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Monday, August 5, 2013

Mish's Global Economic Trend Analysis

Message to 5.7 Million Truck Drivers "No Drivers Needed" Your Job is About to Vanish; Time Marches On, Fed Resistance is Futile
Job Growth Trends by Type of Job and Part-Time Status
Japan Near Stagnation Following 9 Months of Growth; Service Sector Prices Back in Deflation; Spotlight on Abenomics

Message to 5.7 Million Truck Drivers "No Drivers Needed" Your Job is About to Vanish; Time Marches On, Fed Resistance is Futile

Posted: 05 Aug 2013 09:42 PM PDT

Over the next two decades, machines will drive themselves and 5.7 million truck driving jobs will vanish.

Many pooh-pooh that idea for insurance reasons, but costs savings and improved technology suggest the trend is inevitable.

Please consider the Wall Street Journal report Daddy, What Was a Truck Driver?

Ubiquitous, autonomous trucks are "close to inevitable," says Ted Scott, director of engineering and safety policy for the American Trucking Associations. "We are going to have a driverless truck because there will be money in it," adds James Barrett, president of 105-rig Road Scholar Transport Inc. in Scranton, Pa.

Economic theory holds that such basic changes will, over time, improve standards of living by making us more productive and less wasteful. An idle truck with a sleeping driver is, after all, just a depreciating asset.

"Holy s—," exclaims Kevin Mullen, the safety director at ADS Logistics Co., a 300-truck firm in Chesterton, Ind. "If I didn't have to deal with drivers, and I could just program a truck and send it?"

Roughly speaking, a full-time driver with benefits will cost $65,000 to $100,000 or more a year. Even if the costs of automating a truck were an additional $400,000, most owners would leap at the chance, they say.

"There would be no workers' compensation, no payroll tax, no health-care benefits. You keep going down the checklist and it becomes pretty cheap," adds Mr. Barrett of Scranton, who says he can't find enough drivers.

Safety is why so-called "closed-course" uses, which keep automated trucks away from the public, are happening first.

In an Australian mine, in a scorched, wretched area called The Pilbara, Caterpillar is today running six automated model 793f mining trucks. Stuffed with 2,650 horsepower and more than 25 million lines of software code, they haul away layers of rock and dirt, up and down steep grades. Traditionally, these trucks would require four drivers to operate 24 hours a day.

Today the trucks use guidance systems to run on their own, only monitored by "technical specialists" in a control room miles away. If an obstacle appears in its path, the trucks have enough onboard brain power to decide whether to drive over or around it.

In addition to safety risks, human drivers "will often make judgments, most good, but some bad, and those inconsistencies can lead to problems," says Ed McCord, the Caterpillar executive in charge of the program. Automated trucks never flinch, he says. "If it's supposed to be in fifth gear coming down a grade, it will be in fifth gear every time.

Eventually there will be 45 of these trucks on site, eliminating most of the need for 180 driving positions, according to Mr. McCord. The fewer remaining jobs, he said, pay better but be more technical — at their core, about software.

One day, your grandchildren will be wondering, as they do about the rotary phone and the VCR. "Truck driver! What was that?"

What will you tell them?

No Drivers Needed

The Trucker's Report had excerpts of the WSJ report in ATA: Self-Driving Trucks Are "Close To Inevitable"

A couple of paragraphs in the article stood out.

"People come up with these grandiose ideas," says Bob Esler, a commercial trucker for almost 50 years. "How are you going to get the truck into a dock or fuel it?"

And then there's loading and unloading. Pre-trip inspections. Signing for drop-offs and pickups. Making sure cargo is properly secured. Making sure the cargo that's being loaded actually gets loaded. The list just keeps going on and on.

Bury Your Head in the Sand Mentality

Comments to the article show that truck drivers refuse to accept reality.

James: Put truck drivers out of work, you're going to have an unemployment crisis on your hands that will make America's Great Depression look like a Wall Street blurp. Leave us alone, already? Please?

James: We're guys and gals just out here trying to do a job. And like it not, America needs us. Like, seriously, maybe try to figure out ways to support us, instead of trying to figure out new ways to regulate us, and now worse, trying to figure out ways to get rid of us. Address the real problems, and just please, leave us truckers alone.

Poli: C'mon guys even if they make it work, comes up some crazy guy with few thousand dollars buy one Russian 150 miles radius GPS/communication jammer and you'll see how many deaths in one minute!!

Hotrod: Are you kidding me? With all the glitches and failure of computers you would have more accidents than ever.

Andrew: And in the beginning, self piloted trucks will all slam into a low clearance bridge in Chicago because the programmers forgot to take into account truck routes in various cities.

Angelo: This is a fantasy and nothing more until we arrive at the "George Jetson" generation. The infrastructure doesn't exist as it took 200 years to build the existing model which is certainly not designed for it, nor can it be retrofitted for such an endeavor.

Kay: I doubt it will happen in our lifetime. There are too many critical components to driving a truck on the road. Decisions have to be made by humans, not machines. If they can ever create a robot with a mind as complex and brilliant as humans and with the dexterity of arms and legs then they might be able to have automated-driving trucks. We aren't there yet and we won't be for another 30-50 years, IMO .

Alchemist: Who will have money to buy the products these automated trucks are hauling? I'd like to know how they expect to sell anything to the vast nation of jobless, impoverished obsolete humans?

One person understands and offered this set of comments

Jon: Of course trucking companies are excited about this. So should everyone else. Passenger cars will get the same treatment, just a little slower. Yes us truck drivers will be out of a career. Welcome to the world of technological advancement. It happens to all professions eventually. Get used to the idea.

