The difficulty filling positions that some employers are already experiencing can be seen in the rising number unfilled job openings at the end of each month. The latest BLS survey reveals that there were 3,844,000 job openings at the end of March, virtually unchanged from the 3,899,000 openings still available at the end April. Again, significant monthly fluctuations notwithstanding, the number of job openings at the end of each month has been steadily increasing since mid-2009.

- Challenger Gray & Christmas

Here is the Jobs Openings and Labor Turnover (JOLTS) data from the BLS which Challenger was referring.

(click to enlarge)

Challenger continued:

As the number of job openings rises and the number of unemployed falls, the number of available workers per job opening continues to shrink.

Is headline unemployment a measure of labor slack? Most know my position is that headline unemployment (U-3), or even the all in

There have been several posts over the past few weeks discussing college / university education. Goldman Sachs economist Jan Hatzius stated:

[T]he faster job growth among college graduates is entirely due to faster growth in the size of the college-educated population; the employment/population ratio among college graduates has in fact fallen sharply,

Here is a graph showing the relative growth of employment of college / university graduates (blue line) and high school dropouts (red line).

(click to enlarge)

This post was accompanied by the following graphic showing the differentials in the employment - population ratio.

(click to enlarge)

This discussion needs additional context as the implication is that lower educated people's lot in life is improving, while higher educated people's potential is declining. Before going too far, be sure to note that 76% of college graduates are employed (compared to 58%+ for the total population), while the ratio for

The love affair between Wall Street and the Bureau of Labor Statistics' (BLS) employment situation report - aka the Jobs Report - continues to amaze me. It is nearly a worthless data set in real time if your intent is to have some vision of market and economic direction.

Much has been written on this topic. Here are three views of the BLS Jobs data:

• Jeff Miller
• Steven Hansen
• Lee Adler

The bottom line is that the jobs data does not provide reliable information in real time. But this is not the point intended to be made here. The point is that the jobs data does not correlate to, or even give any vision in, predicting economic or market performance.

Non-Farm Private Employment (lighter blue line), Dow Jones Industrial Average (green line), GDP (dark blue line), Personal Consumption Expenditure (red line) and Consumer Credit (orange line) - all indexed to

This week Personal Consumption data was released showing weak (but above expectations) growth.

Since 2000 to the end of 4Q2012:

• Population grew 12.0%;
• Inflation grew 31.9% (using GDP deflator);
• Unadjusted GDP grew 63.4%;
• Unadjusted Personal Consumption Expenditures grew 68.3%;
• Unadjusted Corporate Profits grew 241%.

(click to enlarge)

I like to test data by looking at inflation adjusted per capita data. Since 2000:

• GDP has risen 10.5% per capita;
• Personal Consumption Expenditures has risen 13.8% per capita;
• Corporate Profits after taxes have risen 130% per capita.

(click to enlarge)

Is this good and what is the point? If you know the rules you can play the game. This data is telling you the only "growth" sector of the economy is corporate America - and as an investor, this is the place to be.

Second, it tell you that 20% of GDP growth since 2000 has been driven by corporate PROFITS. When

How many of the elderly living totally on social security benefits live better and better every year? It seems that social security is designed as a declining real benefit program. Yet the CBO in Testimony on using the Chained CPI to index Social Security stated:

The purpose of indexing Social Security and other federal benefits for inflation is to prevent the purchasing power of those benefits from eroding over time as prices rise. Similarly, the purpose of indexing parameters of the tax code is to tax similar amounts of real (inflation-adjusted) income at roughly the same rates over time.

[...] Although many analysts consider the chained CPI to be a more accurate measure of the cost of living than the traditional CPI, using it for indexing could have disadvantages. The values of the chained CPI are revised over a period of several years, so affected programs and the

The inordinate growth of student loans - and its effect on the economy - is killing consumption (autos) and the housing sector. This is no short term dynamic, but will affect the economy for decades.

(click to enlarge)

The USA is a consumer driven economy. A study released this week authored by Meta Brown and Sydnee Caldwell stated:

As a result of tighter underwriting standards, higher delinquency rates, and lower credit scores, consumers with educational debt may have more limited access to housing and auto debt and, as a result, more limited options in the housing and vehicle markets, despite their comparatively high earning potential.

Both these factors-lowered expectations of future earnings and more limited access to credit-may have broad implications for the ongoing recovery of the housing and vehicle markets, and of U.S. consumer spending more generally. While highly skilled young workers have traditionally provided a vital influx

The Federal Reserve's FOMC meeting minutes were released earlier this week indicating many (few, majority, most, all?) members were leaning towards terminating some aspects of the current quantitative easing (QE) purchases sooner rather than later.

