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It is rare around here, but I'm thinking it is somewhat well founded. I'm ever so slightly more optimistic today.
The employment situation looks very ugly and I expect our long-term employment situation to remain very ugly (as we continue to automate and outsource jobs), but there is a small ray of sunshine buried within the "household data".
Civilian Employment
March: 140,887,000
April: 141,007,000
Has the cliff diving slowed or better, even stopped?
Yes, unemployment rose. We all expected that. Had you asked me several weeks ago, I would have expected worse though.
Employment Situation Summary
Not in Labor Force
March: 81,038,000
April: 80,541,000
More people are trying to find jobs it seems. It makes sense. Some who thought they were comfortably retired and were enjoying never ending gains in the stock market and real estate have no doubt altered their opinions. If the data can be believed (it is just one month's worth), then I am somewhat optimistic. It is better to have higher unemployment because many more people are looking for work than it is to have higher unemployment because jobs continue to disappear at higher and higher rates. The economy overall can somewhat survive the former, but not the latter.
That being said, I am not optimistic. I'm simply more optimistic. Big difference!
Here are two reasons I'm not all that optimistic.
1. The price of oil rises every time the economy is seen to be improving. Return of the Killer Commodity Bubble, Commodity Bubble: Season of the Peak Oil, Commodity Bubble IV: The Final Chapter, Commodity Bubble V: A New Beginning and so on would be exciting movies to watch of course, but would make protecting my nest egg that much more difficult. Sigh.
2. The same employment report shows 539,000 jobs were lost overall within the "establishment data" survey. The data comes from two different surveys (household data vs. establishment data) and the pictures they paint is conflicting. However, the 539,000 number is not as bad as I would have guessed just two weeks ago. I guess that's something.
November 1, 2003
A Jobless Recovery?
There are two sources of labor market statistics, the Establishment Survey and the Household Survey--both conducted by the Labor Department. The first asks manufacturing and service sector companies how many employees they have. The second asks a sample of people whether they have jobs. The two give different answers and, important right now, the difference changes systematically over time. The reason is that the number of companies does not remain fixed. In our dynamic economy, old firms die and new ones are born. The Labor Department learns about the deaths quickly, but it takes longer to learn about the births.
Real Estate Newsletter Articles this Week: Existing-Home Sales Increased to
4.15 million SAAR in November
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At the Calculated Risk Real Estate Newsletter this week:
[image: Existing Home Sales]*Click on graph for larger image.*
• NAR: Existing-Home Sales Increase...
11 hours ago
8 comments:
Great post!
I have Friday Night Rock Blogging every Friday and I am almost done with this evenings entry so check it out if you like.
Stag,
The employment report was better than I expected too.
A few caveats. First, 72K gov jobs were created, mostly for the census. Those are not productive jobs in my mind. That aside, those jobs are temporary and will cause a subtration of 72K in the not to distant future. Second, prior month revisions were quite negative. Also of note, the birth death model added almost 300K jobs via a black box calculation. I'm of the opinion that past trends cannot be projected forward as we are at an historic inflection point in the economy.
As for commodities, gas near me is up to $2.23 vs. $1.77 a few months ago. That's a huge increase. Thanks Bumbling Ben! I'll reduce my driving to the extent possible, but I will also have to cut back on spending somewhere else to keep the budget.
I tend to think oil is rallying based on speculation rather than demand, but that is to be expected given we are preserving the life of non-productive credit - it has to go somewhere.
Mark - I am in line with MAB on this issue. There seems to be hope for a decline in the rate of unemployment's rise, but the direction is still negative, and the undertow seems to be picking up.
As for oil prices, they appear to be the flag of a bubble and not a recovery.
IMF revised their world trade prediction for 09 to -11%. Oil inventories are rising just about everywhere, to the point that I am wondering where the stuff can be put in another couple of months.
A lot of money has been dumped into the market, and both in Asia and in the US people appear to be buying based on speculation.
Two more things - interest rates this low are not compatible with the sudden commodity rise, and since the oil-related price increases are already flowing through to the consumer, we now have termites gnawing on the lower legs of the ladder. This will be true around the world.
