Mish's Global Economic Trend Analysis

Egypt Calls in Army, Imposes Curfew; Mubarak Orders Ministers to Resign; US Puts Egypt Aid Under Review; Will the US Get this one Right?
Ping-Pong Seasonal Madness In Weekly Jobs Claims; How to Predict Whether the 4-Week Moving Average Will Rise or Fall
Gallup Poll: 41% of Unemployed Think a Job Offer Will Come Within 4 Weeks; 57% Would Accept a Job Under $24,000

Egypt Calls in Army, Imposes Curfew; Mubarak Orders Ministers to Resign; US Puts Egypt Aid Under Review; Will the US Get this one Right?

Posted: 28 Jan 2011 04:32 PM PST

The violence in Egypt continues to escalate with more protests, fire bombs, and buildings set ablaze. Protesters burnt the headquarters of Egyptian President Hosni Mubarak's ruling party to the ground. The US embassy was also attacked, but so far, those protesters have been turned back.

President Mubarak imposed curfews, however, those curfews were ignored. When shutting down the internet failed, Mubarak's next step was to bring in the army.

Egypt Calls In Army as Protests Rage

The New York Times reports Egypt Calls In Army as Protests Rage

After a day of increasingly violent protests throughout Egypt, President Hosni Mubarak ordered the military into the streets to reinforce police struggling to contain riots by tens of thousands of Egyptians that posed one of the most serious challenges to his long and autocratic rule.

The president also imposed an overnight curfew nationwide, but demonstrators defied the order, remaining in the streets of the capital, setting fire to police cars and burning the ruling party headquarters to the ground. As smoke from the fires blanketed one of the city's main streets along the Nile, crowds rushed the Interior Ministry and state television headquarters, but the military moved into the buildings to establish control. Protesters also tried to attack the American Embassy.

Calling out the military is a signal of how dramatically the situation had spiraled out of control after four days of demonstrations. The army, one of the country's most powerful and respected institutions, prefers to remain behind the scenes and has not been sent into the streets since 1986.

But the police, a much reviled force prone to violent retribution against anyone who publicly defies the state, appeared unable to quell the unrest despite a heavy-handed response that included beatings of protesters and the firing of a water cannon at Nobel laureate Mohamed ElBaradei. In several cases in the capital and elsewhere, the police were forced to back down by throngs of protesters.

In one of the most arresting scenes of the day, in Alexandria, protesters snatched batons, shields and helmets from the police. Honking cars drove up and down a main street, holding police riot shields and truncheons out the windows as trophies.

In both Cairo and Alexandria, some army patrols were greeted with applause and waves from the crowds — a seemingly incongruous response from demonstrators who say they want to bring down the president. But many people support the army for its success in shocking the Israeli Army with a surprise attack in 1973 and for its perceived reluctance, at least in the past, to get involved in politics.

As the chaos continued, it appeared some Egyptians might be taking steps on their own to stop any destruction. An Al Jazeera correspondent, who had spoken by phone to eye witnesses at the National Museum, said that thousands of protesters had formed a "human shield" around the museum to defend from possible looting of antiquities, though there were no confirmed reports that such looting had begun.

Violent Clashes on the Streets of Cairo

The NYT has a 21-image Slideshow of the Violent Clashes on the Streets of Cairo. Here are 3 of the 21 images.

Tahrir Square on Friday night. Internet and cellphone connections have been disrupted or restricted in Cairo, Alexandria and other places, cutting off social-media Web sites that had been used to organize protests and complicating efforts by the news media to report on events on the ground.

Credit: Peter Macdiarmid/Getty Images

The unrest in Egypt — fueled by frustrations over government corruption, economic stagnation and a decided lack of political freedom — came after weeks of turmoil across the Arab world that toppled one leader in Tunisia.

Credit: Scott Nelson for The New York Times

The protests across Egypt have underscored the blistering pace of events that have transformed the Arab world, particularly among regimes that have traditionally enjoyed the support of successive administrations in Washington.

Credit: Mohamed Omar/European Pressphoto Agency

Mubarak Orders Ministers to Resign

The people clearly want the Egyptian president to resign, instead, Mubarak Orders Ministers to Resign.

President Hosni Mubarak of Egypt appeared on television late Friday night and ordered his government to resign, but backed his security forces' attempts to contain the surging unrest around the country that has shaken his 28-year authoritarian rule.

He did not offer to step down himself and spent much of the short speech explaining the need for stability, saying that while he was "on the side of freedom," his job was to protect the nation from chaos.

