Concerned about European bank deleveraging impacting Emerging Market growth prospects? Worried over Global Trade Volumes dropping and a multi-decade low in the Baltic Dry? Fearsome of record inventories for commodities in China and the potential for a harder landing from credit contraction in the shadow banking system? Concerned that Europe's sovereign and financial insolvency problems are not all gone? Worry no more. It appears, and who are we to argue with the data, that the USA is in fact leading the world out of this global growth slowdown with its Composite PMIs the highest of all the major growth drivers. From Markit Economics, we see that perhaps Goldman's Jim O'Neill will have to change his famous acronym to UBRIC as the decoupling myth (not a lag or inventory cycle) remains firmly in place (and the record-breaking jumps in some of the US Services PMI sub-indices should be treated with all the respect in the world).
Listen To Obama Explain Why The US Labor Force Declined By 1.2 Million And Why Temp Jobs Surged By A RecordSubmitted by Tyler Durden on 02/03/2012 - 11:32
Actually, now that we think about it, he may not touch on those specific issues.
It appears the record surge in people not in the labor force is not the only outlier in today's data. For the other one we go to the Household Data Survey (Table 9), and specifically the breakdown between Full Time and Part Time Workers (defined as those "who usually work less than 35 hours per week"). We won't spend too much time on it, as it is self-explanatory. In January, the number of Part Time workers rose by 699K, the most ever, from 27,040K to 27,739K, the third highest number in the history of this series. How about Full time jobs? They went from 113,765 to 113,845. An 80K increase. So the epic January number of 141.6 million employed, which rose by 847K at the headline level: only about 10 % of that was full time jobs: surely an indicator of the resurgent US economy... in which employers can't even afford to give their workers full time employee benefits. We can't wait for Mr. Liesman to explain how this number, too, is unadulterated hogwash, and how it too is explained away to confirm economic strength. Incidentally this is not the first time we have discussed the issue of part vs full time workers: for more see here: "Charting America's Transformation To A Part-Time Worker Society, Following 6 Straight Months Of Full Time Job Declines"
Non-Manufacturing ISM Ignores Banker Layoffs, Surges Past Expectations On Biggest Jump In Employment Index EverSubmitted by Tyler Durden on 02/03/2012 - 10:18
And another major economic indicator beat, this time coming from the January Non-manufacturing ISM data, which unlike yesterday's miss in the manufacturing ISM, surged past estimates of 53.2, up from a revised 53.0 in December, to a whopping 56.8 in January. The primary reason for this was the reported jump in Employment which rose from 49.8 to 57.4, which was the biggest jump pretty much ever (see chart below), and the highest employment number since 2006. And this happened in a month in which the banking sectors laid of thousands of bankers. Brilliant. We leave it up to readers to estimate the credibility of this report. In other news, inflation is back, as the report states that "Corrugated Cartons is the only commodity reported down in price." What was up? "Airfares; Beef; Chemical Products; Chicken; Crab; Coffee (2); #1 Diesel Fuel (2); #2 Diesel Fuel (3); Fuel; Gasoline; Medical Supplies (2); Paper; Petroleum Based Products; Resin Based Products; Vehicles; and Wire." In other news, factory order missed expectations of a 1.5% increase, coming in at 1.1%. But who cares: it is an election year and the propaganda machine is on in full force.
The mainstream media seem willing to sound the all-clear and bring us back from Defcon-3 on the back of what can generously be described by realists willing to look at the actual data as a 'murky' NFP print. The market's reaction seems modestly QE-off (with rates up decently) but the only modest drop in Gold appears to fit with a lack of conviction in the data (especially given the EUR sell-off on Papademos chatter). It seems, as Bloomberg reports, Kyle Bass is right to take the longer-view when he notes today "I'm against selling any of the gold" in UTIMCO's portfolio, pointing out the mounting risks from government deficits in US and Europe, "as every day goes by, I see deflation in the things you own and inflation in the things you need." Summing up the reality of our global situation, one of Bass's colleagues adds "This is a grand experiment and they typically never end well."
