Fresh doubts emerge on US economy after weak jobs report

[papau]

http://story.news.yahoo.com/news?tmpl=story&cid=1504&ncid=1504&e=7&u=/afp/20040109/ts_afp/us_economy_040109233004

Fresh doubts emerge on US economy after weak jobs report

WASHINGTON (AFP) - A surprisingly weak report on US job growth roiled financial markets and sparked fresh doubts about the sustainability of the growth pace of the world's largest economy.

The Labor Department reported that the US economy generated just 1,000 jobs in December. The report was a shock to economists, who projected average job growth of 148,000 in the month to signal an end to the so-called jobless recovery in the United States.
Additionally, Friday's report by the Labor Department showed job growth in the previous four months was revised lower by a total of 66,000.

<snip>"The unemployment rate dropped to 5.7 percent but only due to the fact that the labor force fell faster than unemployment did," said David Rosenberg, economist at Merrill Lynch. "Moreover, the labor force participation rate fell to 66.0 percent, its lowest level since August 1991."

But Democratic presidential front-runner Howard Dean said the report highlighted the failure of the Bush policies. "It is time for George Bush to acknowledge that offering tax breaks to corporate special interests and the wealthy and imposing the 'Bush Tax' on working Americans is not the way to help the millions of workers and families hurt by his economy," Dean said. <snip>

[kalian]

1. What was so "surprising"....?

:shrug:
Shrub once again LIED and grabbed the seasonal hiring binge...that
will quickly lead to a firing binge as a clear sign that the
economy was "recovering".

[papau]

2. labor force participation rate 66.0 percent, its lowest level since 91

all these comparisons to Daddy!

:-)

[AndyTiedye]

3. Bush* Does Not Want To Create Jobs -- He Thinks 2004 Is In The Bag Anyway

The robber barons want unemployment high, and so do the Army recruiters.

[AndyTiedye]

4. Labor Force Participation Excludes The Long-Term Unemployed

Once your benefits run out, they take you out of the labor force.

[Frodo]

7. Got a link for that?

'cause it just ain't so.

[rapier]

8. notes

That is a common misconception. The truth isn't a lot better. People who essentially give up looking for work are taken out of the equation. The well of such discouraged workers is huge, possibly 50% or even more of the official unemployed. As a general rule take the offical rate and then add 100% and your closer to the truth I think,

[Frodo]

11. The problem with that is that it isn't a "secret". And doesn't explain...

...the recent report.

The ranks of "disouraged workers" is nowhere near what you speculate. Many here seem to assume that since they are no counted in the "official" number (true) they must represent the big gap between today's employment picture and former ones that had similar "official" numbers. That the number of discouraged workers is some kind of secret.

Unfortunately, that just isn't true. The number of people "who essentially give up looking for work" is not a secret. They ARE counted (and in the same survey that gives us the official number), just not included in the simplified report. They get reported (by the BLS) on the same page as the 5.7% figure, just not by the press.

Now here's the confusing part: Though 500,000 people dropped out of the labor pool last month, there was no statisticaly significant change in the number of discouraged workers. There's an unexplained and unexpected factor involved here.

Interestingly, as people's perception of the employmnet picture improves, you can actually expect the official unemployment number to go UP as hundreds of thousands of people who have wanted jobs all along start looking again. They've been unemployed all this time but haven't made the top-line number. Soon they'll get counted again and we can expect a modest bump UP in unemployemnt rates.

[kalian]

15. The 5.7% figure does not account for the folks that have

stopped looking for work.
5.7% means all the eligible people that are actively looking
for work.
My understanding is that the BLS has THREE different figures and the
"discouraged workers" that have stopped looking for work fall into
the third and last figure...which is the highest figure.

I could care less about the unemployment numbers...I'm much more
concerned about "effective employment". When you have former
engineers (software, hardware, electrical, etc) working part-time
retail jobs...those people are NOT effectively employed.
Same goes for former dbase admins, sys admins, etc from the IT sector
that are now doing dry-walling, driving trucks or other some such
job.
Their skills are NOT tied into the proper market. Their wages are
now what I term "survival wages". Yes, they are "employed" but they
aren't really adding much to the economy...

