Economic Speed Round: December 2016

The latest helping of government data on jobs and the economy are remarkably rosy, but there are more than a few dark clouds surrounding the silver linings.

It’s the first Friday of December, so the job numbers for November are out from the Bureau of Labor Statistics, and the latest economic report came out from the Bureau of Economic Analysis on November 29th. The latest helping of government data on jobs and the economy are remarkably rosy, but there are more than a few dark clouds surrounding the silver linings. Let’s dig in to the numbers.

Official Unemployment Rate: 4.6%

The U-3 unemployment number is the biggest news from the latest jobs report, dropping to the lowest level since 2007. While a welcome sign of recovery, this is a number we could have seen four years ago without the burden of ObamaCare and massive taxing and spending programs that have slowed the economy. While the U-6 number also improved to a seasonally adjusted 9.3%, the Labor Force Participation Rate and Employment-Population Ratio numbers remained at their historically low 62.7% and 59.7% rates, respectively.

This indicates that the improvement in the unemployment rate is largely due to new workers entering the work force and finding jobs, while older members of the work force continue to drop out of the work force entirely. Only when we see a significant increase in both the LFPR and EPR numbers, along with a low unemployment rate, could we confidently say sidelined workers (ie, not presently in the work force) by the recession are reentering the work force. We aren’t seeing that, so put away the Champagne for now.

Jobs Created: 178,000

The economy created a solid number of jobs in November, though 65,800 fewer jobs than the Q4 2013-2015 average of 243,800 and 102,000 fewer jobs than same period last year. This isn’t something we can just gloss over, because that indicates that 26.9% fewer jobs were created from the prior three year average. That’s not insignificant, especially when considering the sheer number of temporary retail jobs that are generally created in late November leading into the Christmas shopping season.

The number of workers marginally attached to the work force jumped to 1.9 million, “up by 215,000 from a year earlier” (from the Labor Report), and, according to table B-1 from the report, year to year retail jobs were down 8.3%, with department stores reporting 5.1% fewer jobs from just 2015. While some of this may be due to increased competition from online retail, it’s too early to write it entirely off to that. It also represents quite a bit of dark cloud around the silver lining.

Q3 Annualized GDP Growth: 3.2%

The second estimate of the Q3 number came out at the end of last month, showing the first GDP growth rate above 3.0% since 3rd Quarter of 2014, only the eighth time the GDP growth rate has broken 3.0% during the Obama administration. Tempering this good news is that the stimulus programs of Quantitative Easing and historically low federal funds rates remain in place.

If the economy were really in good shape, the GDP growth rate should be over 10% given current stimulus conditions, yet both growth and inflation remain at very modest levels. If we think of stimulus programs as hospital care, until the patient isn’t receiving any more treatment, we can’t say definitively that the patient, being the US economy, is no longer very sick.

That’s the Economic Speed Round for December 2016. Catch you in a month.

Liberty is For The Win!


We just checked, and it turns out that fighting for Liberty isn’t free, because it requires time and energy to research, prepare, and propagate this message for you. Please drop just a dollar a month into the proverbial tip jar and become a Patriot Patron. Of course, don’t forget to like, subscribe, and share. Keep this fight for Liberty going! – @LibertyIsFTW

Economics Speed Round: November 2016

As we look toward the end of the year and the 4th Quarter, the change in political leadership could change the economic landscape, depending on how quickly the Congress and White House can enact whatever policy they plan on pushing forward.

The election is over with a surprise ending that many people, including myself, missed. All of the data, both positive view of the president and positive economic data seemed to give momentum to the Democratic candidate. Given the intensity of the election, this article has been delayed, but, even given the age of the data, it’s important to look back at it.

Highlights from the September Jobs Report

  • Net nonfarm payroll rose by 161,000.
  • the U-3 unemployment was little changed at 4.9 percent, a 0.1 point improvement.
  • the U-6 unemployment dropped 0.1 point in October to 9.2 percent, but there was little change of the seasonally adjusted U-6 of 9.5 percent.
  • labor force participation rate, at 62.8 percent, changed little.
  • employment-population ratio, at 59.7 percent, changed little.

