Mish's Global Economic Trend Analysis

Trends in Civilian Population, Labor Force, Employed
Hollande and Merkel Want a "Super Mr. Euro" Position; I Nominate Max Keiser For The Job
Finland Threatens to Leave Euro Rather Than Pay Debts of Others; Eight Things To Remember
Third Consecutive Weak Payroll Report: Jobs +80,000, Unemployment Rate Steady at 8.2%
Plunging New Orders Suggest Global Recession Has Arrived

Trends in Civilian Population, Labor Force, Employed

Posted: 06 Jul 2012 09:12 PM PDT

Here is an interesting chart from Tim Wallace on Civilian Population, Labor Force, Employed. The chart compares June of 2012, to June in previous years.

click on chart for sharper image

Population keeps growing but labor force does not. This is mostly due to the weak economy not boomer demographics (although demographics does come into play).

Demographics suggests the labor force would be growing at a smaller rate, but still growing. Instead, the labor force has stalled for four years. For example: in 2000 it took about 150,000 jobs per month to keep up with birthrate and immigration. In 2007 it took about 125,000 jobs per month (a number I believe Bernanke still uses).

I think it now takes about 75,000. However, so many boomers are desperate for jobs and the participation rate has dropped so low, that should the economy improve and people start looking for work, the number could easily rise back up to 125,000 per month.

For a detailed discussion, please see Question on Jobs: How Many Does It Take to Keep Up With Demographics?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Hollande and Merkel Want a "Super Mr. Euro" Position; I Nominate Max Keiser For The Job

Posted: 06 Jul 2012 12:25 PM PDT

Eurozone announcements are often as amusing as attempts to herd cats on horseback.

Today is no different. Via Google translate please consider Hollande and Merkel Want a "Super Mr. Euro"

The ever-present Jean-Claude Juncker will probably continue for some months at the head of the Eurogroup, but it is only the beginning of history: France and Germany are working on the installation, from the Next year, a "super Mr Euro" in order to provide the single currency a more responsible policy, more visible and more international than the current Prime Minister of Luxembourg.

Reinforced that stature should be the president of the Eurogroup level equal to the President of the ECB , Mario Draghi , or to the Executive Director of IMF , Christine Lagarde , told the BBC French and German sources. The mandate would be five years. Function become exclusive, forcing the person to give up its national responsibilities.

Sign of the strengthening of the position, the new owner would participate in the summit of G20, which instance Jean-Claude Juncker has so far found excluded, despite its greatest.

The Ever-Present Jean-Claude Juncker

Actually, the eurozone could stand a lot less of the "ever-present" Jean-Claude Juncker who famously stated "When it becomes serious, you have to lie"

G20 Totally Useless Except for Humor

The idea that that a "Super Mr Euro" can lead breakthroughs at the G-20 is farcical. Indeed the only use of the G-20 is for the ensuing humor.

In case you missed it, please consider the incredibly funny video Here It Comes Your 19th Euro Breakdown in which Nigel Farage blasts idiotic statements made by José Barroso at the last G-20 gathering.

Given the only use of the G-20 is humor, why not put someone on the G-20 guaranteed to deliver just that?

Nigel Farage could do the job, but he is already tied up in EU parliament.

Nominating myself would likely to be seen as too self-serving. Besides, I have a better person in mind: Max Keiser.

I hereby nominate Max Keiser for position of "Super Mr. Euro".

I am 100% positive that Max is the perfect man for the job. Not only will he deliver much needed humor in these trying times, he will also strive to put financial crooks behind bars.

What more could anyone possibly ask from Super Mr. Euro?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Finland Threatens to Leave Euro Rather Than Pay Debts of Others; Eight Things To Remember

Posted: 06 Jul 2012 09:34 AM PDT

The Independent reports Finland warns of euro exit rather than pay debts of others

FINLAND would consider leaving the eurozone rather than paying the debts of other countries in the currency bloc, Finnish Finance Minister Jutta Urpilainen has said.

In a newspaper interview today she said she'd consider crashing her AAA-rated country out of the eurozone.

"Finland is committed to being a member of the eurozone, and we think that the euro is useful for Finland. Finland will not hang itself to the euro at any cost and we are prepared for all scenarios.

"Collective responsibility for other countries' debt, economics and risks; this is not what we should be prepared for. We are constructive and want to solve the crisis, but not on any terms," she said.