Jon: [In response to Kay and others] Kay, that just shows you lack vision and imagination. It will be here in a decade. I assure you. The roads will be safer. Fueling? Self-driving trucks will go to full service truck stops. You'll have some guy pumping gas making minimum wage. How's that for a blast from the past? Dexterity of arms and legs? The truck drives itself, you can even sit in the drivers seat while it does it. You can't just say "gee that sounds bad, therefore it won't happen".

Time Marches On, Fed Resistance is Futile

The natural state of affairs is deflation, not inflation because of productivity improvements.

Farming is a good example. Because of productivity improvements in farm equipment, and of genetic improvements such as drought resistance, it takes far fewer people to grow corn wheat, and other agricultural products as it did even 15 years ago. Compared to 50 years ago or 100 years ago the difference is massive.

And so it goes. Planes will be pilotless and trucks driverless. The result will be fewer skilled jobs but cheaper prices.

Bernanke's 2% Inflation Goal

Achieving 2% annual inflation creates numerous problems as noted in Bernanke Wants 2% Inflation in a Deflationary World; Who Pays the Price?

The Fed wants home prices up to help out the banks, but what about the new household formation? And what about student loans and the ability to pay those loans back?

And think about how cheap money allows corporations to borrow money for next to nothing to buy technology to replace humans with hardware and software robots.

Trends noted by PEW and predicted in this corner at least six years ago are structural long-lasting trends.

Those expecting a huge pickup in inflation, a spike in US GDP, or a big boom in housing based on misguided perceptions of "pent-up housing demand", fail to understand how Fed boom-bust and bank-bailout policies preclude such outcomes.

Disastrous Fed Policies

Deflation is a good thing. Who doesn't want cheaper prices? Deflation only seems bad because of the enormous amount of debt that cannot possibly be paid back.

Young adults cannot afford to get married, and they certainly cannot afford a house. Household formation is on the decline because of student debt and declining real wages.

And the Fed is directly responsible for declining real wages. Fed policies also fuel the income inequalities of the 1% vs. the 99%.

Who Benefits From Inflation?

The Fed is fighting the deflationary trends of technology, battles it cannot win. Real wages have not and will not keep up as asset bubbles in stocks and equities get bigger and bigger.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Job Growth Trends by Type of Job and Part-Time Status

Posted: 05 Aug 2013 10:37 AM PDT

Here is an interesting chart by reader Tim Wallace that shows growth on jobs in five distinct job categories: Construction, Manufacturing, Hospitality, Retail, and Government.

click on chart for sharper image

Wallace Comments

On Government Jobs: "Remember, this is only direct government payrolls, local, county, state and federal, and does not include the millions of contracted positions from privatization. I am still trying to find a reputable way to extract those numbers. Note the steady, steep growth in government jobs over the years, only dipping and then going flat in 2009. The growth in working age population since 1939 is about 150%, the growth in government jobs about 440%. This is more than a little skewed.

On Construction Jobs: Construction staffing levels go back to May of 1997. Since then the working age population is up by 43 million, a 21% population increase, with no increase in construction jobs.

On Manufacturing Jobs: Manufacturing jobs are now back to the levels of February 1946. Since then, working age population has increased by 144 million. Manufacturing jobs peaked around June of 1979 at 19.6 million and was about 17.3 million in early 2000. Manufacturing jobs now total approximately 12 million.

Additional Charts From St. Louis Fed

click on any chart for sharper image

Total Nonfarm Employees

Leisure and Hospitality: Total

Leisure and Hospitality: Food Service and Drinking Establishments

Of the total increase in L&H jobs, most were Food Service and Drinking Establishments jobs. These are typically low paying, part-time jobs.

Education and Health Services

Education and healthcare was a big winner in the recovery and even before. Some of these are well paying jobs such as nurses and some teaching positions. Other jobs in this sector are very low paying.

Retail Trade

These jobs tend to be low paying part-time jobs as well.

Part Time Job Growth

Finally, here is a chart from Doug Short at Advisor Perspectives on Part-Time employment.

Click on the preceding link for additional charts and analysis.

Doug comments and I concur "It is certainly possible that the Affordable Care Act (aka Obamacare) is playing a role in employer decisions about full-time versus part-time employment. The $2,000 per employee penalty for employers who do not comply with regulations has influenced some employers to begin shifting their employment policies. Last month the government pushed the start of the penalty from January 2014 to January 2015. But the anticipation of the penalty, even though delayed a year, will probably continue to influence the interim decisions of private employers."

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Japan Near Stagnation Following 9 Months of Growth; Service Sector Prices Back in Deflation; Spotlight on Abenomics

Posted: 05 Aug 2013 07:24 AM PDT

The pace of growth in Japan slowed to a crawl as new orders stagnate as noted by the Markit Japan Services PMI™ for July.

Key Points

Weakest rise in service sector activity in nine months

Services employment and new orders broadly stagnate

Ninth successive month of higher input prices in the service sector

Summary

The latest data for Japanese service providers indicated that the expansion evident in previous surveys continued in July, but the pace slowed. Business activity increased only marginally, whilst new business and employment stagnated, in each case ending eight-month sequences of growth.

The headline seasonally adjusted Business Activity Index fell in July to 50.6 from 52.1 in June. Whilst this was the weakest increase so far in the current period of expansion, July marked the continuation of a nine-month run of growth, the longest ever recorded in the series.

Employment

Service sector employment stabilised in July, following eight months of expansion. Anecdotal evidence indicated that increased production, and expansions in sales teams, had compensated for strategic reductions in payroll numbers. The Composite Employment Index fell marginally, to the lowest level recorded since October 2012, and signalled a marginal drop in staffing levels.