[Frodo]

16. I can fil in a few blanks there.

There are actually SEVERAL numbers, the most commonly used is the "U3" figure (5.7% today). But there's a lower ("U1"?) figure that just represents people unemployed for more than 12-13 weeks. "Discouraged workers" actually falls into the NEXT category ("U4") and is usually only slightly higher than the official number since it's awfully hard to get counted as "discouraged". You have to want/need a job and NOT be looking for one BECAUSE you just don't believe there are any jobs to be found. That just isn't very common. Look at good 'ol mhr here. He's CLEARLY "discouraged" but there is no way he's going to stop looking for a job, so he falls into U3 not U4.

That "last figure" (though it really isn't the last, there's a whole extra sheaf of numbers that try to account for total unemployment) is a split "U6a" and "U6b" that DO include "discouraged workers" but also includes all of those people who are UNDERemployed. THAT's the big jump. The current U6 figure is somewhere in the high 9's (possibly 10%). Even THAT does not account for all of the people who are working full-time for less than they think they are worth. The problem is I'm not sure how you measure that. Just about EVERYONE thinks they make less than they are "worth".


(BTW - you can make pretty good money driving a truck)

[mhr]

17. OK Frodo - Let's Challenge One Of Your Definitions

As you define U4, this category covers Discouraged but still looking workers.

You are right that at 42 months of unemployment, I am still looking yet discouraged.

However, how does the Government know this. I do not report my status to anyone. Not the county, not the state, not the Feds.

So how does anyone know to count someone in the U4 category?

I understand that you wish to "cling" to these definitions steadfastly.

However, I argue that the definitions do not mean much anymore since so many white collar professionals have exhausted their unemployment benefits and are still unemployed.

[kalian]

18. Its all part of the "voodoo economics" thing....

The quick and dirty answer is: they don't know. And that's my point.
But still, I would like for them to concentrate on the "effectively"
employed.
Driving trucks might pay well...IF you are part of one of the BIG
trucking companies. Driving delivery trucks and the likes within
a given city is not the best pauing job out there.
And besides...people that had to take these jobs after being used to
living with 65K+/year are NOT going to spending it like before. Their
life style has gone to hell in a handbasket... Some have lost their
homes...their savings...and their marriages...

[Frodo]

20. Read one of the dozen or so links I've sent you over the months.

It's a statistical sampling. They DON'T know how to count YOU (unless you're in the revolving pool), but they DO sample ~100,000 people in the labor pool to determine where everyone fits. When they ask "did you look for work last week" and someone says "no"... they then ask "why?" (or some more scientific version of "why"). If the response is "there just aren't any jobs out there! There is no use in looking!" they get marked down as part of the labor force (even though "no job & not looking" would normally not qualify) and count as "discouraged".

I don't need to "cling to the definitions" they are the same definitions that almost EVERY country in the developed world uses. You can find out what the "U4" for Australia is, or for Italy. It isn't something invented by this administration for this time in history. These are standard economic figures.

Here's the BLS citation again:

Who is not in the labor force?

Labor force measures are based on the civilian noninstitutional population 16 years old and over. Excluded are persons under 16 years of age, all inmates of institutions and persons on active duty in the Armed Forces. All other members of the civilian noninstitutional population are eligible for inclusion in the labor force, and those 16 and over who have a job or are actively looking for one are so classified. The remainder--those who have no job and are not looking for one--are counted as "not in the labor force." Many who do not participate in the labor force are going to school or are retired. Family responsibilities keep others out of the labor force. Still others have a physical or mental disability which prevents them from participating in labor force activities.

A series of questions is asked each month of persons not in the labor force to obtain information about their desire for work, the reasons why they had not looked for work in the last 4 weeks, their prior job search, and their availability for work. These questions include: 1. Do you currently want a job, either full or part time? 2. What is the main reason you were not looking for work during the LAST 4 WEEKS? 3. Did you look for work at any time during the last 12 months? 4. LAST WEEK, could you have started a job if one had been offered?