Sick of the BLS propaganda? Then do the following calculation with us: the US civilian non-institutional population was 242,269 in January, an increase of 1.7 million month over month: apply the long-term average labor force participation rate of 65.8% to this number (because as chart 2 below shows, people are not retiring as the popular propaganda goes: in fact labor participation in those aged 55 and over has been soaring as more and more old people have to work overtime, forget retiring), and you get 159.4 million: that is what the real labor force should be. The BLS reported one? 154.4 million: a tiny 5 million difference. Then add these people who the BLS is purposefully ignoring yet who most certainly are in dire need of labor and/or a job to the 12.758 million reported unemployed by the BLS and you get 17.776 million in real unemployed workers. What does this mean? That using just the BLS denominator in calculating the unemployed rate of 154.4 million, the real unemployment rate actually rose in January to 11.5%. Compare that with the BLS reported decline from 8.5% to 8.3%. It also means that the spread between the reported and implied unemployment rate just soared to a fresh 30 year high of 3.2%. And that is how with a calculator and just one minute of math, one strips away countless hours of BLS propaganda.
Great news from today's BLS report, right (when one excludes that record 1.2 million explosion in people out of the labor force of course)? Wrong. As is well known banks have been firing workers left and right: these are the jobs that actually matter in the grand withholding taxes scheme of things. Yet someone is getting hired supposedly. Well, as we suggested before the NFP report, this is merely rotation from high paying jobs to "low-wage jobs." And no, it's not our words - this is what CRT Capital says. Per Bloomberg: About 113k of NFP gain from “low wage jobs,” David Ader, strategist at CRT Capital Group, writes in note. Additionally, “we didn’t see the drop in courier and messengers as expected - but suspect we will." Moreover, ‘‘long-term stress remains at the U6 measure at 15.1% is still high, but likely falling due to people leaving labor force, and duration on unemployment remains over 40 weeks." But yes, it is an election year, so by November expect the labor participation rate to be under 60% and the unemployment rate to drop to under 6%, or some other propaganda BS.
EURUSD longs just got punk'd again, with the EURUSD surging to over 1.32 on the fake BLS number (1.2 million labor force decline, whatever, with ), when it collapsed by 100 pips as the news we tweeted earlier that Greek PM Papademos may resign today throwing the entire Greek bailout out of the window, if his talks for further austerity fail. From Kathimerini: "Papademos is expected to meet PASOK’s George Papandreou, New Democracy’s Antonis Samaras and Giorgos Karatzaferis of the Popular Orthodox Rally (LAOS) on Saturday. The three politicians will have to agree on measures that will satisfy Greece’s lenders and pave the way for a new bailout. Sources told Kathimerini that the troika is demanding that the minimum wage of 751 euros per month (gross) be reduced and that labor costs in the private sector drop by 25 percent in a bid to help Greece regain competitiveness. Skai TV and radio reported on Friday that should the leaders fail to agree a deal, he will tender his resignation on Monday." And just to make the confusion complete, Jean Claude Juncker just announced there would be no Eurogroup meeting on February 6. So while the market is celebrating the rotation of banker jobs with minimum wage jobs, Greece may be on the verge of blowing up Europe.
Record 1.2 Million People Fall Out Of Labor Force In One Month, Labor Force Participation Rate Tumbles To Fresh 30 Year LowSubmitted by Tyler Durden on 02/03/2012 - 08:51
A month ago, we joked when we said that for Obama to get the unemployment rate to negative by election time, all he has to do is to crush the labor force participation rate to about 55%. Looks like the good folks at the BLS heard us: it appears that the people not in the labor force exploded by an unprecedented record 1.2 million. No, that's not a typo: 1.2 million people dropped out of the labor force in one month! So as the labor force increased from 153.9 million to 154.4 million, the non institutional population increased by 242.3 million meaning, those not in the labor force surged from 86.7 million to 87.9 million. Which means that the civilian labor force tumbled to a fresh 30 year low of 63.7% as the BLS is seriously planning on eliminating nearly half of the available labor pool from the unemployment calculation. As for the quality of jobs, as withholding taxes roll over Year over year, it can only mean that the US is replacing high paying FIRE jobs with low paying construction and manufacturing. So much for the improvement.