Inflation

Input prices for the service sector continued to exert inflationary pressure as they rose for the ninth successive month, though the pace of inflation eased somewhat.

Meanwhile, prices charged by Japanese service providers ended their short period of inflation, and fell marginally in July.

Abenomics and Inflation

I agree with the comments of Claudia Tillbrooke, Economist at Markit who said:

"The Japanese service sector continued its nine-month sequence of growth in July, but the rate of expansion weakened. This follows a period of particularly strong performance relative to the survey history. Whether the short period of recovery will continue remains to be seen; but with the latest data showing employment and new orders stagnating in July, the outlook is distinctly less positive than reported in previous surveys."

Note that input prices are still rising yet prices charged are back in deflation. There is simply no demand for services in Japan.

Recall that prime minister Shinzo Abe wants taxes to double the sales tax rate from 5% to 10% by 2015 which will further decrease demand.

Should additional revenue come in from the tax hike, it will serve (in isolation) to strengthen the Yen, something Abe does not want.

So Abenomics remains in the spotlight. What's he going to propose next if deflation in prices remains?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Sunday, August 4, 2013

Mish's Global Economic Trend Analysis

Bernanke Wants 2% Inflation in a Deflationary World; Who Pays the Price?

Posted: 04 Aug 2013 05:55 PM PDT

PEW Social Trends research shows a Record 21.6 Million Young Adults Live in Their Parents' Home

Here are some clips from the fascinating PEW study.

In 2012, 36% of the nation's young adults ages 18 to 31 the so-called Millennial generation—were living in their parents' home, according to a new Pew Research Center analysis of U.S. Census Bureau data. This is the highest share in at least four decades and represents a slow but steady increase over the 32% of their same-aged counterparts who were living at home prior to the Great Recession in 2007 and the 34% doing so when it officially ended in 2009.

A record total of 21.6 million Millennials lived in their parents' home in 2012, up from 18.5 million of their same aged counterparts in 2007. Of these, at least a third and perhaps as many as half are college students.

The steady rise in the share of young adults who live in their parents' home appears to be driven by a combination of economic, educational and cultural factors. Among them:

Declining employment: In 2012, 63% of 18- to 31-year-olds had jobs, down from the 70% of their same-aged counterparts who had jobs in 2007. In 2012, unemployed Millennials were much more likely than employed Millennials to be living with their parents (45% versus 29%).
Rising college enrollment: In March 2012, 39% of 18- to 24-year-olds were enrolled in college, up from 35% in March 2007. Among 18 to 24 year olds, those enrolled in college were much more likely than those not in college to be living at home – 66% versus 50%.
Declining marriage: In 2012 just 25% of Millennials were married, down from the 30% of 18- to 31-year-olds who were married in 2007.

Percent of Married Millennial Declines

Long-Term Changes in Young Adult Living Arrangements

Household Formation

Married Residing in Own Household Plummets

Since 1968, age at first marriage has increased by nearly six years for both men and women. Consequently, the share of young adults who are married and residing in their own household has plummeted since 1968. In 2012, only 23% of Millennials were married and residing on their own as household head or spouse, a precipitous decline compared with 1968 when 56% of 18- to 31-year-olds were married and on their own.

End PEW

Fed Policies Exacerbate Trend

Bernanke wants 2% inflation in a deflationary world. Wages have not kept up with inflation as Fed policies exacerbate the trends.

The result is apparent. Everyone pays the price, but especially Young adults who cannot afford to get married, and they certainly cannot afford a house.

The Fed wants home prices up to help out the banks, but what about the new household formation? And what about student loans and the ability to pay those loans back?

And think about how cheap money allows corporations to borrow money for next to nothing to buy technology to replace humans with hardware and software robots.

Trends noted by PEW and predicted in this corner at least six years ago are structural long-lasting trends.

Those expecting a huge pickup in inflation, a spike in US GDP, or a big boom in housing based on misguided perceptions of "pent-up housing demand", fail to understand how Fed boom-bust and bank-bailout policies preclude such outcomes.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Magazine Ad Revenues Plunge; Google Collects Half of Mobile Internet Ads; Cannibalization of Ad Market

Posted: 04 Aug 2013 04:15 PM PDT

Is the advertising pie growing, shrinking, or simply being redistributed? Let's start with a look at PEW Center research that shows News magazines hit by big drop in ad pages.

In a difficult advertising environment for the magazine industry overall, newly-released numbers from the Association of Magazine Media (MPA) show the nation's news magazines being hit particularly hard.

Total consumer magazine ad pages dropped 4.9% compared with the first half of 2012, according to MPA data for the first six months of 2013, released July 9. But the drop in ad pages for five major news magazines—Time, The Economist, The Atlantic, The Week and The New Yorker—was far steeper, a combined 18% in the first half of 2013 compared with the same period a year earlier. In one indicator of the difficulties facing news magazines, Newsweek—which saw ad pages decline by 60% from 2002 to 2012—discontinued its print edition at the end of 2012.

While these numbers highlight a difficult print advertising climate, they don't tell the whole story. MPA President Mary Berner says magazines are increasingly generating digital revenue. Initial industry monitoring of digital advertising revenue for some magazine iPad versions found that sales increased about 25% in the first half of 2013. Berner called those gains "encouraging" and added that later this year, about 100 magazines will begin reporting some digital revenue results. In addition, some news magazines, most notably The Economist and The Atlantic, have begun diversifying revenue streams with such initiatives as events, conferences and creation of niche content.