Job numbers for August were revised upward to 176,000, and job numbers from September were revised upward to 191,000 net jobs created, even after several downward revisions. Compared to the 2013-2015 average for October, the current number is 60,000 fewer than the 228,000 average of the previous three years, indicating a continuing long term softening in the employment market. Other indicators are changing negligibly.

Highlights from the 2nd Quarter Economic Report

  • 3rd Quarter GDP grew at an annual rate of 2.9 percent, in its initial estimate.
  • 2nd Quarter GDP grew at an annual rate of 1.4 percent.

The 3rd Quarter GDP number is +1.5 points higher than the 2nd Quarter GDP number, and a full +2.1 points higher than the 1st Quarter GDP number. While the GDP number is obviously relatively robust (compared to the average for the Obama Administration) in this initial estimate, it is largely based on increases in consumer spending, exports, and federal spending, per the report. In the background are the continued Quantitative Easing monetary policy and a low federal funds rate. Inflation has been increasing (to 1.5% in October from 1.1% in September), but remains very low overall, and is currently projected to be lower in November, which indicates a very low likelihood of any change in Federal Reserve policy.

As we look toward the end of the year and the 4th Quarter, the change in political leadership could change the economic landscape, depending on how quickly the Congress and White House can enact whatever policy they plan on pushing forward. There are significant questions as to the exact policy directions that the incoming leadership will be taking the country, as many of his campaign policies have already been brought into doubt in the days after the election. Time will tell.

Liberty is For The Win!


We just checked, and it turns out that fighting for Liberty isn’t free, because it requires time and energy to research, prepare, and propagate this message for you. Please drop just a dollar a month into the proverbial tip jar and become a Patriot Patron. Of course, don’t forget to like, subscribe, and share. Keep this fight for Liberty going! – @LibertyIsFTW

Economics Speed Round: October 2016

With the election upcoming, we’ve no choice but to wait and see if the bubble economy bursts before or after the election.

So the job numbers came out last week, but the presidential debate and the fall out from the “Trump Tapes” scandal has dominated the news. Let’s talk about the economy, because it’s the only possible game changer left that could seriously impact the elections.

Highlights from the September Jobs Report

  • Net nonfarm payroll rose by 156,000.
  • the U-3 unemployment was little changed at 5.0 percent.
  • the U-6 unemployment dropped 0.4 point from September to 9.3 percent, but there was no change of the seasonally adjusted U-6 of 9.7 percent.
  • labor force participation rate, at 62.9 percent, changed little.
  • employment-population ratio, at 59.8 percent, changed little.

Job numbers for July were revised downward to 252,000, and job numbers from August were revised upward to 167,000 net jobs created. The 156,000 jobs created in September is a decrease of about 11,000 jobs from August. Compared to the 2013-2015 average for September, the current number is 50,000 fewer than the 206,000 average. Together, this reveals a continuing softening in the employment market. Of particular interest is the increase in the official U-3 Unemployment number from 4.9% in August to 5.0% in September, a 0.3% increase since May 2016.

Highlights from the 2nd Quarter Economic Report

  • 2nd Quarter GDP grew at an annual rate of 1.4 percent, a +0.3 percent revision.
  • 1st Quarter GDP grew at 0.8 percent (revised).

This third estimate of the 2nd Quarter GDP number is 0.6% higher than the 1st Quarter GDP number, showing marginal growth, but, compared to the 2.6% from 2nd Quarter 2016, 1.4% still indicates a significant slow down. Later this month, we’ll have initial numbers from the 3rd Quarter, and a slow down could significantly impact the election, especially given the significant stimulative policies already in place. The bubble that the US economy is in seems ready to burst.

The Federal Reserve Committee met at the end of September and “decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent“. This came as a surprise to no one, especially given the impending election. An increase in the federal fund rate would have been have sent a signal that the economy is improving, thus impacting the election positively for Hillary, while doing nothing is fairly ambiguous. With the election upcoming, we’ve no choice but to wait and see if the bubble economy bursts before or after the election.

Liberty is For The Win!


We just checked, and it turns out that fighting for Liberty isn’t free, because it requires time and energy to research, prepare, and propagate this message for you. Please drop just a dollar a month into the proverbial tip jar and become a Patriot Patron. Of course, don’t forget to like, subscribe, and share. Keep this fight for Liberty going! – @LibertyIsFTW

Economics Speed Round: September 2016

Coupled with a broad base slow down in production and construction, we still appear on track for a recession starting in 3rd quarter or 4th quarter 2016, though it does not appear to be a traditional recession.

