Mish's Global Economic Trend Analysis

Trends in Nonfarm Employment, Civilian Employment, Weekly Unemployment Claims
Spain Government May Take Over Some Regions' Finances; Spanish 10-Year Yield His 6.15%, CDS at Record High; Mission Impossible
Mish on Coast-to-Coast Radio Tonight 10:00PM PST Discussing the Global Economy

Trends in Nonfarm Employment, Civilian Employment, Weekly Unemployment Claims

Posted: 16 Apr 2012 09:31 PM PDT

Initial unemployment claims have generally been trending lower, but in a very choppy manner. One way to smooth out the weekly claims reports is to use seasonal adjustments. Another way is to use 4-week moving averages.

However, both methods are subject to fluctuations around floating holidays such as Thanksgiving and Easter.

Adding a couple of extra weeks to the moving averages and comparing not-seasonally-adjusted numbers to the same six weeks in prior years helps even more. Here are a couple of charts to consider.

Unemployment Claims 6-Week Moving Average vs. Same 6 Weeks in Prior Years

Certainly the number of initial claims has fallen dramatically but claims are still above levels from 2004 through 2008.

Workers With a Job Covered by Unemployment Insurance

The above chart shows 6-week moving averages of employees with a job and with benefits, compared to the same 6 weeks in prior years. Self-employed are not eligible for unemployment benefits.

Reader Tim Wallace who prepared the above charts at my request writes ...

Hello Mish

Anyway, here is the last six weeks filing average compared to prior years. Note that only those years in known recession are greater than the current number of claims in spite of the steep drop.

Also note the six-week moving average of covered employees shows we are at 2001 levels.

However, the economy did legitimately add 1,474,871 jobs in the past year, the first upward trend since 2008. Unfortunately, we cannot determine the quality of said jobs. Moreover, the economy will need to add 17 million more jobs just to get back to employment levels of 2001 on an equal percentage basis to the workforce.

Here are a few more charts and statistics to consider.

Nonfarm Employment

In terms of actual non-farm employment, this "recovery" is now back to a level as seen in 2001. Note that the length of each recovery period has gotten longer and longer.

Here are some additional charts from my April 6 report Nonfarm Payroll +120,000, Unemployment Rate Fell .1 to 8.2%, Record 87,897,000 "Not in Labor Force"

Nonfarm Employment - Payroll Survey - Annual Look - Seasonally Adjusted

Actual employment is about where it was just prior to the 2001 recession.

Quick Notes About the Unemployment Rate

US Unemployment Rate dropped .01 to 8.2%
In the last year, the civilian population rose by 3,604,000. Yet the labor force only rose by 1,315,000. Those not in the labor force rose by 2,289,000.
The Civilian Labor Force fell by 164,000.
Those "Not in Labor Force" increased by 310,000. If you are not in the labor force, you are not counted as unemployed.
Those "Not in Labor Force" is at a new record high of 87,897,000.
By the Household Survey, the number of people employed fell by 31,000.
By the Household Survey, over the course of the last year, the number of people employed rose by 2,270,000.
Participation Rate fell .1 to 63.8%
Were it not for people dropping out of the labor force, the unemployment rate would be well over 11%.

Over the past several years people have dropped out of the labor force at an astounding, almost unbelievable rate, holding the unemployment rate artificially low. Some of this was due to major revisions last month on account of the 2010 census finally factored in. However, most of it is simply economic weakness.

Between January 2008 and February 2010, the U.S. economy lost 8.8 million jobs.

Since a recent employment low in February 2010, nonfarm payrolls have expanded by 3.6 million jobs. Of the 8.8 million jobs lost between January 2008 and February 2010, 41 percent have been recovered.

Statistically, 125,000+- jobs a month is enough to keep the unemployment rate flat. For a discussion, please see Question on Jobs: How Many Does It Take to Keep Up With Demographics?

The average employment gain over the last 25 months has been 143,000, barely enough (statistically speaking) to make a dent in the unemployment rate. Thus, the unemployment rate fell because millions dropped out of the labor force.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Spain Government May Take Over Some Regions' Finances; Spanish 10-Year Yield His 6.15%, CDS at Record High; Mission Impossible

Posted: 16 Apr 2012 12:24 PM PDT

Madrid Threatens Intervention as Regional Debt Worries Mount

The Financial Times reports Madrid threatens to intervene in regions

Madrid has threatened to seize budgetary control of wayward Spanish regions as early as May if they flout deficit limits, officials said – as investors took fright at the fragility of some eurozone economies.

Concerns about overspending by Spain's 17 autonomous regions and fears that its banks will need to be recapitalised with emergency European Union funds undermined confidence in the country's sovereign bonds, forcing down prices and pushing yields up above 6 per cent on Monday – towards levels considered unsustainable.

The cost of insuring the country's debt also rose, with Spanish credit default swaps jumping to a record 510 basis points, according to Markit, the data provider.