Looking over the past decade, from 2003 through 2012, the overall ad pages for news magazines (excluding Newsweek) dropped by 36%, from 7,848 to 5,008. But within that time frame were several shifts in trajectory. A major drop-off in ad pages occurred from 2008 to 2009 (17%.) Ad pages stabilized from 2009 to 2011, growing at a modest 1%. But then another downturn occurred as ad pages in 2012 dropped 13% from the previous year, followed by the 18% decline in the first half of 2013.

Google Take Home Half of Mobile Internet Ads

eMarketer reports Google Takes Home Half of Worldwide Mobile Internet Ad Revenues.

Google earned more than half of the $8.8 billion advertisers worldwide spent on mobile internet ads last year, helping propel the company to take in nearly one-third of all digital ad dollars spent globally, according to eMarketer's first-ever figures on worldwide digital and mobile advertising revenues at major internet companies.

Ad Revenues in Dollars and Percent of Market

After making nearly half a billion dollars worldwide on mobile ads last year, Facebook—which had no mobile revenue in 2011—is expected to increase mobile revenues by more than 333% to just over $2 billion in 2013, and account for a 12.9% share of the global net mobile advertising market.

eMarketer estimates that Google made $4.61 billion in mobile internet ad revenues last year, more than triple its earnings in 2011. This year's mobile revenues will be up a further 92.1% to $8.85 billion.

Combined, three companies—Google, Facebook and Twitter—account for a consolidating share of mobile advertising revenues worldwide, as other players, such as YP, Pandora, Apple and Millennial Media, see their shares decrease, despite maintaining relatively strong businesses growing at rapid rates.

Cannibalization of Ad Market

My friend "BC" who sent the links surmises ....

"The decline in magazine ad revenues is approximately the same as the increase in Internet and mobile/social media ads; therefore, the net increase in ads is a wash, i.e., cannibalization of the advertising market. Companies earning their revenues from ads will now be in a zero-sum competition for no growth of, and later a falling number of, ad dollars hereafter."

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Saturday, August 3, 2013

Mish's Global Economic Trend Analysis

An Analysis of July Employment Numbers 1955 to 2013; Full-Time Employment Down Over 5 Million Since 2007
World’s lightest and thinnest circuits pave the way for "imperceptible electronics"; Man vs. Machine Comparison
IMF "Baseline Scenario" Projects Spain Unemployment Will Remain Above 25% for 5 Years with Little Growth

An Analysis of July Employment Numbers 1955 to 2013; Full-Time Employment Down Over 5 Million Since 2007

Posted: 03 Aug 2013 08:26 PM PDT

Reader Tim Wallace provides another excellent set of graphs on employment as shown below.

Full-Time Employment

click on any chart for sharper image

Full time employment is actually now 5.17 million below the 2007 level.
Total employment is 2.2 million below the 2007 level in spite of 13 million more people of working age.

Part-Time Employment

Wallace writes: "The past five years are near or above the previous all time high set back in 1982. These five years are all in that abysmal range. No other year comes close. I expect things will get worse as the year continues."

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

World’s lightest and thinnest circuits pave the way for "imperceptible electronics"; Man vs. Machine Comparison

Posted: 03 Aug 2013 09:12 AM PDT

The latest news from RoboHub shows World's lightest and thinnest circuits pave the way for 'imperceptible electronics'.

Researchers from Asia and Europe have developed the world's lightest and thinnest organic circuits, which in the future could be used in a range of healthcare applications.

The new flexible touch sensor is the world's thinnest, lightest and people cannot feel the existence of this device.

The circuits are extremely lightweight, flexible, durable and thin, and conform to any surface. They are just 2 microns thick, just 1/5 that of kitchen wrap, and weighing only 3g/m^2, are 30 times lighter than office paper. They also feature a bend radius of 5 microns, meaning they can be scrunched up into a ball, without breaking. Due to these properties the researchers have dubbed them "imperceptible electronics", which can be placed on any surface and even worn without restricting the users movement.

The integrated circuits are manufactured on rolls of one micron thick plastic film, making them easily scalable and cheap to produce. And if the circuit is placed on a rubber surface it becomes stretchable, able to withstand up to 233% tensile strain, while retaining full functionality.

"This is a very convenient way of making electronics stretchable because you can fabricate high performance devices in a flat state and then just transfer them over to a stretchable substrate and create something that is very compliant and stretchable just by a simple pick and place process."

Video on "Imperceptible Electronics"

Link if video does not play: Imperceptible Electronics

Carl the Robot Serves Drinks

In case you missed it, please consider Carl the Robot Bartender Mixes Drinks and Chats With Customers

Also note that Farm Robots to Make Migrant Worker Vegetable Pickers Obsolete; Welcome the "Lettuce Bot", the "Grape Bot", the "Strawberry Bot"

Man vs. Machine Perspective

For comparison purposes, a Facebook video shows "Humans are Awesome".

Play the video for a very entertaining perspective on what Robots are up against.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

IMF "Baseline Scenario" Projects Spain Unemployment Will Remain Above 25% for 5 Years with Little Growth

Posted: 03 Aug 2013 03:50 AM PDT

I am normally critical of IMF forecasts, but their baseline unemployment projection for Spain of 25% or more with no more than .6% annual growth through 2017 seems reasonable. The pessimistic scenario is a toxic deleveraging downward spiral that continues right now.

The optimistic scenario assumes 2% growth, but that scenario does not start until 2018, and only if labor reforms in Spain and Europe take place.

Via Mish-modified Google translate from El Economista, please consider IMF estimates that Spain will grow by an average of 0.6% over the next five years

The team led by James Daniel, Chief of Mission of the International Monetary Fund (IMF) to Spain, estimates unemployment, which will remain above 25% over the next five years.