Meanwhile, eurozone officials are cautioning against expecting any quick action from the currency bloc's finance ministers when they meet on Monday to sort out the tangle of loose ends and disagreements left by last month's EU debt-crisis summit.

Time-frames may already be slipping and opposition is building in euro zone hardliners the Netherlands and Finland.

"You have a Finnish problem. You have a Dutch problem. You have a German problem too," said one euro zone diplomat, ..."I don't see a package done by Monday."

Eight Things To Remember

The ESM is supposed to be in place by July 9th. Think that's going to happen?
There have been 19 summits to date. Here It Comes Your 19th Euro Breakdown
Germany has still not ratified the ESM because it is under constitutional review (see German Supreme Court Delays ESM; Another Setback for Merkel; Creeping Bailouts; Reflections on German Expectations for details)
The CSU (Merkel's coalition partner), has threatened to sink the Coalition if Merkel gives any more ground. (See Merkel's Coalition About to Splinter Over Creation of "European Monster State".)
A "Third Front" is forming against Merkel (See German Central Bank Head Warns Merkel on Repeated Weakening of Positions; Third Front Against Merkel)
The rise of the Five Star Movement suggests Italy may leave the eurozone. (See Time-Lapse Interactive Graph Shows Stunning Rise in Anti-Euro Sentiment in Italy)
No currency union in history has ever survived without a fiscal union as well.
It's Just Impossible!

Four Reasons It's Impossible

The Bundesbank said there should be no banking union until there is a fiscal union.
Angela Merkel said that there should be no fiscal union until there is political union.
François Hollande said that there should be no political union until there is a banking union.
The German supreme court will not allow a political union nor a fiscal union, nor a banking union without a German referendum.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Third Consecutive Weak Payroll Report: Jobs +80,000, Unemployment Rate Steady at 8.2%

Posted: 06 Jul 2012 08:44 AM PDT

Jobs Report at a Glance

Here is an overview of today's release.

US Payrolls +80,000 - Establishment Survey
US Unemployment Rate steady at 8.2% - Household Survey
Average workweek for all employees on private nonfarm payrolls rose .1 hours to 34.5 hours
The average workweek for production and nonsupervisory employees on private nonfarm payrolls rose .1 hour to 33.8 hours.
Average hourly earnings for all employees in the private sector rose by 6 cents.

Recall that the unemployment rate varies in accordance with the Household Survey not the reported headline jobs number, and not in accordance with the weekly claims data.

Quick Notes About the Unemployment Rate

US Unemployment Rate steady at 8.2%
In the last year, the civilian population rose by 3,666,000. Yet the labor force only rose by 1,754,000.
This month the Civilian Labor Force rose by 156,000.
This month, those "not" in the labor force increased by 34,000 to 87,992,000, another record high. If you are not in the labor force, you are not counted as unemployed.
In the last year, those "not" in the labor force rose by 1,912,000
This month, the number of people employed rose by 128,000. Over the course of the last year, the number of people employed rose by 3,030,000.
Participation Rate was steady at 63.8%;
There are 8,210,000 workers who are working part-time but want full-time work, an increase of 112,000
Long-Term unemployment (27 weeks and over) was steady at 5.4 million.
Were it not for people dropping out of the labor force, the unemployment rate would be well over 11%.

Over the past several years people have dropped out of the labor force at an astounding, almost unbelievable rate, holding the unemployment rate artificially low. Some of this was due to major revisions last month on account of the 2010 census finally factored in. However, most of it is simply economic weakness.

June 2012 Jobs Report

Please consider the Bureau of Labor Statistics (BLS) June 2012 Employment Report.

Nonfarm payroll employment continued to edge up in June (+80,000), and the unemployment rate was unchanged at 8.2 percent, the U.S. Bureau of Labor Statistics reported today. Professional and business services added jobs, and employment in other major industries changed little over the month.

Click on Any Chart in this Report to See a Sharper Image

Unemployment Rate - Seasonally Adjusted

Nonfarm Employment - Payroll Survey - Annual Look - Seasonally Adjusted

Employment is finally above the total just prior to the 2001 recession.

Nonfarm Employment - Payroll Survey February to June - Seasonally Adjusted

click on any chart for sharper image

Between January 2008 and February 2010, the U.S. economy lost 8.8 million jobs.

Since the employment low in February 2010, nonfarm payrolls have expanded by about 4.2 million jobs. Of the 8.8 million jobs lost between January 2008 and February 2010, approximately 47.8% percent have been recovered (not accounting for normal demographics growth)

Statistically, 125,000+- jobs a month is enough to keep the unemployment rate flat. For a discussion, please see Question on Jobs: How Many Does It Take to Keep Up With Demographics?