Wow, people are talking about the employment data for August, which is exciting, because it shows people are paying attention. Unfortunately, they are focusing on completely extraneous information and working themselves into a panic in order to justify their own political decisions. This shows just how badly informed the populace is about economic data. Let’s just start with the 94,391,000 people not in the work force, since it’s what people are talking about.

From the BLS website: “The survey is designed so that each person age 16 and over (there is no upper age limit) is counted and classified in only one group.” So the survey includes tens of millions of retirees, who are watching TV on the days they aren’t out playing golf or fishing. It also includes tens of millions of stay at home housewives and adults staying home as caretakers to elderly parents, who have no interest or ability to reenter the work force. It also includes tens of millions of full time students in high school, college, or post graduate programs who just don’t have the time to work.

Now, there are, in fact, some portion of that 94,391,000 people who are working age (younger that 65), out of work, and just discouraged, and that is the number we should be concerned about, but it’s very difficult to bore down to that number with any accuracy using the data available, and it’s only a fraction of the 94,391,000 number. So let’s focus instead on the other key numbers.

Highlights from the August Jobs Report

  • Net nonfarm payroll rose by 151,000.
  • the U-3 unemployment was unchanged at 4.9 percent.
  • the U-6 unemployment dropped to 9.7 percent, and reducing by 0.4 points, but there was no change of the seasonally adjusted U-6.
  • labor force participation rate, at 62.8 percent, changed little.
  • employment-population ratio, at 59.7 percent, changed little.

The 151,000 jobs 100,000 fewer jobs than was created in July and is 60,000 jobs below the average of the last 3 years of August job numbers of 212,300. It is also 60,000 jobs below the average for 3rd Quarter job creation for the last 3 years of 211,800. This points to continued softening of the economy. It was below analyst predictions. In the background, jobs numbers for July were revised downward, bringing the 2nd Quarter job creation monthly average down to a very troubling 146,000 jobs.

Especially troubling are decreases in jobs in Construction of 6,000 jobs and Manufacturing of 14,000 jobs and Durable Goods of 16,000 jobs in August. Overall goods production decreased by 24,000 jobs, representing a fairly broad slow down in production in August.

Highlights from the 2nd Quarter Economic Report

  • 2nd Quarter GDP grew at an annual rate of 1.1 percent, a -0.1 percent revision.
  • 1st Quarter GDP grew at 0.8 percent (revised).

The final number for 1st Quarter 2016 is in at 0.8%. The 2nd Quarter 2016 number was revised downward from a grim 1.2% GDP growth rate to a grimmer 1.1% GDP growth rate. Accounting for govt spending, the economy is hovering around a 0% GDP growth rate. Combined with aggressive stimulus programs, such as quantitative easing and the federal funds rate still between 0.25% and 0.5%, this poor growth rate remains extremely troubling. Coupled with a broad base slow down in production and construction from the labor data, we still appear on track for a recession starting in 3rd quarter or 4th quarter 2016, though it does not appear to be a traditional recession.

Liberty is For The Win!


We just checked, and it turns out that fighting for Liberty isn’t free, because it requires time and energy to research, prepare, and propagate this message for you. Please drop just a dollar a month into the proverbial tip jar and become a Patriot Patron. Of course, don’t forget to like, subscribe, and share. Keep this fight for Liberty going! – @LibertyIsFTW

Economics Speed Round: August 2016

The primary drivers for 3rd Quarter or 4th Quarter economic downturn in the United States remain driven by domestic policies.

Economic data came out in droves in the last two weeks, with the Bureau of Labor Statistics putting out jobs numbers last Friday, the Bureau of Economic Analysis releasing their 2nd Quarter initial estimate on July 29th, and the Federal Reserve issuing a news release on July 27th, so we’ll handle things back to front.

Highlights from the July Jobs Report

  • Net nonfarm payroll rose by 255,000 in July.
  • the U-3 unemployment was unchanged at 4.9 percent in July.
  • the U-6 unemployment rose to 10.1 percent in July, and worsening of 0.2 points.
  • labor force participation rate, at 62.8 percent, changed little in July.
  • employment-population ratio, at 59.7 percent, changed little in July.

