Friday, September 23, 2011

An Employment Trend that Has Not Failed



That's not it. It failed in the 1970s.



That's not it either. It failed in the 1990s.

I promised an exponential trend that has not failed. Here it comes!



We can get this ratio to infinity simply by continuing to shed manufacturing jobs faster than we shed financial activities jobs. It might not be as easy as it looks though.

Source Data:
St. Louis Fed: All Employees: Financial Activities
St. Louis Fed: All Employees: Manufacturing

28 comments:

Mr Slippery said...

Relative employment is useful, just like the relative value of floating currencies.

That said, the gold crash rattled my narrative today. The margin hike alone doesn't explain the carnage fully. There are two stories in my head and I don't know which is true. Story one, central banks are buying gold and will keep it elevated as the dollar based system decays. Story two, gold is in a classic bubble collapse.

Either way, I sold a little today, and will take profits on half my position over the next few weeks. In six months, we'll know which story is true and I will have been half right and half wrong by selling. Too clever by half.

Stagflationary Mark said...

Mr Slippery,

You pretty much know my opinion but I'll try to state it in a different way.

When gold and silver are cheap, they trade as safe havens.

When gold and silver are not so cheap, they trade as risk assets.


The same was true of housing and that's my primary concern.

For what it is worth, my 30-year TIPS bond took some damage too today. There's no way a 30 year bond can ever truly be called a safe haven in my opinion. I just see it as generally safer than most alternatives. It is currently up about 30% since I bought in February. What goes up that quick, can come back down that quick. I hold just the same.

As faulty as TIPS are, at least they offer this.

1. I do not require a greater fool to sell them to if I never plan to sell them.
2. Since I do not plan to sell them, I really don't care what the market thinks they are worth.
3. It is in my best interest to root for lower bond prices. When a bond matures I'd like to reinvest the proceeds at a favorable rate. I cannot get a favorable rate if everyone piles into TIPS!

I have money set aside to participate in January's TIPS auction. Let the carnage continue.

On a personal note, my crown fell off. Have I been dethroned?

Well, sort of. It's dental. I'm thinking that since there is a bit of tooth in the crown I'll be finding out what a root canal is all about. Not unlike the root canal given to silver investors over the past 2 days!

Stagflationary Mark said...

I just realized that I could have gotten more pun bang for the buck.

It was a GOLD crown that fell off. Perhaps it is tied to the markets, lol.

Mr Slippery said...

It was a GOLD crown that fell off. Perhaps it is tied to the markets, lol.

An omen! Bummer about the dental work. I've had root canals, no fun. Even a simple crown is no fun. Gold is still really useful for dental work. Good luck.

Stagflationary Mark said...

Mr Slippery,

I've got more than my fair share of crowns. I'm rather desensitized at this point.

I went from having no crowns to a LOT of crowns all within a few years. The new dentist felt every quadrant of my mouth needed a few.

I'll be visiting an even newer dentist. I hope the rest of my crowns are in better shape. Sigh.

I have high hopes. The new dentist is named Dr. Strange. No joke. I hope he's got a sense of humor about it because there's no way I can pass this up, lol.

Doctor Strange

Doctor Strange can use magic to achieve virtually any effect he desires...

Is one tooth too much to ask? ;)

getyourselfconnected said...

Tennessee Tuxedo wll not fail!

dearieme said...

Another thing that doesn't change:

http://blogs.telegraph.co.uk/news/danielhannan/100106981/a-cautionary-tale-about-greek-politicians/

Stagflationary Mark said...

"Duh, OK Tennessee."

Tennessee Tuxedo and His Tales

I opted to play the role of dim-witted Chumley. I probably should feel a bit insulted that I fell right into the part so easily (due to the sarcastic tone I would hope, lol).

Now that we are faced with more trouble than we can bear, we apparently should turn to the "Man with All the Answers" next.

Where is professor Whoopee?

Stagflationary Mark said...

dearieme,

From your link...

The king asked for the pen to be returned, but no one moved. He asked again. Nothing. Eventually, he declared:

'Gentlemen, this joke has gone far enough. I shall now turn off the lights. If, when I switch them back on, the pen is back in its place, we shall say no more about it'.

He switched off the lights. When they came back on, his silver inkstand had vanished too.


Hahaha!!!

Troy said...

New chart I made for another argument that is somewhat apropos here:

http://research.stlouisfed.org/fred2/graph/?g=2pA

Red is financial debt/GDP
blue is household
cyan is biz
green is fed

Wall Street sure levered up!

CMDEBT 2002-2007 was partially supported by lower interest rates and the feedback of HELOC spending in the paycheck economy (real estate ladies getting manicures, beauty parlor operators buying Lexi, etc).

Biz debt is interesting . . . doesn't look too bad until you realize that GDP was being boosted by all this debt-takeon to begin with. Unscaling for GDP:

http://research.stlouisfed.org/fred2/series/TBSDODNS and the picture isn't so pretty.

The poor Feds, left alone down in the cellar for so long.

The post 2010 shape of the first graph is what I found most interesting . . . 0.8 GDP for all!

Stagflationary Mark said...

Troy,

The post 2010 shape of the first graph is what I found most interesting . . . 0.8 GDP for all!

Perhaps it is a convergence zone.