Ignoring the 1.6% downturn that the IMF expects the country to suffer this year, the average growth for the Spanish economy between 2014 and 2018 will be 0.6%. GDP growth will remain below 1% until 2017 and thereafter only begin to expand beyond these levels.

In 2018, the optimistic scenario in which reforms (both from Spain and Europe) are accelerated and gain ground would result in an acceleration of growth of 2% in 2018 and a significant increase in employment.

The pessimistic scenario starts immediately if deleveraging pressures and financial difficulties intensify. This scenario would create a toxic spiral between macro and financial context and would leave the public and private debt at high levels in the future, the country would not grow until 2017, and unemployment would remain above 27%.

The baseline scenario suggests Spain will probably start to grow later this year, in the third or fourth quarter, but that's not important. "The really important question is whether Spain will grow enough to create a lot of jobs to reduce the unacceptably high unemployment and increasing family income".

Unfortunately, growth will not be strong and have to generate a lot more work. Reducing unemployment requires action in many areas, including from Europe, "specifically on labor issues." The head of the IMF Mission explained that to ensure job creation Spain needs a further increase in wage flexibility, improvement in training for the unemployed, reduced taxes and elimination of regulations that discourage hiring.

The Fund criticizes the adjustment burden continues to fall on employment (temporary and youth especially) instead of wages. It therefore recommends a social pact in which employers commit to hiring increases in exchange for wage cuts of up to 10% over the next two years.

According to the IMF, these measures should be accompanied by a reduction in employers' contributions to social security and VAT increased two years of pay cuts.

IMF Proposes Spain Reduce Wages by 10% in Two Years

Via Google translate, La Vanguardia reports IMF Proposes Spain Reduce Wages by 10% in Two Years

The IMF said today that it would be beneficial to Spain a social pact in which employers commit to hiring increases in exchange for wage cuts in agency models would be 10% in two years.

These measures should be accompanied by a reduction in employers' contributions to social security and VAT increased two years after wage cuts, according to the annual report on the Spanish economy published today by the International Monetary Fund (IMF).

IMF urges Spain to "greatly reduce the number of contracts", reviving the idea advocated by some analysts and agencies to establish "a permanent contract with lower firing costs initially and gradually increase with seniority."

IMF Silliness

Hiking the VAT is ridiculous, hiring commitments are ridiculous, and although lowering wages is likely a good idea, the free market should set rates, not government bureaucrats who have no idea what wages should be.

The best way for Spain to reduce its deficit is not by hiking the VAT, but by getting rid of government bureaucrats and lowering pension benefits for government workers.

IMF Projections

Projections	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018
Gross domestic product	-3.7	-0.3	0.4	-1.4	-1.6	0.0	0.3	0.6	0.9	1.2
Unemployment rate (percent)	18.0	20.1	21.7	25.0	27.2	27.0	26.9	26.6	26.0	25.3
Deficit as Percent of GDP	-11.2	-9.7	-9.0	-7.0	-6.7	-5.9	-5.1	-4.2	-3.3	-2.3

The above table condensed from IMF Executive Board Concludes 2013 Article IV Consultation with Spain

Note that the IMF does not think Spain will reduce its deficit below 3% until 2018. Prime Minister Rajoy thinks the deficit will be 2.7% by 2016. Recall that in April of 2012, Rajoy projected 3% by 2013. 2016 is fantasy-land material as well. Even the IMF projection is highly optimistic (at best).

Spain may return to growth for a brief while later this year, but don't expect many jobs out of it. Spain needs labor reform, work rule reform, pension reform and lower taxes. So does France, Greece, Italy, and the rest of Europe.

Unfortunately, Brussels is likely to demand higher taxes, and the unions are likely to resist the needed reforms. A further downward spiral is not out of the question, but neither is stagnation and zero growth (lower than the baseline scenario of the IMF).

The optimistic scenario is five years away at the earliest, and unlikely at that, unless unions suddenly give in to badly needed reforms and/or some strong political leader can force free-market policies over substantial opposition.

In the meantime, who knows what crazy rules the Nannycrats in Brussels are likely to come up with?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Friday, August 2, 2013

Mish's Global Economic Trend Analysis

NSA tool collects "Nearly Everything You Do On the Internet"; Targeting Journalists; What Google Knows About You; Warrantless Cellphone Tracking Upheld

Posted: 02 Aug 2013 09:09 AM PDT

Today I offer a quartet of news stories on the NSA, widespread targeting of Journalists even by New Zealand, broad cellphone tracking, and a synopsis of what Google knows about you.

Let's kick off with the Guardian XKeyscore: NSA tool collects 'nearly everything a user does on the internet'.

• XKeyscore gives 'widest-reaching' collection of online data
• NSA analysts require no prior authorization for searches
• Sweeps up emails, social media activity and browsing history

A top secret National Security Agency program allows analysts to search with no prior authorization through vast databases containing emails, online chats and the browsing histories of millions of individuals, according to documents provided by whistleblower Edward Snowden.

The NSA boasts in training materials that the program, called XKeyscore, is its "widest-reaching" system for developing intelligence from the internet.

XKeyscore, the documents boast, is the NSA's "widest reaching" system developing intelligence from computer networks – what the agency calls Digital Network Intelligence (DNI). One presentation claims the program covers "nearly everything a typical user does on the internet", including the content of emails, websites visited and searches, as well as their metadata.

The purpose of XKeyscore is to allow analysts to search the metadata as well as the content of emails and other internet activity, such as browser history, even when there is no known email account (a "selector" in NSA parlance) associated with the individual being targeted.

Analysts can also search by name, telephone number, IP address, keywords, the language in which the internet activity was conducted or the type of browser used.