In the second quarter of 2012, employment was up by an average of 75,000 per month, compared with an average monthly gain of 226,000 for the first quarter of the year.

In the first half of 2012, job gains averaged 150,000 per month, about the same as the average monthly increase in 2011.

The average employment gain over the last 28 months has been 137,000, barely enough (statistically speaking) to make a dent in the unemployment rate.

Yet, the civilian unemployment rate has fallen from 9.8% to 8.2%.

Current Report Jobs

Average Weekly Hours

Average Hourly Earnings vs. CPI

BLS Birth-Death Model Black Box

The BLS Birth/Death Model is an estimation by the BLS as to how many jobs the economy created that were not picked up in the payroll survey.

The Birth-Death numbers are not seasonally adjusted while the reported headline number is. In the black box the BLS combines the two coming out with a total.

The Birth Death number influences the overall totals, but the math is not as simple as it appears. Moreover, the effect is nowhere near as big as it might logically appear at first glance.

Do not add or subtract the Birth-Death numbers from the reported headline totals. It does not work that way.

Birth/Death assumptions are supposedly made according to estimates of where the BLS thinks we are in the economic cycle. Theory is one thing. Practice is clearly another as noted by numerous recent revisions.

Birth Death Model Adjustments For 2011

Birth Death Model Adjustments For 2012

Birth-Death Note

Once again: Do NOT subtract the Birth-Death number from the reported headline number. That approach is statistically invalid.

Household Survey Data

click on chart for sharper image

In the last year, the civilian population rose by 3,666,000. Yet the labor force only rose by 1,754,000. Those not in the labor force rose by 1,912,000 to yet another record high 87,992,000.

That is an amazing "achievement" to say the least, and as noted above most of this is due to economic weakness not census changes.

Decline in Labor Force Factors

Discouraged workers stop looking for jobs
People retire because they cannot find jobs
People go back to school hoping it will improve their chances of getting a job
People stay in school longer because they cannot find a job

Were it not for people dropping out of the labor force, the unemployment rate would be well over 11%.

Part Time Status

click on chart for sharper image

There are 8,210,000 workers who are working part-time but want full-time work.

BLS Alternate Measures of Unemployment

click on chart for sharper image

Table A-15 is where one can find a better approximation of what the unemployment rate really is.

Notice I said "better" approximation not to be confused with "good" approximation.

The official unemployment rate is 8.2%. However, if you start counting all the people that want a job but gave up, all the people with part-time jobs that want a full-time job, all the people who dropped off the unemployment rolls because their unemployment benefits ran out, etc., you get a closer picture of what the unemployment rate is. That number is in the last row labeled U-6.

U-6 is much higher at 14.9%. Both numbers would be way higher still, were it not for millions dropping out of the labor force over the past few years.

Duration of Unemployment

Long-term unemployment remains in a disaster zone.

Grossly Distorted Statistics

Given the complete distortions of reality with respect to not counting people who allegedly dropped out of the work force, it is easy to misrepresent the headline numbers.

Digging under the surface, the drop in the unemployment rate over the past two years is nothing but a statistical mirage. Things are much worse than the reported numbers indicate.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Plunging New Orders Suggest Global Recession Has Arrived

Posted: 06 Jul 2012 07:14 AM PDT

Forget about probabilities and statistics and measures of so-called leading indicators (such as the stock market which does not lead), and the yield curve that is useless when zero-bound. Instead, simply focus on data from around the globe, especially new orders.

Markit reports Global economic growth eases to near-stagnation in June

The global economy skirted closer to stagnation at the end of the second quarter. Growth slowed in the service sector and manufacturing production fell back into contraction territory.

The JPMorgan Global All-Industry Output Index – produced by JPMorgan and Markit in association with ISM and IFPSM – slipped to 50.3 in June, down further from February's 12- month peak of 55.4.

Commenting on the survey, David Hensley, Director of Global Economics Coordination at JPMorgan, said: "The PMIs suggest that the global economy downshifted into neutral gear in June. Output and new order inflows were only marginally above stagnation levels, signalling that global GDP growth over Q2 2012 as a whole will be the most sluggish for around three years."