Either oil breaks or consumer spending narrows further (back into food and basics). The key for Asia is a pickup in exports, and the two are not compatible at this point.
mab & MaxedOutMama,
Great comments!
I'm with both of you! If a ship continues to sink, we shouldn't put on the party hats just because it starts to sink at a slower rate. Sigh. I'm not optimistic because the sink is sinking at a slower rate. I am simply more optimistic than I was when the ship was sinking at a faster rate. That's all. In other words, I'm still wearing a life preserver!
"I tend to think oil is rallying based on speculation rather than demand..." - mab
"Oil inventories are rising just about everywhere, to the point that I am wondering where the stuff can be put in another couple of months." - MaxedOutMama
If there was one thing I could bury in my backyard right now and hold for the next 40 years it would be oil (not dollars). That being said, since I CANNOT bury oil in my backyard, perhaps I should think twice about assuming that others can. In fact, I do think twice. I have no oil investments.
In the heckle in my post I talk of commodity bubbles, not of sustainable commodity rallies. I'm not much of a stagflationist it seems, since I'm sitting in TIPS and I-Bonds instead of commodities while praying for tame inflation. I want their deflation protection. I still hoard toilet paper though, since I like its price relative to gold, silver, and oil. What's the harm?
Speaking of gold and silver...
The TV is flooded with gold advertisements. I'd be very nervous if I owned gold right now (which I don't). It went up in price as other prices rose. It now goes up in price as other prices fall. Apparently, it is some sort of miracle metal now.
A few days ago I saw a gold commercial offering to sell gold clad coins that were reproductions of 2 1/2 ounce gold coins. They spoke of how these huge coins were 90% pure gold. Any guesses on how much gold were in the "gold clad" reproductions? If memory serves, a whopping 51 mg of 24k pure gold goodness. That's roughly 1/500th of an ounce (less than $2 worth).
Tell me that gold isn't exhibiting bubble like properties and I'll eat a bug.
One ounce of gold can make 200 square feet of gold leaf. It's amazing how far gold can go when it is pounded that thin.
http://en.wikipedia.org/wiki/Metal_leaf
Put another way, I have no desire to hold gold at these prices. It reminds me way too much of 1982. Further, that wasn't exactly a good year to be hoarding oil either. In fact, 1982 was one of the worst years ever to be hoarding oil.
http://inflationdata.com/inflation/inflation_Rate/Historical_Oil_Prices_Table.asp
"Either oil breaks or consumer spending narrows further (back into food and basics)." - MaxedOutMama
I agree! My "Return of the Killer Commodity Bubble" joke is 100% compatible with that. If oil continues to rise, we're probably going to get a double-dip recession (and that in turn would crash oil prices, again).
Stagflationar Mark,
First off thanks for all the great input you added over at my site. I appreciate your comments.
Second, Oh man do not get me going on gold and silver!!!!
Kidding, but I am strongly in favor of gold and silver going forward. As far as bubble possibilities the metals have always lacked a key imgrediaent for a bubble: use of leverage to speculate. All the leverage in gold is on the short side. Silver even more so. Going forward silver is really going to go up as it's depletion rate is high.
I could go on for hours, and I have written extensively on the metals many times. Short term they are ready to pull back (seasonality of the metals) but I am looking for my entry point before the fall.
Regards,
GYSC
Oh, another thing Mark. What do you think the two month shut down of GM & Chrysler is going to do this summer? It's gonna be plug-ugly.
Getyourselfconnected,
I think I got you going on gold and silver, lol. ;)
MaxedOutMama,
"Oh, another thing Mark. What do you think the two month shut down of GM & Chrysler is going to do this summer? It's gonna be plug-ugly."
Platinum has already experienced one "plug-ugly" event. I suppose this implies it could have another. It's sure hard to be a pure stagflationist these days, even with helicopters dropping money 24/7.
http://www.miningweekly.com/article/platinum-to-remain-in-surplus-in-2009-as-autocat-demand-drops-2009-04-23
“While the scale of this remains uncertain, a 15% drop in vehicle production would not be surprising and a similar further contraction in overall platinum-group metals (PGMs) demand seems probable,” stated Ryan.
I watched another "Doomsday" movie last night. Nobody was hoarding platinum OR dollars near as I could tell.
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