem. I fear the problem is much more severe and much more complex than a tax cut will cure. Our economy is changing dramatically and we need to figure out what it is changing to and then change our businesses and workforce accordingly. Consumerism is dead for awhile - perhaps it will come back some day. And globalization means production is everywhere in the world, the owners of production are everywhere in the world, and the U.S. no longer controls the world economy.
You just made me very happy that I don't invest with you
On Jul 02 04:27 PM Stone Fox Capital wrote:
> good points. The worst has been seen. I'd probably go with July being
> the end of the recession based on the numbers. But its definitely
> coming to an end. Amazes me that so many people focus at lagging
> data.
It seems convenient to report unemployment levels in single digits, as 9.5% gives off a much warmer, fuzzier feeling than going beyond the magic 10. Realistically, unemployment includes underemployment (people working part time who wish to but cannot find full time work) and this should be closer to 15%.
"Interesting factoid: based on the household survey, 95.4% of the jobs that existed at the peak of the business cycle in early 2008 are still around today. There's been a lot of shuffling going on beneath the surface, but on net, job losses have been less than 5%."
Almost ten consecutive years of low interest rates have already killed all American retirees' retirement plans. Retirees, the babyboomers, are hurt by low interest rates. The only blood suckers that benefit from low interest rates are investment banks, importers that hold a lot of inventories like Walmart, and speculators in the stock market and the real estate market.
Everyone who are retired or who are smart enough to prepare for their retirement suffers unanimously from the prevailing negative real interest rate. How can we expect people to spend more, when they are worrying about their retirement? If Obama keeps the interest low for another couple of years, I expect a lot of American retirees to commit suicide!
You know what? The unemployment rate is going to rise above 20% in 5-10 years time (with some exaggeration) because at the current negative interest rate, many retirees are forced to rejoin the labor force and they are too old to be able to find a job!
Can you imagine a 90-year old with Alzheimer's, who used to rely on his bankrupting Social Security and the interests from his CDs, to work at the big M selling burgers? What is more important? To give him a cheap healthcare plan or to give him bread to keep him from starving? Nada, you simply give him a fair share of his interest!
You mess with the interest rate again; you create a bubble; you get burned.
Dear Stone Fox Capital: I hope you're short (just in case) going into the 2Q earnings reports. Your optimism is admirable. Were you a cheerleader in college? Just a note on the "end of the recession": it is declared by NBER usually 6 to 12 months after the fact (just as we learned only in 4Q08 that it had begun in 12/07). So trumpeting that it has ended this month means that you either have been to the future and seen the past or are speculating. In addition, the primary 'factoid' taken into account by NBER is when GDP turns positive. Many economists differ with this classical definition of recession. When you broaden the definition to "turnaround in the economic well-being of citizens, companies and governments (fed,state,local)" it will clearly take much longer to leave this recession behind us.
Also, given what's going through Congress right now, you might be choking on your words over the next few years as it pertains to economic growth.
I can appreciate Mr. CA Beach Boy's optimism...it's always nice to take a trip away from reality, though not during a trading day.
On Jul 02 05:48 PM frosty wrote:
> Tax cuts for companies losing money and people losing jobs and taking
> pay cuts are not especially stimulative for jobs. It can be argued
> that Bush's tax cuts did not create jobs, rather the wars and their
> ramped up spendng created the jobs. The tax cuts were just squirrelled
> away in Switzerland and the Cayman Islands. The table below is interesting.
>
>
> President Term Beg Jobs End Jobs Ann % Chg
> Roosevelt 1933-1945 25,700 41,903 4.37%
> Kennedy/Johnson 1961-1969 53,683 69,438 3.25%
> Carter 1977-1981 80,692 91,031 3.10%
> Clinton 1993-2001 109,725 132,469 2.45%
> Truman 1945-1953 41,903 50,145 2.40%
> Nixon/Ford 1969-1977 69,438 80,692 1.95%
> Reagan 1981-1989 91,031 107,133 1.85%
> Eisenhower 1953-1961 50,145 53,683 0.90%
> H. W. Bush 1989-1993 107,133 109,725 0.60%
> "W" Bush 2001-2008 132,469 134,580 0.20%
> Hoover 1929-1933 32,100 25,700 -9.00%
>
> All democrats created more jobs than all republicans. Reagan cut
> taxes, however he also gave us a huge boost in defense spending and
> the largest deficits since WWII. Even so, job increases were a measly
> 1.85% a year. Our worst president on the jobs front (since Hoover)
> is the one we just got rid of. Bush! 0.2%!! And the largest spending
> increase in history which, it can be argued, was responsible for
> keeping millions employed, rather than the tax cuts advocates seem
> to praise so much. Tax cuts are a knee-jerk conservative reaction
> to every economic problem. I fear the problem is much more severe
> and much more complex than a tax cut will cure. Our economy is changing
> dramatically and we need to figure out what it is changing to and
> then change our businesses and workforce accordingly. Consumerism
> is dead for awhile - perhaps it will come back some day. And globalization
> means production is everywhere in the world, the owners of production
> are everywhere in the world, and the U.S. no longer controls the
> world economy.