Focus on New Orders

US Manufacturing ISM: ISM's New Orders Index registered 47.8 percent in June, which is a decrease of 12.3 percentage points when compared to the May reading of 60.1 percent. ISM's New Export Orders Index registered 47.5 percent in June, which is 6 percentage points lower than the 53.5 percent reported in May, and represents the first month of contraction in the index since June 2009
US Services ISM: ISM's Non-Manufacturing New Orders Index grew in June for the 35th consecutive month. The index registered 53.3 percent, a decrease of 2.2 percentage points from the 55.5 percent reported in May.
Eurozone Composite PMI: Steep rate of contraction, Near-record fall in service sector confidence, Service providers were hit by a further sharp fall in new business
Eurozone Manufacturing PMI: The level of new export orders subsequently fell at the fastest pace since last November. The German export engine in particular continued to splutter, with new export business falling at the most substantial pace since last November. Only Greece reported a steeper rate of export order book decline than Germany.
Germany Services PMI: New business received by service providers in Germany dropped for the third month running in June. Month-on-month fall in business sentiment was the greatest since November 2002
Germany Manufacturing PMI: Sharpest drop in new export orders since November 2011. June data highlighted another marked reduction in German manufacturing output, as shrinking new order volumes continued to squeeze production requirements. The reduction in new work extended the current period of deteriorating order books to 12 months.
France Services PMI: New business received by French service providers decreased for the third month running in June. Evidence of spare capacity in the service sector, as outstanding business fell for a sixth successive month in June
France Manufacturing PMI: Underlying the fragile performance of the manufacturing sector during June was a further reduction in the level of incoming new orders. Backlogs of work decreased at an accelerated pace in June, with the rate of contraction the sharpest since May 2009. Correspondingly, employment was cut at the fastest pace for 33 months.
Italy Services PMI: Job shedding accelerates to solid pace. Outstanding business decreased at an accelerated rate in June. Overall rate of backlog clearing was the sharpest since October 2009.
Brazil Manufacturing PMI: Output and new orders both decline at strongest rates in eight months
UK Services PMI: UK service sector growth slumps to eight-month low in June
Spain Services PMI: New business fell sharply again and firms lowered employment. New orders decreased for the twelfth successive month.
China Services PMI: New order growth in China's service sector eased since the month before, with the index measuring trends in overall new work at a ten-month low. This, coupled with an accelerated decline in new orders placed at goods producers, meant that overall new work fell for the first time in 2012 so far.
China Manufacturing PMI: New orders fall to greatest extent in seven months, as export orders slump. A lack of demand was behind the latest deterioration in operating conditions, with total and foreign new orders falling at accelerated rates in June. New export orders placed at goods producers dropped at the steepest rate in over three years. North America and Europe were both cited as sources of new order book weakness.
Japan Services PMI: Subdued growth of service sector new business meant that companies transferred spare resources to completing existing workloads in June, with backlogs of work falling further. Rates of decline in outstanding business were broadly similar across both manufacturing and services.
Japan Manufacturing PMI: June data pointed to the first month-on-month reduction in manufacturing output since December 2011, as both new business and new export orders fell.

The one and only bright spot in that entire mess is the US non-manufacturing ISM (assuming a drop in new orders from 55.5 to 53.3 is a bright spot). Otherwise, every country is contracting or on the verge of contracting with a noticeable contraction in new orders.

Germany and France, the two largest Eurozone economies are sinking fast.

Focusing on one indicator is normally a mistake, but this data is pervasive. Moreover, given the global economy is already in serious stagnation trouble, a plunge in new orders across the board is likely to mean one thing only: global recession.

No US Decoupling

In 2007 all sorts of ridiculous decoupling theories, US hyperinflation scenarios, US treasury crash scenarios, crude is going to $200, Natural Gas is going to $40, and other nonsensical ideas came out of the woodwork, many in book form, some still persisting to this day.

Instead, the reverse happened! It was the US that decoupled from the global economy. Moreover, China has been exposed for the malinvestment bubble that it is.

Now, in 2012, nearly everyone but the die-hard hyperinflationists thinks the US will decouple from the global economy. This reverse-decoupling idea is primarily based on the absurd belief the Fed will not let the economy or the stock market down (when the Fed is in fact not in control). For further discussion, please see Is There a Limit on Central Bank's Ability to Inflate?

The debate on the Fed will remain, but the facts show that I disagreed with decoupling in 2007 and I disagree with reverse-decoupling theories now.

Please see 12 Reasons US Recession Has Arrived (Or Will Shortly) for detailed rationale.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

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