Secretary of State Hillary Rodham Clinton, reading a prepared statement, called Friday on Egypt's government to "restrain the security forces" and said that "reform is absolutely critical to the well-being of Egypt." "We urge the Egyptian authorities to allow peaceful protest and to reverse the unprecedented steps it has take to cut off communications," she said, apparently referring to interruptions in Internet and cellphone connections in some cities. She also urged that protesters "refrain from violence and express themselves peacefully." After her comments, the State Department issued a travel alert cautioning Americans against all nonessential trips to Egypt in the next month.

Images of the lowly challenging the mighty have been relayed from one capital to the next, partly through the aggressive coverage of Al Jazeera. Social networking sites like Facebook and Twitter have given the protesters a potent weapon, enabling them to elude the traditional police measures to monitor and curb dissent. But various regimes have fallen back on a more traditional playbook, relying on security forces to face angry demonstrators on the streets.

U.S. Puts Egypt Aid Under Review

Bloomberg reports U.S. Toughens Stance on Mubarak; Puts Egypt Aid Under Review

"The people of Egypt are watching the government's actions, they have for quite some time, and their grievances have reached a boiling point and they have to be addressed," White House press secretary Robert Gibbs told reporters in Washington. The U.S. will be looking at its "assistance posture" toward Egypt, Gibbs said.

"For the U.S., any effort on our part to provide support for Mubarak is going to be read in Egypt as support for a crackdown and support for an undemocratic regime," said Steven Cook, a fellow at the Council on Foreign Relations in Washington. "We need to be forward looking for this."

More than 80 percent of U.S. aid to Egypt, or $1.3 billion, is in the form of military assistance, according to data supplied by the U.S. State Department. With President Barack Obama in power, military aid has stayed unchanged and economic assistance has been cut to $250 million from $411 million in 2008 with the phasing out of democracy-linked programs.

The amount of money Egypt receives from the U.S. is exceeded only by Afghanistan, Pakistan and Israel, based on the State Department's budget request for the current fiscal year.

After four days of demonstrations, the top U.S. diplomat for the first time said the U.S. was "deeply concerned" about the crackdown by security forces and police. Clinton was the highest U.S. official in the administration to speak on the matter today.

"These protests underscore that there are deep grievances within Egyptian society and the Egyptian government needs to understand that violence will not make these grievances go away," Clinton read out in a statement in Washington. "We think that moment needs to be seized."

Clinton urged the Egyptian government to "reverse the unprecedented steps it has taken to cut off communications." Clinton still referred to Egypt, without naming Mubarak, as an "important partner" in the Middle East.

The US is in a very tough spot and has to guess how this will play out. If President Mubarak survives, the US does not want to alienate him. If he doesn't survive (and I bet he doesn't regardless of the short-term outcome), the US does not want to alienate those who take over.

Such thinking explains the careful statements by Hillary Clinton calling Egypt an important partner, not President Mubarak an important partner.

Look at the military and other aid we pour into the region (Egypt, Afghanistan, Pakistan, Israel, Saudi Arabia, Yemen, Iraq, Kuwait) in a hypocritical attempt to be on all sides of multiple fences simultaneously, shaking hands with dictators one day, invading their country the next. Has it been worth it? How?

The wars in Iraq and Afghanistan were a complete waste of trillions of dollars. We failed to capture Bin Laden, did not make the region more stable, and made more enemies than before the wars started.

Maybe we will get this one right, but history suggests otherwise.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Ping-Pong Seasonal Madness In Weekly Jobs Claims; How to Predict Whether the 4-Week Moving Average Will Rise or Fall

Posted: 28 Jan 2011 12:59 PM PST

Weekly unemployment claims have been all over the map recently. Here are the seasonally-adjusted Weekly Unemployment Claims totals for the last 5 weeks.

Jan 27, 454,000
Jan 20, 403,000
Jan 13, 447,000
Jan 06, 411,000
Dec 30, 388,000

The first three numbers above are from the current report. I calculated the January 6, number. The December 30 number is from the archives.

The reported seasonally-adjusted number on January 6 reporting was 409,000. It was revised up but no one saw that revision.

The reason no one can easily spot revisions is the weekly report only gives the latest 3 weeks. I calculated January 6th number from the 4-week moving average, now reported as 428,750.

A similar calculation looking at the January 20 Weekly Claims Report shows that December 30, was revised up from 388,000 to 391,000. These are small revisions but even large ones would be hard to spot if you do did not do the math or go to the archives.

Computing the Missing Number and Hidden Revisions

The 4-week moving average is constructed from the current 4 weeks. However the report only shows 3 weeks. To compute the week not shown, take the 4-week moving average (SA) and multiply by 4. Subtract the last three weeks shown on the report. What remains is the hidden 4th week used to compute the 4-week moving average.

Moreover, the difference between that number and was was originally reported for that number is a hidden revision.

Gaming the 4-Week Moving Average

If you want to pace a bet on whether the 4-week moving average will rise or fall, you need to know the number to beat and how to calculate it.

