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

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, September 06, 2013

Blue World Employment Situation Report Analysis 8-2-2013

Posted on August 2, 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, August 02, 2013

Brain surgery is not rocket science to a brain surgeon©

The Song That Stays the Same…

If you’ve ever watched a soap opera, dropped it and picked it up again about a year later you found you hadn’t missed much. It feels like that with this damn jobs report. We missed the June report due to the karate national championships in Greenville, SC. Just a quick shout out to Greenville. What a great town.

Hey, new jobs were created and the unemployment rate fell!! I remember the good old days when news like that signaled an improving economy. Now, as our readers know, it just means that we were on the plus side of new jobs but the number of those reporting as available to work either increased less or, as is the case for July 2013, shrank! That’s right, we added net 162k jobs in July but the civilian labor force got smaller…again. Correspondingly, the participation rate fell by .1 and those reported as not in the labor force grew by nearly a quarter of a million! Many of the job gains came from the lower end in food service and hospitality.

Some other revealing negatives showed up. Wages are down overall and in manufacturing in particular. The work week got shorter for all employees and is back to where it was in July of 2012 but the manufacturing work week has fallen below the one year ago level and overtime hours fell by .2, an unusually large move.

So, what’s new(s)? We have to start to wonder about something. We have been very critical of the use of the word “recovery” over the past many months because we have argued (and defended) a position that we are not in recovery. Trivial data like historically low participation rates, GDP below 2 percent, trendless regional fed reports, etc. tend to cast doubt on recovery assertions. After all, we have just learned that for every job created since the “end” of the recession we have added at least two people to the food stamps rolls. That has never been a sign of recovery in America and we should not accept it as such now or ever. BUT, if we were to concede a recovery by its broadest, most charitable definition we are at a point where we have to ask this. “How long does a ‘recovery’ last?” If the recession ended in 2009 as commonly reported, shouldn’t we have been talking about the recovery in the past tense by now? How many “recoveries” last four years? How many “recoveries” boast stats like these? It just doesn’t hold water, folks.

Investors, business managers and owners, we still urge caution, defensive strategies and avoidance of rose colored glasses brand optimism. It’s still very weak out there with huge uncertainty and risks internationally and domestically. Obamacare implementation is among the biggest. They are trying to deny O-care’s effect on the move toward part-time employment but just take a look at the Employed Persons at Work Part Time section near the bottom of Table A at www.bls.gov.

We hope you’ve all had a great summer and God bless all the kids returning to school. Work hard and remember, never study to “pass the test.” Always study from the point of view “could I explain this to someone else.”

See you in September.

Thanks for reading and, please, stay tuned…

Release Site: www.bls.gov

©Blue World Asset Managers, LTD Friday, August 02, 2013

Pixels vs. Images: A Quick Take on GDP, Markets, Business and the Economy

Posted on June 26, 2013 by blueworldadmin

Wednesday, June 26, 2013

Ignorance is curable. Stupid is forever.©

Pixels vs. Images: A Quick Take on GDP, Markets, Business and the Economy

So, China growth slows and the U.S. markets tank. U.S. growth slows and the U.S. markets fly? That’s what happened this month. We even saw a market “expert’s” headline today “GDP Revised Down but Street Still Optimistic on Economy.” “Based on what” is the question we’d ask. Again, every headline today indicates the drop in GDP was “unexpected.” This continues to be our problem with the “experts.” They read one day’s news and proclaim a definitive view on the economy. The next day some new data is released and we get a whole new view, as if yesterday’s news was totally negated or, even worse, totally forgotten.

For market investors that’s fine AS LONG AS they know how to play defense. We, obviously, don’t object to a rising market whatever the reason. We just worry about the folks who are naked. As we’ve said, it makes us nervous when there are no fundamentals to support a bull market. We are happy to make money on it but we are ready for reality shocks, too. As long as you’ve got your swinging accounts, stops, puts, inverse ETFs, long-short strategies, or whatever other defense you/your advisor employs then let the market run and run with it. We do.

Running a business is a different story. As managers we have to be more concerned with economic fundamentals because we don’t have the kind of defensive measures that are available in the markets. The only defense we have is a keen awareness of what the economy is actually doing so that we can make appropriate decisions on everything from hours of operation to inventory stocks to employment.

The deplorable GDP is NOT a surprise if we’ve watched AND REMEMBERED all the other reports from this and previous periods. No report is valuable unto itself. Each must be viewed through the prism of the universe of data sets. Then each new data set must be triangulated with and compared to the rest of that universe. It’s the difference between viewing a single pixel vs. the entire image. Each data point that is released is just a single pixel in the image that is created when all the pixels are viewed together.

That’s how Blue World does it. For example, starting with the two most recent employment reports (Blue World Analysis at & ) we saw a continuing trend of flat hours, overtime hours and wage growth in manufacturing. The diffusion index (number of companies hiring) fell below fifty percent and the labor force remains stagnant. Then, all the regional Fed reports ranged from negative elements to negative across the board in each of the last two months. Sure, we hear some of you yelling at us about the positive Durable Goods report this month but, again, viewed historically the reports has been very volatile. “Good” is nowhere near what “good” should/used to be and the current year over year level is no better than February of 2012 and far worse than it was in 2010! See Econoday’s chart at .

The markets do not reflect reality. Please don’t use them as a gauge to make decisions in your sector, business or department. Just ride them as they produce and let us know if you’d like help with the defense.

There is tremendous uncertainty regarding the effect of tax policy, ObamaCare, immigration reform and a multitude of other domestic and international issues. Follow Blue World for a big-picture take on the economy and to aid in business decisions. Call us for individual help and analysis.

Our assessment continues to be that the economy is not in a meaningful recovery. We have an extensive collection of pixels that we organize into an image to back up that assessment. That’s why we typically only use the word “unexpected” when we read an “expert” who got it right.

As always, thanks for taking the time and 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 Asset Managers, LTD Wednesday, June 26, 2013

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

Posted on June 20, 2013 by blueworldadmin

Thursday, June 20, 2013

Ignorance is curable. Stupid is forever.©

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…

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