Blue World Jobs Report Analysis 12-6-2013

Posted on December 6, 2013 by blueworldadmin

Blue World Employment Situation Report Analysis

Release Date: Usually the first Friday of each month

Market Sensitivity: VERY HIGH

Management Value: VERY HIGH

Friday, December 06, 2013

Brain surgery is not rocket science to a brain surgeon©

The November jobs report is a great example of why individual reports are not nearly as important as trends. There are some nuggets of encouraging news this time which is in stark contrast to last month. Unfortunately those bright spots are followed by a “but.”

The unemployment rate fell to 7.0% on the creation of 203k new hires. I don’t think we have to explain the math again. The magnitude of new hires outpaced the increase in labor force size, thereby forcing the unemployment rate down in spite of no actual improvement. The 203k includes 7,000 government hires, so the private sector only added 196k.

We acknowledge that some of the data is a little skewed by the return of Federal workers following the shutdown. Those effects will be out of the system by next month, but the impact was fairly minor and actually provided more benefit than harm to this report.

The labor force grew by a respectable 455k in November of 2013, but that was not enough to offset October’s decline of 720k, and we are still below the total labor force size of a year ago. Wages have shown an increase of about 2% which is currently beating inflation. The participation rate popped up by .2, but that keeps it at 63 in all-time low territory and still a huge .6 below November of 2012. The work week got a little longer, but is still range bound. Manufacturing hours, for example, has run between 40.5 and 41 hours per week going back to 2012 with no breakout. We still have over 91 million people out of work, and when those are added to the count used to calculate the rate we are still over 13% unemployment.

Here are the most recent Force vs. Employed and Not in Labor Force Graphs.

Not in Force 12-6-13

Hopefully, this will be the first of reports to start an upward trend. We’ve had a few head fakes like this over the last few years, so here’s to hoping some positives hold and grow.

Matt will be going over this report on WBBM Chicago’s Noon Business Hour at 12:10pm on AM780 and 105.9 FM. A link to the podcast will go out later tonight.

Merry Christmas and Happy New Year from everyone at Blue World. We’ll see you for the first report of 2014 on Friday, January 10.

Thanks for reading and, please, stay tuned…

Release Site: www.bls.gov

Every effort is made to ensure accuracy of data transcription but accuracy cannot be guaranteed. The official release site should be cross referenced. The analysis represents the opinion of Blue World Asset Managers, Ltd. who does not warrant or guarantee predictions based on its analysis.

©Blue World Asset Managers, LTD Friday, December 06, 2013

Blue World Jobs Report Analysis November 08 2013

Posted on November 8, 2013 by blueworldadmin

Blue World Employment Situation Report Analysis

Release Date: Usually the first Friday of each month

Release Site: www.bls.gov

Market Sensitivity: VERY HIGH

Management Value: VERY HIGH

Friday, November 08, 2013

Brain surgery is not rocket science to a brain surgeon©

The Good News Stops at the Headlines…again.

Yesterday I was introduced to a great phrase. In a nod to my friends at Slocum out of Minneapolis I am reporting, “The good news has a lot of hair on it.”

In a quick take on the GDP report that surprised the “experts” to the upside, the news wasn’t very good. The 2.8 percent growth came in .8 percent higher than expected, but of that .83 was inventories, so actual growth was below 2 percent. In addition, the downward trend in personal expenditures that began in 2010 continues. Those are just a couple of the lowlights.

The jobs report didn’t offer much better. The net jobs created in the private sector came in at 212,000. They are reporting 204,000 because that number includes government, which shed 8,000 jobs, so the net private sector number is actually 212,000. While not the 250,000 we need to break even, it sounds better than the low one hundreds we’ve seen lately, right? Sorry.

I hope you’re sitting down.

The civilian labor force dropped by 720,000 dragging the participation rate down a whopping .4 percent to 62.8 percent. To put this in perspective, the records on participation rate go back to 1948. This number is an all-time record low and running 10 points lower than it was at the worst of the recession. I grow so weary of the word “recovery.”

The number of those unemployed rose, and the number of those employed fell by 735,000! The math is simple – 212,000 new jobs, with 735,000 fewer people with jobs, and the number of those reported as not in the labor force soared by…wait for it…932,000.

We appear to be seeing Obamacare’s initial effect on the labor market as those involuntarily working part-time is on the rise for the past three months.

The overall workweek hours, manufacturing hours, and manufacturing overtime hours are all flat while construction’s week shortened by .2 hours.

