Mish's Global Economic Trend Analysis |
Posted: 30 Mar 2012 01:06 PM PDT In a welcome, albeit long overdue attack of common sense, Canada Eliminates Penny Costing Penny-and-a-Half to Make. Canada will withdraw the penny from circulation this year, saving taxpayers about C$11 million ($11 million) annually and forcing retailers to round prices to the nearest nickel, the government announced in its budget today.Economists said there would be "little" impact on inflation. Actually, there will be "no" impact on inflation. The penny has not been discarded as a pricing point, rather final transaction costs will be rounded to the nearest nickel. The US needs to follow suit. Dealing with pennies is a nuisance. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
Question on Jobs: How Many Does It Take to Keep Up With Demographics? Posted: 30 Mar 2012 10:29 AM PDT John Mauldin pinged me with a question on jobs and demographics from one of his readers. Hello John.How Many Does It Take to Keep Up With Demographics? Ben Bernanke has estimated 125,000 jobs a month. That is the number I have been using recently. However, based on demographics alone, I believe 75,000 is indeed the correct number. 75,000 is a number I arrived at a couple of years ago independently, for the boomer-bust years of 2013-2015. So why use 125,000 if it only takes 75,000? I do not know Bernanke's rationale, but I can explain mine.
Point number 4 above is the key issue. Household Survey Data - March 9, 2012 click on chart for sharper image Take a good look at the household survey from the latest BLS jobs report. Recall that the unemployment rate comes from the household survey, and not the headline jobs number. Note that 428,000 jobs were allegedly created in February. Also note the unemployment did not change. Why? Because the civilian labor force went up by an even larger 476,000. Thus the unemployment rate actually rose a fractional amount that rounding took away. If I would have told you that a rise in 428,000 jobs would not drop the unemployment rate you would have thought I was off my rocker. Yet it happened, assuming of course you believe BLS numbers, complete with amazing seasonal adjustments. Back to School Stats Let's take a look at some interesting points from Consumer Credit "Demolishes Expectations" Really? No Not Really! The "Non-Bounce" in Non-Revolving Credit Non-Revolving credit rose $11.8 billion in December. However, $8.8 billion of that is growth in federal government loans (which just happens to be where student loans are parked).Hiding Out In School All those hiding out in school, including those going back to school for retraining are not counted in the ranks of the unemployed. Nor are discouraged workers, who stopped looking for a job. As soon as those folks think there are jobs, they will start looking. Economically speaking, that would be a good thing if it happened, but it would also increase the number of jobs it will take to hold the unemployment rate steady. In a vacuum, all things being equal, it would take about 75,000 jobs a month demographically speaking. But things are not equal. Millions of workers want back in the labor force and they will start looking, especially students who at some point will have no choice. It may take 150,000 jobs a month or even 175,000 jobs a month, if those workers come back into the labor force in a 2-year surge. That is still not the end of the story. What if we slip back into recession and people stop looking? How many will it take then? The answer may be closer to 100,000. The middle of the road approach is to stick with the number I have been using recently which is 125,000 a month. The irony is, the better the economy is, the more jobs it will take. One way or another, headwinds on lowering the unemployment rate are very strong. All things considered, I see no reason to deviate from my "Structurally High Unemployment For a Decade" call made years ago and reiterated in January in Fundamental and Mathematical Case for Structurally High Unemployment for a Decade; Shrinking Job Opportunities and the Jobs Gap; The Real Employment Situation. For further discussion please see Where is the Unemployment Rate Headed? Interactive Mapping Lets "You" Set the Parameters, and Plot a Graph Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
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