….A few participants noted that they already viewed the costs as likely outweighing the benefits and so would like to bring the program to a close relatively soon. A few others saw the risks as increasing fairly quickly with the size of the Federal Reserve's balance sheet and judged that the pace of purchases would likely need to be reduced before long.

This conjured up images of market volatility, yet the markets reacted positively. So much for the belief that this market run up was on the back of QE, and effectively disproving a withdrawal of QE is necessarily market negative. The following graph points the low correlation between market prices and QE.

(click to

This week, Marc Faber (aka Dr. Doom) stated on CNBC:

I don't think the market is as overbought as it was in '87, so I don't expect a crash. But I think for the time being, the market has peaked out, and I think in the meantime, bonds, which are extremely oversold, could rebound.

No one has a crystal ball - and market dynamics do not work in completely predicable patterns. I do worry that the risk from Europe affecting the economy is not quantifiable. Looking at historical relationships, one would conclude that Europe would only be a headwind to the USA Wall Street economy (aka GDP) via lower exports, and would have little effect on Main Street. Export sector is a disproportionately small employer.

Yet, what is going on in Europe is a continuation of the unresolved global financial crisis where there is no historical precedent. Many economic forecasts

Last week, my weekend "think piece" showed that the unadjusted data was not (yet) confirming an economic expansion. This week I shift to Econintersect's economic forecast which was published on Saturday:

The index is now forecasting a flat growth trend (positive growth, no acceleration) - a welcome change from the positive growth, declining acceleration seen since July 2012.

The question is whether we are at an economic turning point - a good turning point in this case.

For starters, our index does not have accurate vision very far in the future - it is based to a large degree on transport movements. Industry, wholesale, and retail make decisions many months in advance what products need to be purchased. Transport historically is a great pulse point in real time for the economy - and has proven to be valid in the new normal.

But our index has the

The Federal Reserve's FOMC believes the economy's rate of expansion is improving. It is not that the economy MAY be expanding at a faster rate - but the evidence is mixed to negative at this point. As usual, my view is using the unadjusted data whilst most only read the headlines.

The defect in my approach is that the unadjusted data is usually much more noisy (big month-over-month variation) which takes at least 3 months to confirm a trend. The talking heads, on the other hand - rely on an adjusting methodology which continues to overstate the month-over-month gains.

Retail sales is the major dividing factor in the view whether the economy is improving. The economy is approximately 2/3 driven by the consumer, and retail sales is a good proxy for consumer spending. The blue line in the chart below shows the headline number which indicates a gradually improving

You should be concerned with those who claim debt is subsiding, and therefore the government should continue high spending to stimulate the economy. Paul Krugman in a New York Times Op-Ed stated:

But after peaking in 2009 at $1.4 trillion, the deficit began coming down. The Congressional Budget Office expects the deficit for fiscal 2013 (which began in October and is almost half over) to be $845 billion. That may still sound like a big number, but given the state of the economy it really isn't. Bear in mind that the budget doesn't have to be balanced to put us on a fiscally sustainable path; all we need is a deficit small enough that debt grows more slowly than the economy. To take the classic example, America never did pay off the debt from World War II - in fact, our debt doubled in the 30 years

Economists continue to warn that austerity is not the way to go for government spending. I am open to using austerity as one of the tools to balance an economy - just not the primary tool. You cannot hope to pay off sovereign debt by contracting the economy.

What would an economy look like if we taxed and pared spending to the bone? Lord Keynes answered "We would have a depression."

There is enough evidence to take Lord Keynes' answer as a given - even though scientifically this "theorem" is based on a limited amount of iterations with situations that did not include a sovereign debt load of 100% of GDP. The USA economy could be in the zone of the no win scenario with all paths leading to an elevator shaft with no elevator present - as there is also enough evidence to conclude the debt load itself works

This week's post is co-authored with John Lounsbury.

CBO [Congressional Budget Office] requests appropriations of $45.7 million for fiscal year 2014. That amount represents an increase of $1.6 million, or 3.7 percent, from the $44.1 million (on an annualized basis) provided to CBO under the continuing resolution for fiscal year 2013. The increase would enable CBO to support 235 full-time-equivalent positions (FTEs), which would be roughly 7 percent less than the 254 FTEs funded in 2010 and in line with the FTEs funded between 2004 and 2008. The increase also would enable the agency to catch up on critical purchases of information technology and other items that are being deferred this year. The proposed budget represents the amount that CBO believes will be necessary to avoid a further reduction in the information and analysis that the agency provides to the Congress.