Good Luck, and May Your Dow Never Jones.
One item to consider is that we have likely entered uncharted waters. Data currently produced may not have a historical counter part.
A Keynesian Deficit Spending program based on Social Engineering combined with QE begins the uncharted waters. Add in the expectation of higher Federal, State, and Local Taxes. Then add in unsustainable deficits, unfunded entitlements, Cap and Trade and Socialized Medicine.....you have entered uncharted waters with major cross currents.
Moreover, there is absolutely no incentive for Private Capital Formation leading to Private Sector jobs. Replay of the 1930's. Then add in the expectation of over regulation affecting margins, and you get some more 1930's.
Want some more? Small Cap and Mid Cap companies are hording cash as they can't find access to credit hence they are putting off capital expenditures and have instituted hiring freezes.
More? The money created by QE is sitting in Banks experiencing zero velocity.
Tax Cuts are not the entire Supply Side Theory. Supply Side is Tax Cuts, corresponding reduction in size and scope of Government, and the use of incentives.
The reduction of the size of Government is very difficult to achieve when faced with a highly unionized work force with major political clout. Scope of Government is difficult to reduce given that scope reduction leads to reduction in departments which leads back to the entrenched unionized work force.
Hence Supply Side Economics has never been fully deployed.
In regards to your Job Creation depiction of Democrats vs. Republicans, you would need a corresponding chart of deficit roll ups with each administration. Then you would need to have the deficit roll ups shown in current dollars. You would need a third chart showing unfunded entitlements, as they stand today and in the future, that is associated with each administration (that FDR and LBJ Charts would be some lou-lous).
Without the other charts your argument merely looks like the kind/type of information seen at The Center for American Progress.
On Jul 02 05:48 PM frosty wrote:
> Tax cuts for companies losing money and people losing jobs and taking
> pay cuts are not especially stimulative for jobs. It can be argued
> that Bush's tax cuts did not create jobs, rather the wars and their
> ramped up spendng created the jobs. The tax cuts were just squirrelled
> away in Switzerland and the Cayman Islands. The table below is interesting.
>
>
> President Term Beg Jobs End Jobs Ann % Chg
> Roosevelt 1933-1945 25,700 41,903 4.37%
> Kennedy/Johnson 1961-1969 53,683 69,438 3.25%
> Carter 1977-1981 80,692 91,031 3.10%
> Clinton 1993-2001 109,725 132,469 2.45%
> Truman 1945-1953 41,903 50,145 2.40%
> Nixon/Ford 1969-1977 69,438 80,692 1.95%
> Reagan 1981-1989 91,031 107,133 1.85%
> Eisenhower 1953-1961 50,145 53,683 0.90%
> H. W. Bush 1989-1993 107,133 109,725 0.60%
> "W" Bush 2001-2008 132,469 134,580 0.20%
> Hoover 1929-1933 32,100 25,700 -9.00%
>
> All democrats created more jobs than all republicans. Reagan cut
> taxes, however he also gave us a huge boost in defense spending and
> the largest deficits since WWII. Even so, job increases were a measly
> 1.85% a year. Our worst president on the jobs front (since Hoover)
> is the one we just got rid of. Bush! 0.2%!! And the largest spending
> increase in history which, it can be argued, was responsible for
> keeping millions employed, rather than the tax cuts advocates seem
> to praise so much. Tax cuts are a knee-jerk conservative reaction
> to every economic problem. I fear the problem is much more severe
> and much more complex than a tax cut will cure. Our economy is changing
> dramatically and we need to figure out what it is changing to and
> then change our businesses and workforce accordingly. Consumerism
> is dead for awhile - perhaps it will come back some day. And globalization
> means production is everywhere in the world, the owners of production
> are everywhere in the world, and the U.S. no longer controls the
> world economy.
Government Wants retirees to commit suicide -as they have stolen the many decades worth of money retirees sent in on " other things " ie Wars . In Japan , the formerly 2nd largest economy -80,000 retirees commit suicide a year out of deperation . This is REALLY sending a good message to younger workers today . Work + pay your taxes + fica _ BUT don't expect to get anything Back !
On Jul 03 09:06 AM frosty wrote:
> Dear Up Yours SP500: did you survey only your own household? The
> auto industry alone has destroyed more than 5% of the nation's jobs.
> Your 'factoid' is absurd.
>
> Dear Stone Fox Capital: I hope you're short (just in case) going
> into the 2Q earnings reports. Your optimism is admirable. Were
> you a cheerleader in college? Just a note on the "end of the recession":
> it is declared by NBER usually 6 to 12 months after the fact (just
> as we learned only in 4Q08 that it had begun in 12/07). So trumpeting
> that it has ended this month means that you either have been to the
> future and seen the past or are speculating. In addition, the primary
> 'factoid' taken into account by NBER is when GDP turns positive.
> Many economists differ with this classical definition of recession.
> When you broaden the definition to "turnaround in the economic well-being
> of citizens, companies and governments (fed,state,local)" it will
> clearly take much longer to leave this recession behind us.