William Binney, a former NSA mathematician, said last year that the agency had "assembled on the order of 20 trillion transactions about US citizens with other US citizens", an estimate, he said, that "only was involving phone calls and emails". A 2010 Washington Post article reported that "every day, collection systems at the [NSA] intercept and store 1.7 billion emails, phone calls and other type of communications."

Targeting of Investigative Journalists

Pater Tenebrarum on the Acting Man blog writes about the Targeting of Investigative Journalists and those opposed to the War in Afghanistan.

There are seemingly constantly new revelations about extremely questionable practices employed by the security apparatus. The latest comes from 'five eyes' partner New Zealand, which not too long ago had to admit that its spooks illegally spied on Kim Dotcom to help the FBI make an example of the man in the context of copyright enforcement (we have previously discussed the case of Dotcom, who is accused of breaking laws that apparently don't even exist).

New Zealand's reaction to this embarrassment was, as you may have guessed, to introduce new legislation that will henceforth legalize domestic spying. In the meantime, its security apparatus seems not really deterred by the embarrassment caused to it by the Dotcom case and continues to engage in highly dubious surveillance activities, actively aided and abetted by US intelligence services. The target in the latest case was an investigative journalist working for McClatchy. Here is an excerpt from an article on the matter by the CPJ, [the Committee to Protect Journalists]. We want to direct your attention especially to the final paragraph below, which is quite chilling:

"Concern over government surveillance of journalists has washed up on the faraway shores of New Zealand, with a report in the country's Sunday Star this week asserting that the military there, with help from U.S. intelligence, spied on an investigative journalist who had been critical of its activities in Afghanistan.

Compounding concerns about the New Zealand military's targeting of journalists, the Sunday Star reported that a confidential military training manual drafted in 2003 lists investigative journalists as one of the top threats to state security–up there with terrorists and hostile foreign intelligence groups. A military official in New Zealand acknowledged the existence of the manual on Monday, referring to it as "inappropriate and heavy-handed," and ordered a revision to remove any references to journalists, news reports said."

Whether or not they remove the references to journalists from their training manual, the mindset is clear – this is what they actually believe: "Investigative journalists are one of the top threats to state security–up there with terrorists and hostile foreign intelligence groups."

We have to admit that this is actually true – in a dictatorship. In allegedly free countries, investigative journalists are usually deemed to be among the people who help seeing to it that they remain free.

Search for Pressure Cooker Leads to Knock on Door From Terrorism Police

Via reference from ZeroHedge, please consider pressure cookers, backpacks and quinoa, oh my!

It was a confluence of magnificent proportions that led six agents from the joint terrorism task force to knock on my door Wednesday morning. Little did we know our seemingly innocent, if curious to a fault, Googling of certain things was creating a perfect storm of terrorism profiling. Because somewhere out there, someone was watching. Someone whose job it is to piece together the things people do on the internet raised the red flag when they saw our search history.

Most of it was innocent enough. I had researched pressure cookers. My husband was looking for a backpack. And maybe in another time those two things together would have seemed innocuous, but we are in "these times" now.

I was at work when it happened. My husband called me as soon as it was over, almost laughing about it but I wasn't joining in the laughter. His call left me shaken and anxious.

What happened was this: At about 9:00 am, my husband, who happened to be home yesterday, was sitting in the living room with our two dogs when he heard a couple of cars pull up outside. He looked out the window and saw three black SUVs in front of our house; two at the curb in front and one pulled up behind my husband's Jeep in the driveway, as if to block him from leaving.

Six gentleman in casual clothes emerged from the vehicles and spread out as they walked toward the house, two toward the backyard on one side, two on the other side, two toward the front door.

They walked around the living room, studied the books on the shelf (nope, no bomb making books, no Anarchist Cookbook), looked at all our pictures, glanced into our bedroom, pet our dogs. They asked if they could go in my son's bedroom but when my husband said my son was sleeping in there, they let it be.

They asked about me, where was I, where do I work, where do my parents live. Do you have any bombs, they asked. Do you own a pressure cooker? My husband said no, but we have a rice cooker. Can you make a bomb with that? My husband said no, my wife uses it to make quinoa. What the hell is quinoa, they asked.

Have you ever looked up how to make a pressure cooker bomb? My husband, ever the oppositional kind, asked them if they themselves weren't curious as to how a pressure cooker bomb works, if they ever looked it up. Two of them admitted they did.

45 minutes later, they shook my husband's hand and left. That's when he called me and relayed the story. That's when I felt a sense of creeping dread take over. What else had I looked up? What kind of searches did I do that alone seemed innocent enough but put together could make someone suspicious?

They mentioned that they do this about 100 times a week.

Mostly I felt a great sense of anxiety. This is where we are at. Where you have no expectation of privacy. Where trying to learn how to cook some lentils could possibly land you on a watch list. Where you have to watch every little thing you do because someone else is watching every little thing you do.

All I know is if I'm going to buy a pressure cooker in the near future, I'm not doing it online.

I'm scared. And not of the right things.

CLARIFICATION AND UPDATE

We found out through the Suffolk Police Department that the searches involved also things my husband looked up at his old job. We were not made aware of this at the time of questioning and were led to believe it was solely from searches from within our house.

Warrantless Cellphone Tracking Upheld

The New York Times reports Warrantless Cellphone Tracking Is Upheld

In a significant victory for law enforcement, a federal appeals court on Tuesday said that government authorities could extract historical location data directly from telecommunications carriers without a search warrant.

The closely watched case, in the United States Court of Appeals for the Fifth Circuit, is the first ruling that squarely addresses the constitutionality of warrantless searches of historical location data stored by cellphone service providers. Ruling 2 to 1, the court said a warrantless search was "not per se unconstitutional" because location data was "clearly a business record" and therefore not protected by the Fourth Amendment.