One possible candidate for intervention is Andalucia in the south, Spain's most populous region, which has attacked Mr Rajoy's austerity measures. Mr Rajoy's Popular party had hoped to win a regional election last month and oust the leftwingers who have run Andalucia for 30 years but the PP did not get enough votes and the left remains in control.

Andalucia, however, is not alone in failing to obey fiscal rules. All the major political parties, including the PP, have exceeded deficit targets in the regions they administer.

Spain Government May Take Over Some Regions' Finances

The Wall Street Journal has additional details in its report Spain Government May Take Over Some Regions' Finances

Spain's government Monday warned it could take control of finances in some of its autonomous regions to slash one of Europe's largest budget deficits and shore up investor confidence.

A top government official, who asked not to be named, told journalists there will soon be new tools to control regional spending. Parliament is expected to pass legislation by the end of this month allowing Madrid to force spending cuts, impose fines and take over financial management in regions breaching budget targets or falling into deep difficulties.

The official said Madrid may move take over at least one of the country's cash-strapped regions this year, as lack of access to financial markets and plummeting tax revenue are undermining their capacity to fund themselves.

"The way things are going, the regions themselves will request the intervention," the official said. "There are regions with no access to funding, no way to pay bills. That's why we are going to have to intervene."

The official added Madrid should have more information by May on the state of regional finances, and on which might need to be taken over. The government has set up a new credit line to regions so they can pay off large debts to their suppliers. To access the facility they must present a plan to pay back the money and provide detailed information on their finances.

Separately, Spanish Education Minister Jose Ignacio Wert met regional education authorities to agree a series of measures, including larger class sizes and longer teachers' hours, to cut EUR3 billion from regional budgets. The government meets regional health officials Wednesday to find another EUR7 billion in cuts. These two social services account for the bulk of regional spending, and the regions have long complained they can't reduce it unless Madrid changes regulations governing the services they must provide.

Mission Impossible

Wolfgang Münchau a Financial Times columnist says Spain has accepted mission impossible

News coverage seems to suggest that the markets are panicking about the deficits themselves. I think this is wrong. The investors I know are worried that austerity may destroy the Spanish economy, and that it will drive Spain either out of the euro or into the arms of the European Stability Mechanism.

The orthodox view, held in Berlin, Brussels and in most national capitals (including, unfortunately, Madrid), is that you can never have too much austerity. Credibility is what matters. When you miss the target, you must overcompensate to hit it next time. The target is the goal – the only goal.

This view does not square with the experience of the eurozone crisis, notably in Greece. It does not square with what we know from economic theory, or from economic history. And it does not square with the simple though unscientific observation that the periodic episodes of market panic about Spain have always tended to follow an austerity announcement.

European policy makers have a tendency to treat fiscal policy as a simple accounting exercise, omitting any dynamic effects. The Spanish economist Luis Garicano made a calculation, as reported in El País, in which the reduction in the deficit from 8.5 per cent of GDP to 5.3 per cent would require not a €32bn deficit reduction programme (which is what a correction of 3.2 per cent would nominally imply for a country with a GDP of roughly €1tn), but one of between €53bn and €64bn. So to achieve a fiscal correction of 3.2 per cent, you must plan for one almost twice as large.

Spain's effort at deficit reduction is not just bad economics, it is physically impossible, so something else will have to give. Either Spain will miss the target, or the Spanish government will have to fire so many nurses and teachers that the result will be a political insurrection.

Market Screams Mission Impossible As Well

I too have been preaching the "Mission Impossible" idea for months if not years. More importantly, the market has once again latched on to that idea with credit default swaps on Spain's sovereign debt at record highs, and the yield on 10-year Spanish bonds back above 6% today, settling at 6.07% after reaching a high of 6.156% according to Bloomberg.

History suggests the more eurocrats resists a default for Spain, the bigger the resultant mess. Greece should be proof enough. However, eurocrat clowns have no common sense, no economic sense either, and they do not care about history. Expect a gigantic eurozone mess as efforts to kick the can do nothing but make matters worse.

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

Mish on Coast-to-Coast Radio Tonight 10:00PM PST Discussing the Global Economy

Posted: 16 Apr 2012 10:15 AM PDT

I will be on Coast-to-Coast late night syndicated radio talk show with George Noory to discuss the state of the US and global economies, jobs, stimulus efforts by the FED and ECB, housing, healthcare, the stock market, and gold.

Most major metropolitan areas of the country have a station that will pick up the broadcast. About three million listeners tune in nightly.

Here is a link to a map of Where to Listen to Coast to Coast in your area.

You can also pick up the broadcast on SIRIUS XM Satellite Radio - XM TALK 168.

Please tune in if you can. My scheduled time is at the beginning of the show but there may be a lead-in of general news for 5 minutes or so first.

I will see if Coast-to-Coast will agree to let me take come calls from listeners, and if so perhaps I will be on longer.

Update:

I will be on for most of the entire first hour, not 15 minutes as originally posted. There will be a couple short general news items before I come on.

The show is rebroadcast several hours later. Thus for those on the East coast, listeners can tune in at 1:00AM or 5:00AM.

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

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Monday, April 16, 2012

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

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