The conclusion is becoming almost boilerplate, folks. If you invest real money and employ real people, we cannot stress caution enough. The risks are great and many. Fiscal policy is indefensible and not limited to our shores. Bond buying seems to never end, and the markets now celebrate bad fundamentals for fear the Fed will quit “stimulating.” We are not trying to make a living in rational times, and there is no evidence that anyone who could has any appetite to change it. Stay safe out there.

In addition to the print version on December 6^th I am scheduled to do live analysis on Chicago WBBM AM780 and 105.9FM’s Noon Business Hour at about 12:10pm Central. I hope you can make it.

Have a wonderful and safe Thanksgiving.

Thanks for reading and, please, stay tuned…

Release Site: www.bls.gov

©Blue World Asset Managers, LTD Friday, November 08, 2013

Blue World Employment Situation Report Analysis 9-6-2013

Posted on September 6, 2013 by blueworldadmin

Blue World Employment Situation Report Analysis

Release Date: Usually the first Friday of each month

Release Site: www.bls.gov

Market Sensitivity: VERY HIGH

Management Value: VERY HIGH

Friday, September 06, 2013

Brain surgery is not rocket science to a brain surgeon©

Whoa, Nellie!!

Last month we all but hit copy and paste from May because July was just the same ‘ol, same ‘ol after we missed June. This month there is news. Big news…and it does not bode well for the American labor market, and therefore, the U.S. economy. As much as we hate to sound so negative, we ask you to remember that we have to call it like we see it. Spin is available through a million other sources so feel free, but here we want to provide actionable intelligence to our readers, so here goes…

The mundane and predictable, first:

The Bureau of Labor statistics reports 169,000 new jobs created in August of 2013. Of those only 152,000 came from the private sector. The civilian labor force continued to shrink, the total number of employed people fell and those not in the labor force grew by over a half million! More noticeable, the participation rate fell by an attention commanding .2% to 63.2%.

Employment in construction could do no better than break even, and the gain in manufacturing was not enough to offset the July decline.

Average weekly work hours for all employees remained stagnant, with construction and manufacturing following suit.

Hourly and weekly wages grew month over month by .2% and .5%, respectively. Each are up 2.2% and 2.5% year over year which, at present, is just about parity with inflation. That means any increase in inflation will have a negative impact in buying power.

We occasionally report on the diffusion index for the manufacturing industries. There are a total of 81, and the diffusion index indicates the percentage of those industries that are either holding steady or adding jobs. A 50 is a breakeven, so over 50 shows expansion and under shows contraction. This index, in spite of a 3 month uptrend, is still below 50.

To the more extraordinary…

The overall unemployment rate (7.3%) is reported based on the labor force including all those 16 years of age and older. Then the population is broken down into smaller segments which include:

Adult Men 20+
Adult Women 20+
Teens 16 – 19
Whites
Blacks
Asians
Hispanics

A month over month move in any group is usually .1%, maybe .2%. August 2013 saw a .4% rise in the unemployment rate among blacks. That’s a big number.

The REALLY Big News:

Revisions to the numbers go back three months, and then there are annual adjustments. We expect these and track them, but we don’t often see the numbers change like this. Are you sitting down?

The BLS revised the June report from 188,000 to 172,000. That is a significant reduction but not eye popping. The July report, however, was adjusted from 162,000 to 104,000! That is 74,000 fewer jobs created than initially reported in the summer of 2013. So, how do those revisions affect our confidence in today’s report?

We advocate continued caution with regard to investment and expansion. Cash is king, and defense essential to avoid getting caught off guard by sudden shifts. There are lots of things out there right now that can cause sudden shifts.

Have a great month. See you next time!

Thanks for reading and, please, stay tuned…

Release Site: www.bls.gov

©Blue World Asset Managers, LTD Friday, September 06, 2013

Counterfeiting is a Very Serious Crime…Unless the Fed Does It??

Posted on June 20, 2013 by blueworldadmin

Thursday, June 20, 2013

We have been ringing the alarm bell about this in our posts and Matt has spoken of it on the radio. We are getting more and more questions about it as the likelihood of slowing the current bond buying program (Q.E. whatever) looms.

Ask anyone, including market “experts” if it’s a good idea or bad idea for the government to “kick the can down the road” and they’ll say it’s a bad idea. Then ask if they want the Fed to slow the bond buying program and they’ll exclaim “NO” in a panicked voice! What this betrays is a complete lack of understanding of what “Quantitative Easing” actually is.