For now, the ruling sets an important precedent: It allows law enforcement officials in the Fifth Circuit to chronicle the whereabouts of an American with a court order that falls short of a search warrant based on probable cause.

"This decision is a big deal," said Catherine Crump, a lawyer with the American Civil Liberties Union. "It's a big deal and a big blow to Americans' privacy rights."

Cellphone privacy measures have been proposed in the Senate and House that would require law enforcement agents to obtain search warrants before prying open location records. Montana recently became the first state to require a warrant for location data. Maine soon followed. California passed a similar measure last year but Gov. Jerry Brown, a Democrat, vetoed it, saying it did not strike what he called the right balance between the demands of civil libertarians and the police.

What Google Knows About You

Tyler Durden at Zerohedge has an interesting post What Google Knows About You.

It's safe to assume everything you have ever searched for, every address you looked up on Google, every email you sent, every chat message, every YouTube video you watched. It's also safe to assume every entry is time-stamped, so it's clear exactly, down to the minute, when all of this was done, and where you were at when you did it.

The data can and will be used against you, in many imaginable ways, and in some ways you may not have remotely conceived, such as how searching for pressure cookers may get you an unexpected call from the terrorist police.

My friend Pater Tenebrarum commented via email "The alleged 'separation of powers' is increasingly revealed as a sham - in the end, you have the government 'controlling' and 'limiting' itself."

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Establishment Survey: +162K Jobs, May and June Revised Lower; Household Survey: +227K; Part-Time Jobs +103,000

Posted: 02 Aug 2013 07:25 AM PDT

Initial Reaction

The establishment survey showed a gain of 162,000 jobs.

The previous two months were revised lower. The employment change for May revised down by 19,000 (from +195,000 to +176,000), and the employment change for June revised down by 7,000 (from +195,000 to +188,000).

The unemployment rate dropped 0.2 to 7.4%.

Explaining the Unemployment Rate Drop

Employment rose by 227,000 of which 103,000 were part-time jobs.
The Civilian Labor Force Declined by 37,000 even though population rose by 204,000.
Those "Not in Labor Force" rose by 240,000.
Participation Rate fell 0.1 to 63.4%, a mere 0.1 higher than the low of 63.3% dating back to 1979.

July BLS Jobs Statistics at a Glance

Payrolls +162,000 - Establishment Survey
US Employment +227,000 - Household Survey
US Unemployment -263,000 - Household Survey
Involuntary Part-Time Work +19,000 - Household Survey
Voluntary Part-Time Work +84,000 - Household Survey
Baseline Unemployment Rate -0.2 - Household Survey
U-6 unemployment -0.3 to 14.0% - Household Survey
Civilian Labor Force -37,000 - Household Survey
Not in Labor Force -240,000 - Household Survey
Participation Rate -0.1 at 63.4 - Household Survey

Quick Notes About the Unemployment Rate

The unemployment rate varies in accordance with the Household Survey, not the reported headline jobs number, and not in accordance with the weekly claims data.
In the last year, those "not" in the labor force rose by 1,598,000
Over the course of the last year, the number of people employed rose by 2,035,000 (an average of 170,000 a month)
In the last year the number of unemployed fell from 12,745,000 to 11,514,000 (a drop of 1,231,000)
Percentage of long-term unemployment (27 weeks or more) is 37.0%, an increase of 0.3 from last month. Once someone loses a job it is still very difficult to find another.
8,245,000 workers who are working part-time but want full-time work. A year ago there were 8,245,000. There has been no improvement in a year. This is a volatile series.

June 2013 Jobs Report

Please consider the Bureau of Labor Statistics (BLS) July 2013 Employment Report.

Total nonfarm payroll employment increased by 162,000 in July, and the unemployment rate edged down to 7.4 percent, the U.S. Bureau of Labor Statistics reported today. Employment rose in retail trade, food services and drinking places, financial activities, and wholesale trade.

Click on Any Chart in this Report to See a Sharper Image

Unemployment Rate - Seasonally Adjusted

Month to Month Changes Since 2009

click on chart for sharper image

Change From Previous Month by Job Type

Hours and Wages

Average weekly hours of all private employees fell 0.1 to 34.4 hours. Average weekly hours of all private service-providing employees fell 0.1 to 33.2 hours. Average hourly earnings of all private workers fell $0.02 to $23.98. Average hourly earnings of private service-providing employees fell $0.02 to $23.69.

Real wages have been declining. Add in increases in state taxes and the average Joe has been hammered pretty badly. For 2013, one needs to factor in the increase in payroll taxes for Social Security.

For further discussion of income distribution, please see What's "Really" Behind Gross Inequalities In Income Distribution?

BLS Birth-Death Model Black Box

The BLS Birth/Death Model is an estimation by the BLS as to how many jobs the economy created that were not picked up in the payroll survey.

The Birth-Death numbers are not seasonally adjusted, while the reported headline number is. In the black box the BLS combines the two, coming up with a total.

The Birth Death number influences the overall totals, but the math is not as simple as it appears. Moreover, the effect is nowhere near as big as it might logically appear at first glance.

Do not add or subtract the Birth-Death numbers from the reported headline totals. It does not work that way.

Birth/Death assumptions are supposedly made according to estimates of where the BLS thinks we are in the economic cycle. Theory is one thing. Practice is clearly another as noted by numerous recent revisions.

Birth Death Model Adjustments For 2012

Birth Death Model Adjustments For 2013

Birth-Death Notes

Once again: Do NOT subtract the Birth-Death number from the reported headline number. That approach is statistically invalid.