The number to beat is the missing number (as described above), about to roll off. In this case, 411,000.

Assuming no revisions, a number higher than 411,000 will cause next week's 4-week moving average to rise. A number below 411,000 will cause next week's 4-week moving average to drop.

My guess is the 4-week moving average will rise next week and fall the following week when the January 13 of 447,000 rolls off the report.

Clearly, if you are attempting to predict such numbers, it is critical to look at the number about to roll off.

What's With The Ping-Pong?

Revisions and hidden numbers aside, inquiring minds are asking about the ping-pong.

What's happening is most analysts are misinterpreting seasonal data. It is clear that seasonal hiring picked up in October for the Christmas season. This hiring pattern happened one month sooner than normal. Moreover, some of those people were no doubt kept on (not let go in the traditional after-Christmas employee dump).

In my opinion this is a one-time effect, not a mad rush by retailers (or anyone else) to hire people. With that in mind, one should have expected, in advance, to see large drops in seasonal claims.

Previously, I had commented on the possibility that we might see a couple of hot jobs numbers at the beginning of the year. Certainly the February BLS Jobs Report (for January data) might be impacted by atypical Christmas skew that started early. Also the January data itself is subject to BLS twice-annual revisions. Finally, the BLS is changing the way it does revisions next month, going to quarterly revisions.

If you can game all that, good luck.

While the trend in unemployment claims is likely getting better. I rather doubt the numbers are as good as most think.

Certainly yesterday's reported number of 454,000 may have been impacted by snow, but what about the January 13th number of 447,000?

If this was not messy enough already, next week may again have skew because of snow. Regardless, I do not think we can successfully interpret data for a few more weeks until it is clear that skews caused by changes in Christmas season hiring have ended.

When it does, I believe we will see improvements in weekly claims, but not enough to get overly excited about or enough to cause anyone to believe a big source of jobs is just around the corner.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Gallup Poll: 41% of Unemployed Think a Job Offer Will Come Within 4 Weeks; 57% Would Accept a Job Under $24,000

Posted: 28 Jan 2011 09:36 AM PST

In one of the most overly optimistic survey results I have ever seen, a Gallup poll shows that slightly over 4 in 10 unemployed expect to get a job within 4 weeks.

To show how eager people are to work, 57% of those unemployed said they would take a job making $24,000 or less. An additional 20% did not say.

Here are some highlights from Unemployed Americans Face Challenging Job Search

Despite today's nearly double-digit unemployment rate, 41% of unemployed Americans expect to get a job in the next four weeks.
34% of underemployed have the same expectations with respect to obtaining a full-time job.
On average, unemployed workers report that they have spent 27 weeks actively looking for a job.
On average, unemployed workers say they have applied for 45 different jobs, while the underemployed, on average, report applying for 19 different full-time jobs.
On average, unemployed workers report that they have spent 27 weeks actively looking for a job
In their previous job, 48% said they were making less than $24,000 a year. An additional 25% were making $24,000-$60,000 a year. 20% did not offer an opinion.
For their next job, 57% of unemployed would accept a job paying less than $24,000 a year. An additional 20% would accept a job paying $24,000-$60,000 a year. 20% did not offer an opinion.

Survey Methods and Two Key Questions

Unemployed and underemployed results are based on telephone interviews conducted as part of Gallup Daily tracking from Dec. 21, 2010-Jan. 9, 2011, with a random sample of 15,120 adults, aged 18 and older, living in all 50 U.S. states and the District of Columbia, selected using random-digit-dial sampling.

Here are the two critical questions:

Asked of Unemployed: Do you think that in the next 4 weeks you will have a job?

Asked of the Underemployed: Do you think that in the next 4 weeks you will have a job that requires you to work 30 hours or more per week, or not?

The questions were perfectly valid and easily understandable. Moreover, 15,120 seems like a decent sample size.

Amazing Optimism

As of December 2010, there were 14.5 million unemployed. There were an additional 8.9 million working part-time for economic reasons.

If 41% of the unemployed got a job in the next 4 weeks, the economy would have to create 5.95 million jobs, either full or part-time.

If 34% of the underemployed got a full-time job in the next 4 weeks, the economy would have to create an additional 3.03 million full-time jobs.

Those expectations are simply not going to happen. This economy will struggle to generate 5.95 million jobs with an additional 3 million full-time jobs in the next 4-5 years (not weeks).

I suspect most of those expecting to find a job quickly were recently unemployed and have no idea what others are going through. It would have been interesting to see how optimism changes over time. Unfortunately, Gallup offered no such breakdown.

However, even with the assumption that most of those expecting to find a job quickly are the recently unemployed, I cannot account for such rampant optimism.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

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Friday, January 28, 2011

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

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