These questions form the basis for estimating the number of persons who are not in the labor force but who are considered to be "marginally attached" to it. These are persons without jobs who are not currently looking for work (and therefore not counted as unemployed), but who nevertheless have demonstrated some degree of labor force attachment. Specifically, to be counted as "marginally attached," individuals must indicate that they currently want a job, have looked for work in the last 12 months (or since they last worked if they worked within the last 12 months), and are available for work. "Discouraged workers" are a subset of the marginally attached. "Discouraged workers" report they are not currently looking for work for at least one of 4 reasons: 1) they believe no job is available to them in their line of work or area, 2) they had previously been unable to find work, 3) they lack the necessary schooling, training, skills or experience, or 4) employers think they are too young or too old, or they face some other type of discrimination.

http://www.bls.gov/cps/cps_htgm.htm

[rapier]

5. notes

The only thing surprising about the job report was that it was so low. Duh, well sure you may say. What I mean is that they could just as easily have REPORTED a much higher number for as anyone can see the jobs and unemployment numbers like so many other government statistics are corrupt. Obviously saying unemployment dropped while adding 1000 jobs speaks for itself; that doesn't add up when the numbers are in the tens of millions. For the record in the 4th quarter four times as many people quit looking for jobs as those who got them.

There is nothing surprising about the moribund employment growth trend. After all the trend is 3 years old now. The causes are multiple but the root cause can be attributed to the maladjustments in our, and now the worlds economies, because of our embrace of insane credit growth policies and their attendent monetary explosion. Speculation and asset inflation is now the be all and end all goal of our Federal Reserve, Wall Street, our banking and financial industry and of course the Bush administration and The Party.


Most probably they decided to go with the low and possibly realistic number because the stock market was getting overheated at the expense of the bond market. The latters weakness means higher long term interest rates. (Bond prices SET the interest rates, except the very shortest term ones controlled by the Fed. Interest rates move inversely to bond prices. Lower bond prices = higher interest rates) Since the spring low, long term rates have been higher and all the talk of a super growth economy going forward was leading to anticipation of even higher rates. This has decimated the mortgage market, particularly the refi part of it. The mortgage market is the key component of so called 'economic growth' now. Without extraction of equity and the lowering of payments thru refinancing, a crucial leg in household income and thus consumption growth is gone.

Lower long term rates are imperative if the game is going to continue. Against that need is the specter of inflation and the falling dollar which demand higher rates. The Fed has embraced the first. That is obvious to anyone who cares to listen beyond the silly historical revisionim and hair brained analysis offerd up by Greenspan. It is now official policy to destroy the dollar and embrace inflation.

[bemildred]

6. Yup.

In another place I was reading Drucker pointing out that
the Japanese national debt is dollar denominated, so we
are deflating the Japanese debt. We are also deflating the
value of everybodies mortgages, and the mortgage holders are
going to go nuts when the rates go up and they are still
stuck with all those fixed-rate 5-6% loans. It can get really
wierd trying to figure out who benefits and who gets screwed
by all this manipulation of the funny-money; but the real
danger is that they will gum up the works so badly that
things grind to a halt. Herbert Hoover must be watching with
interest.

[rapier]

9. notes

I dont think he said that or that was his point. I saw something recently about the guy and his outlook, who I am an agnostic on.

The Japaneese government debt is in yen. That debt is stupendous, 150% their GDP, to our 'only' 70%. Much of it they are monetizing, which means printing. THey are detroying their currency, as we are the dollar.

The world is being flooded with money. Money that is simply printed or which is created thru credit creation. Much of that money is circleing at light speed thru the financial system to inflate asset values. Little is going into the real economy. Virtually all corporate 'profits' now stem from financial activity, as opposed to real goods and services being exchanged.

Perhaps this new era will succeed. I doubt it but perhaps.

[bemildred]

10. Here is the link:

http://www.jsmineset.com/home.asp

You may have to scroll down.

Here is the entry:

Friday, January 09, 2004, 4:48:00 PM EST

DRUCKER SEES DANGER SIGNS

Author: Jim Sinclair

Liquidity is without a home as the dollar declines. If equity markets run into trouble, will investors find their way into gold, rather than into US Treasuries?