In general, analysts attribute much more to birth-death numbers than they should. Except at economic turns, BLS Birth/Death errors are reasonably small.

For a discussion of how little birth-death numbers affect actual monthly reporting, please see BLS Birth/Death Model Yet Again.

Table 15 BLS Alternate Measures of Unemployment

click on chart for sharper image

Table A-15 is where one can find a better approximation of what the unemployment rate really is.

Notice I said "better" approximation not to be confused with "good" approximation.

The official unemployment rate is 7.4%. However, if you start counting all the people who want a job but gave up, all the people with part-time jobs that want a full-time job, all the people who dropped off the unemployment rolls because their unemployment benefits ran out, etc., you get a closer picture of what the unemployment rate is. That number is in the last row labeled U-6.

U-6 is much higher at 14.0%. Both numbers would be way higher still, were it not for millions dropping out of the labor force over the past few years.

Labor Force Factors

Discouraged workers stop looking for jobs
People retire because they cannot find jobs
People go back to school hoping it will improve their chances of getting a job
People stay in school longer because they cannot find a job

Were it not for people dropping out of the labor force, the unemployment rate would be over 9%. In addition, there are 8,245,000 people who are working part-time but want full-time work.

Grossly Distorted Statistics

Digging under the surface, much of the drop in the unemployment rate over the past two years is nothing but a statistical mirage coupled with a massive increase in part-time jobs starting in October 2012 as a result of Obamacare legislation.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Thursday, August 1, 2013

Mish's Global Economic Trend Analysis

Treasury Yields Surge Following Allegedly Good Data; Is Bernanke Getting the Message?

Posted: 01 Aug 2013 03:42 PM PDT

Curve Watchers Anonymous notes treasury yields are on the rise following allegedly good economic data.

For my take on the GDP, please see About that "Beat the Street" GDP Number. Nonetheless, the bond market has other ideas.

Historical Yield Curve - Monthly Close

click on chart for sharper image

$TYX 30-Year Green
$TNX 10-Year Orange
$FVX 05-Year Blue
$IRX 3-Month Brown

Market Gets Message

On July 17, Bernanke boldly stated Markets finally get message.

Federal Reserve Chairman Ben Bernanke on Wednesday admitted there has been some confusion as the central bank has tried to explain plans to scale back its stimulus policies, but said he thought financial markets were "beginning to understand our message."

Bernanke's comments came as he reiterated Wednesday that he expected the central bank to start tapering its bond-buying stimulus program this year. But, he emphasized, the Fed was not on a "preset course."

Talk is Cheap

Bernanke and numerous other Fed spokesmen attempted to talk yields lower following the huge surge since the beginning of May.

Let's tune in and see how well talk worked.

$TYX - 30 Year Yield Daily Chart

$TNX - 10 Year Yield Daily Chart

It appears the bond market may have had enough of Bernanke's talk. Is Bernanke getting the message?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

India Housing Bubble Still Expanding

Posted: 01 Aug 2013 10:08 AM PDT

This is a guest post from by Deepak Shenoy, an economic blogger at Capital Mind in India. Charts and analysis that follow are from Deepak.

RBI has released the latest data for their House Price Index and it looks like the mad pace of real estate price growth has mellowed, but only slightly. Price growth at an all India basis is now 19% from last year.

Unfortunately, RBI has not released information about transactions, so we don't know if volumes are up or down.

Housing prices were very high last quarter as well, with prices up 26% year on year. However, every city is different; some cities seem to have slowed down price growth while others have picked up pace significantly.

Mumbai and Delhi Still Red-Hot, But Slower Than Earlier Quarter

Mumbai shows YoY growth of just 11% after a scorching 30% growth in the December quarter (year on year).

Delhi, though, continues to be in scorched earth territory, moving up 33% from last year. Prices have gone up an annualized 30% or more since September 2011, and the index has now reached 259 from a 100 in March 2009 (a compounded growth of 27%, the highest of all cities).

Bangalore and Chennai Show Faster Growth

Bangalore hit 5% price growth in Q4 (March 2013). This is benign, for now.

Chennai is now at 26% price growth and again, looks like it has gone out of control.

Kolkata and Lucknow: The Hot Air Balloons

Kolkata has gone absolutely nuts with a 63% price growth, taking its own compounded price growth from 2009 to 27%, just behind Delhi.
Lucknow, with 29% YoY growth, is still among the fastest growers.
Note that the drop in transaction volumes in the previous quarter seems to have had no impact on price growth.

Jaipur grows 18%, Ahmedabad remains at 9%

Jaipur prics are up the highest since December 2010 (on a yoy growth basis).

Ahmedabad shows signs of softening, though prices have grown slower in the 2010-11 time frame.

Kanpur the weakest link

Kanpur shows a drop of over 21% on prices. Last time I was told of some inaccuracies in Kanpur in that much of the price is in "black" (paid in cash) and thus not recorded.

Compounded Growth Rate Since 2009 at 21%

As of March 2013, Prices have more than doubled since 2009. The All-India Index is at 211, from 100 in March 2009.

The bubble is intact.

But is the bubble bursting? QoQ growth is the second lowest since the data has been recorded – an all India QoQ growth level of 2.1% (versus 6.4% last quarter).

Credit will be constrained from July onwards, so it is quite likely that price growth is hit. Already, rental prices have flattened or reduced, and commercial rents and prices are down (speaking of the June quarter, from anecdotal information). A credit crunch could well cause developer defaults, and then prices will truly fall. For now, the bubble is well and truly visible.

End Deepak

Needless to say (but I am going to say it anyway), this India housing bubble is going to end very badly, especially for those who got in recently.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com