The number for July was a solid 255,000 jobs, but the U-6 number worsened, and there was no change in the LFPR or EPR, which remain at historic lows despite stimulative rates and Quantitative Easing policy from the Federal Reserve. Historically speaking, the average July number was above the average for July, but much of the hiring in July is hold over hiring from May, which was revised upward from +11,000 to +24,000, about 180,000 jobs shy of the average performance of May. The three month average for the last three months was only 190,000, short of the 200,000 average.

Highlights from the 2nd Quarter Economic Report

  • 2nd Quarter GDP grew at an annual rate of 1.2 percent.
  • 1st Quarter GDP grew at 0.8 percent (revised).
  • 1st Quarter GDP revised 0.3-percentage point downward.

The biggest news is that the  1st Quarter GDP was revised downward, dropping below a 1.0% growth for the first three months of the year. The 2nd Quarter GDP growth was not robust, either, coming in well below half of 2nd Quarter GDP of 2015, which was 2.6% annualized growth. The economy hasn’t had a 2.0% quarterly growth rate since 3rd Quarter 2015, and hasn’t had a quarter growth rate above 3.0% since 3rd Quarter 2014.  All indications continue to point toward a recession beginning in this Q3 or Q4 of 2016.

Highlights from the Federal Reserve

  • Inflation is below the Committee’s 2 percent longer-run objective.
  • The Committee currently expects economic activity will expand at a moderate pace and labor market indicators will strengthen.

The Federal Reserve has no plans to change any policy, either their federal funds rate presently between 0.25% and 0.5% or the Quantitative Easing policy, creating free funds, which will continue to keep the stock market afloat. This indicates that the economy still is so weak that it is in no danger of generating inflationary pressure outside of stocks and bonds, where stock prices remain inflated, but additional money continues to flow from the Reserve Banks, so there will be no slow down there.

European markets have stabilized after the contentious #Brexit vote, proving that much of the fears of long term economic fallout from Britain leaving the European Union was overblown. This may remove political and economic barriers to future exits from the EU, though there does not appear to be as much political support in any other EU countries for such a move.

The primary drivers for 3rd Quarter or 4th Quarter economic downturn in the United States remain driven by domestic policies. These economic headwinds can only help the Republicans in 2016, but so much political damage has been done to the Republican brand, that even with every political advantage from almost continuous unfavorable news about the Democratic candidate, any opportunity for a change in political leadership in the White House seems extremely unlikely.

Liberty is For The Win!


We just checked, and it turns out that fighting for Liberty isn’t free, because it requires time and energy to research, prepare, and propagate this message for you. Please drop just a dollar a month into the proverbial tip jar and become a Patriot Patron. Of course, don’t forget to like, subscribe, and share. Keep this fight for Liberty going! – @LibertyIsFTW

Economics Speed Round: July 2016

The bottom line is that while the jobs number for June seems strong, it is accompanied by enough asterisks that excitement over it should be well tempered.

287,000 jobs were created in June is the headline. This number tops expectations, but underlying data strips away some of the shine on this number that leads off this month’s Economics Speed Round. The Employment Situation Report came out today, and the numbers are a mixed bag. Most media attention will focus on what seems to be an unexpectedly large number of jobs created for June.

Total nonfarm payroll employment increased by 287,000 in June, and the unemployment rate rose to 4.9 percent..

This surprised analysts, but the increase in the unemployment number shows that there are still difficulties in the market. For example, the large number of hirings in June seems to be indicative of delayed hiring from May, which saw its already abysmal job number of 38,000 revised downward to 11,000. Right now, the average for 2nd Quarter job numbers is 147,333 jobs per month. That’s down from a 1st Quarter average of 195,667 per month, by about 50,000 fewer jobs.

Both the labor force participation rate, at 62.7 percent, and the employment-population ratio, at 59.6 percent, changed little in June.

While percentage of workers in the work force did not change, the unadjusted U-6 number jumped up by half a percentage point from May to 9.9% (Table A-15), further suggesting that hiring in June is delayed hiring from April and May.

In June, job growth occurred in leisure and hospitality, health care and social assistance, and financial activities. Employment also rose in information, largely reflecting the return of workers from a strike.

