Archive for the ‘Unemployment’ Category

Mission Not-Quite Accomplished

Wednesday, February 26th, 2014

Remember when the announced goal of quantitative easing (QE) was to reduce the unemployment rate to 6.5%?

It’s now 6.6% and heading down.  So can we expect QE to finally end?MW-BS355_CIVPAR_20140110090655_MG

Not really.  While new Fed Czar Janet Yellen talks about continuing tapering, many believe that tapering will stop and some believe she may reverse direction and increase the rate of bond buying.  Even if The Fed continues to cut back bond purchases by $10 billion a month, it will still take more than six months for QE to end.  Minutes of the Federal Open Market Committee’s January meeting, which were released this week, suggest that the final taper would take place in October 2014.

More specifically, the minutes say, “Several participants argued that, in the absence of appreciable change in the economic outlook, there should be a clear presumption in favor of continuing to reduce the pace of purchases by a total of $10 billion at each FOMC meeting.  That said, a number of participants noted that if the economy deviated substantially from its expected path, the Committee should be prepared to respond with an appropriate adjustment to the trajectory of its purchases.”

Tapering aside, does anyone really think the unemployment rate is really decreasing?

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Goodbye, Middle Class

Friday, February 7th, 2014

With all of the talk in Washington about equality, you have to wonder how the gap between rich and poor has widened to the point where even The New York Times is questioning the future survival of the middle class.

Disposable Income

Some have, indeed, made the transition from middle class to upper class and are enjoying a more comfortable lifestyle.  They may not be part of the 1%, but they’ve broken away from the middle.

The New York Times noted that, “In 2012, the top 5 percent of earners were responsible for 38 percent of domestic consumption, up from 28 percent in 1995 … Even more striking, the current recovery has been driven almost entirely by the upper crust … Since 2009, the year the recession ended, inflation-adjusted spending by this top echelon has risen 17 percent, compared with just 1 percent among the bottom 95 percent.”

Put aside your class envy for a minute, though, and recognize that consumer spending by the top 5 percent is keeping the economy out of a recession – albeit, the current recovery has been so weak we may as well be in a recession.

The Great Divide

And while some are moving up, many more are falling down, creating a greater divide than ever between rich and poor.  Consider a few statistics from a cheery blog called, The Economic Collapse (and republished on Zerohedge): (more…)

Solving Our Problems By Executive Order

Friday, January 31st, 2014

Why didn’t he think of this sooner?

President Obama announced during this week’s State of the Union address that he is going to bypass Congress and issue more executive orders during the last three years of his presidency.

You might think that sounds like a dictatorship. After all, our government was formed around a foundation of checks and balances, with Congress and the judicial branch of government keeping the President from acting on his own. He’s not a king, a tyrant or a despot. He’s president of a democratic republic, not a banana republic.Obama

But think about it. We’ve been waiting for years for Congress to handle tough issues like immigration reform, tax reform, Social Security reform, Medicare reform, trade reform and budget reform. Nothing ever happens. When Congress does handle tough issues, we end up with laws that run more than 2,000+ pages long, that no one understands and that bear little resemblance to their original intent.

Do we really want another Affordable Care Act or another Dodd-Frank Consumer Protection Act? Do we really want all of those milquetoast compromises? And what about the billions in pork that have to be added to even the most basic bill before Congress approves it?

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Some Recovery

Friday, January 10th, 2014

The government’s stimulus programs are not working and neither are a growing number of Americans.

In October, we noted that the number of Americans not working exceeded 101 million, setting a record.  But records are made to be broken and the number today is even higher – even while the official unemployment rate continues to drop.

When we wrote in October, the U.S. Bureau of Labor Statistics (BLS) reported that 90,609,000 Americans who are 16 or older were neither working nor looking for work.  Since then, the number has increased to 91,808,000.

LFPR
But that number doesn’t include unemployed Americans who are looking for work, which was 10.4 million in December, bringing the total number of Americans who are not working up to more than 102 million.  That’s an addition of nearly 1 million since October … during what has widely been viewed as a period of economic recovery.

The civilian labor force fell from 155.3 million to 154.9 million in December, bringing the labor participation rate down from 63.0% to a 35-year low of 62.8%.

While the BLS expected 197,000 jobs to be created in December, only 74,000 jobs were created.  That’s a miss of more than 100,000 jobs.  The BLS says inclement weather affected the number of forced part-time jobs being created.  “Forced part-time” jobs are those where a former marketing manager who has been out of work for two years runs out of money and takes a position working the deep fryer at Wendy’s because there are no other options.

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Define “Forever”

Friday, November 15th, 2013


In May, when Fed Chairman Ben Bernanke said that quantitative easing could not continue forever, the stock market tanked and the word “tapering” became the most feared word on Wall Street.

This past week, during her Congressional hearing as President Obama’s nominee to become the next chair of the Federal Reserve Board, Janet Yellen said, “QE cannot continue forever.”  The market moved higher.

Is it Ben morphing into Janet or Janet morphing into Ben?

Is it Ben morphing into Janet or Janet morphing into Ben?

Both the current Fed chair and his assumed successor assured us that the party’s not over, that there are still plenty of bonds to be bought.

But “forever” seems farther away now that it was back in May.