Whopper of a NFP number, which prints at 243K, higher than the biggest forecast of 225K, on consensus expectations of 140K, the biggest jump since February 2009. The devil will certainly be in the revision details.
In 20 minutes we will get the only market moving piece of news, which many hope will bring back volatility to the market. Or it might not. As Goldman says, 'nonfarm payroll growth should slow on seasonal and weather-related factors'
It seems like last Friday we were waiting for details of the latest Greek plan – PSI and Troika. We are still waiting. Details are starting to come out. We should know what the bonds investors are expected to exchange into will look like. The ECB sounds like it may use the interest they have earned on SMP to reduce the amount Greece has to pay back. The Jobs data gives us an additional twist to today’s Euro watching. How many of the courier jobs will disappear? My guess is the data will be okay, but nothing special, just like the rest of the data. The courier jobs are interesting, not just from what happens this month, but will they come back next year? Amazon has been beaten up over the Kindle, but one of the benefits of the Kindle is that Amazon doesn’t have to deliver e-books. I think we will all forget that by next December when everyone’s payroll estimate will include a bump for couriers, but maybe we won’t.
Just when it seemed that nothing could possibly surprise about adverse Greek bank exposure, as these are beyond insolvent already relying on the ECB for day to day operations as is, here comes one more development, this time courtesy of the one index that has been in literal freefall in the past two months, and recently hit a 20+ year low - the Baltic Dry. OpenEurope explains: "An interesting but niche issue has come to our attention recently in relation to the on-going troubles in Greece. The 'Baltic Dry Index' (a measure of global shipping demand/prices) has fallen for a month straight to record lows. When this index falls it suggests that there is trouble in the shipping industry, raising questions over the stability of shipping firms. As it turns out many of these firms have secured their financing from Greek and other European banks – meaning if they start defaulting on their loans these banks could take losses. This raise further questions over the bank recapitalisation plans and whether such contingencies have been thought of in the second Greek bailout (which sets aside €20bn for Greek banks)."
Yesterday, Greek finmin Venizelos did his best to exude confidence when he, of all people, decided to give the ECB, and thus Germany, a virtual ultimatum demanding that public sector creditors are also impaired (supposedly only some, while excluding Greek pension companies). Kathimerini has more on this in "Never mind PSI, OSI is all the rage." And the only reason why Veni needs this critical step is because the hedge fund holdouts among the PSI creditors demand it. Alas, Germany does not deal well with ultimatums, especially from fiscal vassals. As OpenEurope notes, Die Welt reports that Greek Finance Minister Evangelos Venizelos has called for Greece’s official creditors, such as the ECB and national central banks, to take part in the restructuring of Greek debt, something German Economy Minister Philip Rösler insisted was “not currently on the agenda”. It gets better. According to Goldman, German Finance Minister Wolfgang Schäuble said that "no additional contributions from the public sector are necessary.” German finance minister against public sector participation in Greek debt restructuring. Speaking to news channel n-tv finance minister Schäuble said that "Greece needs a reduction in private sector claims of 50% … It does not need an additional contribution from the public sector because we're shouldering everything anyway". When asked whether he thinks that the composition of the Euro area would be the same at the end of the year as today, Schäuble replied: "I hope so". So there you have it: Greece needs further concessions, which Germany will give, if and only if Greece concedes to previous German demands of abdicating fiscal independence. The only question is how badly Greece needs German help. Everything else is smoke and mirrors.
- Greece's Hazardous Road to Restructuring (WSJ)
- Spain Coaxes Banks to Merge to Purge Losses (Bloomberg)
- Brussels Discovers New €15bn Black Hole in Greece's Finances (Guardian)
- UK Recession Predicted to Return (FT)
- Senate OKs insider trading curbs on lawmakers (Reuters)
- China Limits Mortgages for Foreigners (Bloomberg)
- Villagers scramble for fuel in Europe's big chill (Reuters)
- SNB Head Warns of Political Fallout After Crisis (FT)
- Portugal Bond Rout Overstates Greek Likeness (Bloomberg)
- Bernanke Says He Won’t Trade 2% Inflation-Rate Target for More Job Growth (Businessweek)