In this month's Fortune Magazine, Peter Drucker was asked about the state of the U.S. economy and whether he saw any danger signs? His reply is as follows:

DRUCKER: Oh, yes. The biggest problem I see is our total dependence on foreign money to cover our government debt. Never before has a major debtor country owed its debt in its own currency. It is unprecedented in economic history. Japan, by contrast, owes all its foreign debt in dollars. Now if you devalue the dollar, the Japanese economy benefits, because their imports become much cheaper. And the value of their debt goes down also. The individual Japanese companies that invest in dollars would lose, but the overall Japanese economy gains. But we have no experience about what will happen here when we owe so much debt in our own currency and we're forced to devalue the dollar. Sooner or later, we're going to find out.

What's more, there is an enormous amount of surplus capital in the world for which there is no productive investment. The supply greatly exceeds the demand. So there is a very jittery body of excess money that is desperately in need of returns, and it could become panic-prone. We have no economic theory or model for this.

----

It's from goldbug friend of mine, YMMV.

[Art_from_Ark]

12. It is not the Japanese *national* debt that is denominated in dollars

it is the foreign debt. Since much if not most of Japan's foreign debt is connected with oil imports, and since oil is denominated in dollars, it goes without saying that this part of Japan's debt would be denominated in dollars. Thus, a strong yen (versus a weak dollar) would help to keep the price of oil imports low in Japan.

However, the national (that is, domestic) debt is mainly held by Japanese, either in the form of government bonds, or postal savings accounts. It is denominated in yen.

[rapier]

13. notes

Thanks for the backup.
Here is more on how it works. First when Japan sells us something made there some of the dollars end up in the companies bank account there. During periods when the dollar is strong they can, if they wish sell the dollars if they care to on the open market. In the 80's they just kept the dollars and bought up things here, during their boom when everyone was afraid they would own the world. (and not us, God's elect) With the dollar so weak those companies take the dollars and tell their bank to convert them to yen. Those dollars eventually end up with the Japanese central bank which has been buying US Treasury bonds with them.

This dollar recycleing is bizzare. They send us stuff. We send them paper, ie. dollars. The use the paper to buy more of our paper, ie. bonds. The dollars cover the deficit. To make it more bizzare the return on those bonds is being has been strongly negative for Japan. Since the returned interest is in dollars they are depreciatting along with the dollar itself. Furthermore the bonds themselves have been depreciaating in value since the spring. A double whammy.

China's playing this game too. European central banks, or bank now I guess under the EU, has been buying our bonds too, to a lesser degree.

Paper paper everywhere. Huge tidal waves of paper, espeically currencies are flooding the world. That is the excess 'investment' liquidty Drucker says has no 'producitve' home. So the money goes mostly into speculating on other financial assets, paper of course. In that some are getting very very very rich. Those getting rich speculaing want the game to go on forever and they sure as hell don't want to pay taxes on it to support the deadbeats. Besides as we know they are the key to our future because they 'invest'.

[German-Lefty]

19. EU points

European central banks, or bank now I guess under the EU, has been buying our bonds too, to a lesser degree.

As far as I know the EU doesn't get to make debts or accumulate wealth. The member states do this and they're not supposed to rack up more debt then 3% of GDP.

My personal theory: The US is experiencing inflation; it just doesn't know it yet.

If you were to measure US GDP in Euro, it wouldn't look too hot :-).

When should coutries, buy bonds from others? Maybe only when they've paid thier own debts off. Maybe it's a stablizing factor of some economies.

[bemildred]

14. Tsk, careless of me.

Not up on the nomenclature.

[rapier]

22. a start

Don't be sorry. Well, maybe a bit. It's often a badge of honor for progressives to be ignorant of matters relating to money and macro economics. I can appreciate this, but it has been a disaster.

Matters of money are not all that difficult to understand. Perhaps part of the problem is that money is so close to us, so ingrained in everything we do and think that it becomes impossible to stand back from it. Often we are reduced, in fact we are taught, that matters of money are best left to the high priests.

Read JK Galbraith's 'Money', to start. Very easy and entertaining.

[West Coast Democrat]

21. Morgan Stanley: False Recovery (offshoring, outsourcing, unemployment)

An interesting article posted here:

http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=104&topic_id=1010496