Ms. Yellen made it clear during her hearing that there’s still plenty of work for QE to do.  Citing high unemployment, she said, “It is important not to remove support, especially when the recovery is fragile and the tools available to monetary policy, should the economy falter, are limited.”

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Another Record Smashed: More Than 100,000,000 Americans Not Working

Friday, October 25th, 2013

The Labor Force Participation Rate has fallen and it can’t get up.

The U.S. Bureau of Labor Statistics (BLS) reported this week that 90,609,000 Americans who are 16 or older are neither working nor looking for work.  Only 63.2% of Americans are working or looking for work.  Anyone who is unemployed who has looked for a job in the past four weeks is counted as participating in the labor force.

LFPRAdd in unemployed Americans who are looking for work and the total exceeds 101 million.  With a total population of about 313,914,040, nearly one American in three is 16 or older and is not working.

The Labor Force Participation Rate peaked at 67.3% in 2000 and it hovered around 66% in 2007 and 2008, when the financial crisis began.  Now, after five years of stimulus spending and quantitative easing, it has dropped about 3%.  In July, the number of nonparticipants climbed by more than half a million.

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The Queen of QE

Friday, October 11th, 2013

Amidst a government shutdown, a debt-ceiling crisis and other assorted financial turmoil, President Obama this week nominated Janet L. Yellen to chair the Federal Reserve Board.

As a Keynesian economist and academician who served as second-in-command at The Fed, her boost to the top spot was about as predictable as another budget crisis in Washington.  She still needs to be confirmed by the U.S. Senate, but confirmation there is also as predictable as another budget crisis in Washington.

So what can we expect from the first woman to ascend to one of the most powerful positions in the free world?

Janet Yellen

Janet Yellen

The presses will keep rolling.  Current Chairman Ben Bernanke has become the King of Quantitative Easing, but he has been in denial about it.  His roots are as a monetarist.  You wouldn’t know it by his record as chairman, but he is a follower of Milton Friedman.

Ms. Yellen, conversely, is a true believer.  As an “unreconstructed Keynesian,” which we assume is the opposite of a reconstructed Keynesian, she believes that stimulus is a cure-all.  If the government spends more and the Fed prints more, evidence to the contrary, the economy will boom.

As such, we can expect a continuation of QE.  The King is dead, long live the Queen.

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The Beat Goes On

Friday, September 20th, 2013


From a future article in The New York Times:

Janet Yellen, retiring chair of the Federal Reserve Board, announced that The Fed’s quantitative easing program, aka QE12, is close to meeting its goal of achieving a 6.5% unemployment rate. Yellen

With The Fed’s bond portfolio exceeding $10 trillion, The Fed is running out of government bonds to buy, but Chairwoman Yellen said she’s confident the U.S. Treasury will pick up the pace at which it issues new bonds.

Chairwoman Yellen praised the quantitative easing program, which she said has managed to bring the unemployment rate down to 6.8% from a peak of nearly 10% in just 12 years.  QE has also helped the economy grow at a rate of nearly 2% a year.

During a brief press conference, for the first time since the quantitative easing program began, she was asked, “How does buying bonds create jobs?”

She explained that QE obviously decreased unemployment, since the unemployment rate exceeded 9% when QE began and is now approaching 6.5%.

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Get Back to Work

Friday, September 6th, 2013

Labor Day has passed.  It’s time to get back to work … or at least think about work.  Work, or the lack of it, is what the economy is all about.  When Americans are working, they spend money.  When they spend money, the economy grows.

So if the economy is truly recovering, as many pundits suggest, then the unemployment rate should be dropping.  So is it?  Maybe. Gallup

On the One Hand

In today’s report, the U.S. Bureau of Labor Statistics reported that during the month of August, nonfarm payroll employment increased by 169,000, bringing the unemployment rate down from 7.4% to 7.3%.  That’s not a significant change, but it beats the 8.1% rate of a year ago.

In addition, the Institute of Supply Management reported this week that its manufacturing index edged up to 55.7 from 55.4 in July.  That’s also not a significant change, but economists had been forecasting a modest decline.  Instead, it was the third straight month of growth, as any reading above 50 indicates growth.  In addition, the new orders index jumped nearly 5% to 63.2.

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The Age of Low Expectations

Friday, August 16th, 2013

Observing today’s global economy is like watching Adam Sandler’s best movie.  It’s horrible, but it could be worse.

Consider what passes for improvement today:

Europe is no longer in a recession.  Under the headline, “Eurozone’s longest-ever recession comes to an end,” the Associated Press quoted Eurostat, the European Union’s statistics office, announcing that the 17 EU countries that use the euro saw their economic output increase by 0.3% in the second quarter of 2013.  Over a year, the Eurozone’s growth rate would be 1.1%.

The DJIA is following a familiar pattern.

The DJIA is following a familiar pattern.

That’s the first quarterly growth for the Eurozone since 2011, but it requires some perspective.  China’s growth slowed to just 7% this year and it’s widely regarded as a calamity, signaling that the world’s second largest economy is on the brink of failure.  Europe’s economy is growing at a rate of 1.1 % and the party hats are out because some believe that the Eurocrisis is finally over and we’ll never have to hear the term “sovereign debt” again.

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