First of all, it should be of great concern to anyone with money in the markets that government action, even contemplated government action, has become more important than economic fundamentals. Think of how absurd it is for the markets to panic at the thought of improving economic conditions that would lead to LESS government interference. Ya get that? THE MARKETS SELL OFF WHEN THE ECONOMY SHOWS SIGNS OF IMPROVING!! That is absolutely terrifying. When reality catches up, and it always will eventually, the results for those in the markets unprotected will be potentially catastrophic.

So, what is “Quantitative Easing” in actual practice? As with most things it is very simple. The Fed is buying short term debt (bonds) that are nearing expiration and refinancing the debt for a longer term. It is the very definition of “kicking the can down the road.” That is deplorably dangerous economic policy as it is, but never discount the government’s ability to take a bad idea and make it worse. WE DON’T HAVE THE CASH TO PAY OFF THESE LOANS! They are printing money out of thin air to pay off the loans and borrow the money for a longer period! If you did that you’d be arrested for counterfeiting! Does that help explain why you are hearing all this talk about the U.S. dollar no longer being the world’s reserve currency? By printing more supply of money without the demand for it we dilute the value of the currency and that’s why counterfeiting is illegal. There are two blog posts we did last year that explain this in more detail including an explanation of inflation and commodity impacts. They are:

Some Inconvenient Truths can be Backed Up by Real Math and Science Parts 1 and 2

They can be found at:

and

We hope this helps answer some of the questions surrounding the market’s behavior these days. Call or e-mail us with any others!

Thanks for reading and please stay tuned…

Every effort is made to ensure accuracy of data transcription but accuracy cannot be guaranteed. Referenced sources should be reviewed. Any analysis represents the opinion of Blue World Asset Managers, Ltd. who does not warrant or guarantee predictions based on its analysis.

Blue World Employment Situation Report Analysis 6-7-13

Posted on June 7, 2013 by blueworldadmin

Blue World Employment Situation Report Analysis

Release Date: Usually the first Friday of each month

Release Site: www.bls.gov

Market Sensitivity: VERY HIGH

Management Value: VERY HIGH

Friday, June 07, 2013

Perhaps the most exciting thing about the jobs report was our typo last night on Twitter! We were asked for our prediction and we said “more of the same” but we typo’d >200k new jobs instead of <. Sorry. The appropriate parties are being waterboarded…in Egypt, of course.

The rest of it, well, we nailed it. I wish we could claim some genius status for that, but how could we? The pattern is well established, and there have been no economic or policy shifts during the last month that would precipitate any meaningful change.

The biggest “news” out of this report came in the form of adjustments made to the prior two months which demonstrate a net 12,000 fewer jobs than initially reported.

175 thousand new payrolls are reported for May, which is still up to 75 thousand short of break-even. The number of those reporting as employed rose, but so did the number of those reporting as unemployed. This month the growth in the labor force was proportionately larger than the gain in the number of employed persons, hence the uptick in the rate to 7.6%. All were uninspiring as validated by the continued weakness in employment-population ratio and the participation rate which, by the way, are each equal to and below where they were in May of 2012, respectively. Overall, wages are still stagnant and the work week length remains flat.

Manufacturing Has Become a Real Concern

In addition to developing a three month job shedding trend, weekly manufacturing overtime among all employees continues too short and unchanged. More troubling, however, is that the production and non-supervisory set has established a three month downward trend from 4.4 hours of overtime per week in March to 4.2 hours in May. The diffusion index is still a contractionary sub-50 reading. All of this is consistent with what we saw during the month coming out of the regional Fed reports where four of five were negative. On Monday we Tweeted sarcastically regarding the “experts’” surprise at the negative ISM report. Perhaps the anemic GDP could have offered them more clues…

As much as we like them, there is no need for multi-colored charts and graphs this month. The patterns are, unfortunately, consistent.

We are seeing words from “decent” to “fabulous” in describing this report and the “continued recovery” of the labor market. The markets are responding accordingly, but if you invest real money, manage or hire real people or are responsible for the wealth of yourself or others make no mistake, this is a very poor report wearing the makeup of headline numbers and media spin.

This is the United States of America. When was 7 percent unemployment EVER acceptable for even a short time? Unemployment above 7 percent for this long with stagnation from the labor force size to wages is utterly unacceptable and completely avoidable. We can’t say it often enough. Policy Matters!

Thanks for reading and, please, stay tuned…

Release Site: www.bls.gov