This is evidenced by the 140-180+ inches (356 cm-457+ cm) of precipitation annually over Glacier Peak to the east of Puget Sound.

We'll soon be drowning in prosperity thanks to our "Glacier Peak" no doubt, lol. Sigh.

fried said...

Mark,
I'm willing to make a very small bet that that trend may not be exponential for very long. The wolves are closing in on Greece, and the bearish turn in the market may increase the already announced speed of layoffs. I do think they may have kicked the can down the road just about as far as they can...we may be heading into a serious unwinding. I of course have been wrong before, but it does seem serious at this point. By the way, your call on TIPS and ibonds is now heading into genius territory. MP, a serious man, was opining on CR that only the US dollar is safe haven...as in Ts. We shall see.

Troy said...

http://research.stlouisfed.org/fred2/graph/?g=2pX

^ per-capita growth in CMDEBT. I may have posted this here before, but 'tis a beautiful thing.

NOBODY in the halls of power or academy apparently has the faintest idea that this was the drivespring of the erstwhile happy times.

I think I found the drive springs of the 1990s, too:

http://research.stlouisfed.org/fred2/graph/?g=2ps

http://research.stlouisfed.org/fred2/graph/?g=2pC

http://research.stlouisfed.org/fred2/graph/?g=2pu

Audrey said...

I heard a story this weekend:

A friend of a friend is two years behind the real estate tax payments on her house in Austin, Texas. She's about 4 months behind on the mortgage payments. She declared bankruptcy last year to get out from under $60,000 in credit card debt. I've been hearing about her off and on about 10 years, and things have gone slowly from good to, well, I would call that bad.

She's refinanced her house several times over that time period.

Why was I not surprised to learn that the bank holding the current mortgage (and not foreclosing) is, drum roll please, Bank of America.

How many other people are in the same boat as her?

Stagflationary Mark said...

fried,

I'm willing to make a very small bet that that trend may not be exponential for very long.

I could go either way on the long-term financial activities to manufacturing employment ratio exponential trend failing.

On the one hand, I think the ratio will fall as financial activities job cuts continue.

On the other hand, I think the ratio will rise as manufacturing jobs continue to be automated.

Stagflationary Mark said...

Troy,

NOBODY in the halls of power or academy apparently has the faintest idea that this was the drivespring of the erstwhile happy times.

Or at the very least, is willing to admit it publicly. Sigh.

Stagflationary Mark said...

Audrey,

How many other people are in the same boat as her?

I guess this leaves me as the straight man in this gallows humor comedy routine.

312,665,000?

I'm not exactly living it up on the upper decks of the Titanic right now. Oh sure. The music is playing. The captain assures me all is fine.

Nautical Terms: List

A vessel's angle of lean or tilt to one side, in the direction called roll. Typically refers to a lean caused by flooding or improperly loaded or shifted cargo (as opposed to 'heeling', which see).

I think we can rule out improperly loaded or shifted cargo.

getyourselfconnected said...

Mark, post was mentioned on The Reformed Broker:
http://www.thereformedbroker.com/2011/09/25/this-trend-is-nobodys-friend/

Cool!

Stagflationary Mark said...

GYSC,

Thanks for sharing that!

getyourselfconnected said...

No prob, I Tweet a lot of your articles.

Troy said...

>312,665,000?

what kills me is the people arguing we still need more immigrants.

WTF don't they understand about what U-6 is telling them???

I'm a borderline physiocrat and strong believer in the "lump of labor fallacy claim fallacy".

http://www.lump-of-labor.org/

Stagflationary Mark said...

Troy,

I certainly don't get it. You'd think pointing to U-6 would be enough.

If we have an exponentially growing population then we need exponential job creation to go with it.

Good luck on that one long-term with accelerating automation and outsourcing!

59,000 people work at Alcoa. In 2010, Alcoa shipped 9.246 million metric tons of alumina.

That's 157 metric tons per employee.

I think it is safe to say that Alcoa won't be providing the job creation of the future.

January 7, 2009
Alcoa's 13,500 Layoffs Could Taint Pittsburgh's Corp. Image

Pittsburgh-Based Aluminum Maker To Cut Production 18 Percent

Poof.

Troy said...

Curious chart:

http://research.stlouisfed.org/fred2/graph/?g=2rc

Blue is U6, red is total debt / total wages

'tis a curious picture. I wonder what % of the country can look at it and tease its lessons out.

Stagflationary Mark said...

Troy,

Your link was broken. I teased a valid one out of it though. :)

Troy said...

I should really collect my FRED charts into a coherent thesis. I've learned just tons looking at the data they have.

CR is just kinda phoning it in these days I think, but it was his chart of Z.1 stuff back in 2006 first woke me up WRT the role debt take-on was playing.

Stagflationary Mark said...

Troy,

The Z.1 reports are always fascinating. Too bad they just so average data.

If one foot is in the ice bucket and foot is in the boiling bucket, everything works out okay on average.

In other words, seeing problems in the average data is only a fraction of the story. Sigh.

Stagflationary Mark said...

I meant to say that it is too bad that the data is averaged.

Troy said...

yeah I was thinking the same thing.

People are saying our leverage is coming down, but it doesn't work if you just divide total A / total B.