This request to the Subcommittee on the

Recent releases from the International Energy Agency tell of moderating growth rate of the global demand for oil - which was based on lower economic growth projections. And promises of "fracking" to boost oil supply are bouncing around cyberspace. Images of supply and demand curves flash in one's mind.

Yet, the cost of oil today has little to do with supply versus demand - but is more about marginal cost of supply and producers' ability to manipulate supply. Peak oil and anti-Obama rhetoric notwithstanding, oil production in the USA has been growing (see graph below).

(click to enlarge)

There has been much hope for moderation of oil prices triggered by additional supply of crude being brought by fracking. The BBC reported:

The oil and gas industry in north-east Scotland has been warned it needs to adjust to the challenges and opportunities from "fracking" and other unconventional methods

Most readers know I have issues with the U.S. Census headline data. The data does not add up against itself. When I was a negotiator, one of the tools used is to run your opponent in a loop - and see if the numbers equal to the numbers they submitted.

My analysis of Census economic releases seem to constantly state that the data is worse than the headlines - normally due to the month-over-month change which is headlined. I have looked at 3 major economic releases from Census - and how their month-over-month headlines stack up against the Census current data.

Admittedly, the quibble is not normally whether the data is better or worse than the previous month, but the size of the change. However, from time-to-time I disagree even with the direction of the change.

One should not expect total correlation as the headlines are based on preliminary data.

The nascent recovery of new and existing home sales may be losing some steam.

• New Home December 2012 sales were the worst year-over-year gain in 2012.
• Pending Home December 2012 index was the worst year-over-year gain in 2012. Pending home sales are counted when a purchase agreement is signed for an existing home.

Both new homes sales and pending home sales are based on contract signing - while existing home sales are based on contract (closing) completion. So both pending home sales and pending home sales offer a glimpse of the future.

What is being seen is a cooling of the growth in home sales. The evidence at this point is not strong, and could be argued it might be a transient effect.

Defining the Effect

First a look at pending home sales (graph below); there was a drop in the index in December 2012.

(click to

Of course taxation correlates to economic growth. One could generalize and say the higher the tax rate, the slower the growth. Yet this belief is too simplistic to be a litmus test for economic decisions.

• The USA must compete against the global economies - and lower tax rates in a trading partner push the economic advantage towards the trading partner;
• A more reasonable question may be what one considers "economic growth". The 0.1% may believe economic growth is monetary based, while the 99.9% may think the primary test of growth is if they have a job;
• Why tax at all at the Federal level? The government can print all the money it needs. It should be obvious to most economic observers that the USA printed $3 trillion dollars (see Fed balance sheet) - and the dollar did not collapse and inflation did not raise its ugly head. However, this is

What are the commonly listed headwinds to economic growth in the USA?

• baby boomers not spending but saving for retirement;
• European recession;
• Divided government with no direction.

The divided government should be a headwind as they are finding few long range issues on which the two sides can agree. Is the USA to have degraded infrastructure, uneducated high school graduates, or spiraling health care? Most of the government related headlines are on short term topics. Without long range planning, the government is in a continuous rear-guard fight (instead of the government getting ahead and trying to moderate the economy or trying to have positive interactions between the public and private sectors).

One might ask why the government is important in a consumer driven economy? Well timed INVESTMENT spending by the government can be used to offset consumer spending contractions. Investing in the future (education of citizens, infrastructure, health care, research

This past week Industrial Production (analysis here) finally exceeded the July peaks, and now all of the economic broad measures are at 2012 highs. In a week and a half we will see the advance estimate of 4Q2012 GDP. It looks extremely unlikely this GDP estimate will show the economy contracted.

Yet one recession call remains on the table. On 07 December 2012, Economic Cycle Research Institute (ECRI), a New York-based independent forecasting group stated:

Following our September 2011 recession call, we clarified its likely timing in December 2011. Based on the historical lead times of ECRI's leading indexes, we concluded that, if it didn't start in the first quarter of 2012, it was very likely to begin by mid-year.

But we also made it clear at the time that you wouldn't know whether or not we were wrong until the end of 2012. And so it's

Ask 10 people what is the definition of unemployment, and you will get 10 different answers. The tragedy is that it is likely no person's definition will match the definition used in the creation of the headline unemployment rate from the Bureau of Labor Statistics (BLS). And the methodology the BLS uses does not match the reporting methodology used in other countries.

The real purpose of unemployment data for economists and central bankers is to determine employment slack.

Econintersect has long stated that the way to view unemployment was by using employment-population ratio (the proportion of the civilian non institutional population aged 16 years and over that is employed).

(click to enlarge)

This ratio is telling me that the REAL employment situation is not improving, as the percentage of the population with a job is not growing. It should be difficult to distort this ratio unless you change