This won’t hit the headlines, about 28,000 jobs in information and 11,000 jobs in “motion picture and sound recording industries” are fluffing the June 2016 number. Pulling these numbers out, and the actual jobs created looks more like 248,000. Of these jobs, 59,000 were in leisure and hospitality, which are reflective of summer jobs. Further, the report talks about the downward trend that we covered in last month’s ESR.

Job gains in leisure and hospitality have averaged 27,000 per month thus far this year, down from an average of 37,000 in 2015, reflecting slower job growth in food services and drinking places.

The big job number conceals a slowdown in the economy that continues this year. The third estimate of the 1st Quarter GDP number from Bureau of Economic Analysis came out quietly, and the economy grew by only 1.1%. The economy remains anemic, and the underlying markers are very poor for the upcoming months, which is why the Federal Reserve backed off of plans to increase the federal funds rate in mid June.

The bottom line is that while the jobs number for June seems strong, it is accompanied by enough asterisks that excitement over it should be well tempered. The economy is not healthy. It is not generating jobs at the rate it should be. We are still on track for a recession this year.

That’s the Economics Speed Round for July. Catch everyone next month.

Liberty is For The Win!


We just checked, and it turns out that fighting for Liberty isn’t free, because it requires time and energy to research, prepare, and propagate this message for you. Please drop just a dollar a month into the proverbial tip jar and become a Patriot Patron. Of course, don’t forget to like, subscribe, and share. Keep this fight for Liberty going! – @LibertyIsFTW

 

Economics Speed Round: June 2016

Unfortunately, the stage is set for a recession. Brace yourselves.

Straight to business. Buried under the abysmal jobs report from May was the second estimate of the 2016 Q1 GDP Growth from the Bureau of Economic Analysis. The news is not good.

Real gross domestic product increased at an annual rate of 0.8 percent in the first quarter of 2016, according to the "second" estimate released by the Bureau of Economic Analysis.

This represents a gain of only 0.3% points over the first estimate, as other factors are reported to the BEA. With several negative indicators, such as large decreases in hiring, there are indications that the final number for 2016 Q1 will be below 1.0% and that 2016 Q2 will be poor as well. The Bureau of Labor Statistics released their most recent jobs numbers last Friday, with two very interesting and conflicting data points.

The unemployment rate declined by 0.3 percentage point to 4.7 percent in May...

This unemployment rate would normally be cause for celebration, as that’s the lowest rate in a decade, but it’s clear that this number is an artifact of the poor formula for the “official” U-3 number, as the numbers fail to account for people who stop looking for work and are no longer counted as part of the work force. This 0.3% point drop in unemployment is utterly nonsensical when the jobs created are taken into account.

"[N]onfarm payroll employment changed little (+38,000)...

This number is abysmal, full stop.

There isn’t any way to dress this up as a positive number for the economy. We have to go all the way back to September 2010, in the tail end of the Great Recession, to find a jobs number this bad, with major job losses in mining, information, and manufacturing. The bottom may be ready to fall out from under the economy.

U-6 Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force: 9.4%

This is a 0.1% increase in the U-6 unemployment number, which is a larger overall number than the U-3 number. This increase in the U-6 number proves that the officially reported U-3 number (at 4.7%) is misleading, especially given a sharp spike in the number of people who have been moved to part time positions from full time.

The number of persons employed part time for economic reasons .. increased by 468,000 to 6.4 million in May..

With almost half a million people being moved to part time positions, this is a major indicator of an economic slow down. Companies are shedding work hours to brace for impact.

In May, the civilian labor force participation rate decreased by 0.2 percentage point to 62.6 percent. The rate has declined by 0.4 percentage point over the  past 2 months, offsetting gains in the first quarter.

The decrease in the civilian labor force participation rate proves that the decrease in the U-3% number is largely due to attrition from the work force, rather than any gains in the job market. Unfortunately, the stage is set for a recession. Brace yourselves.

That’s the Economics Speed Round for June. Catch everyone next month.

Liberty is For The Win!


We just checked, and it turns out that fighting for Liberty isn’t free, because it requires time and energy to research, prepare, and propagate this message for you. Please drop just a dollar a month into the proverbial tip jar and become a Patriot Patron. Of course, don’t forget to like, subscribe, and share. Keep this fight for Liberty going! – @LibertyIsFTW