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Bloomberg on Unemployment and the Potential for a Big (not so) Surprise
Bloomberg has an excellent interactive analysis on the potential
for a near one million count revision upwards of the unemployment
numbers. This combined with the work my team and I have put together
should lead subscribers to believe that medium term, unemployment can
exacerbate the global equity market decline. See "Are
the Effects of Unemployment About To Shoot Through the Roof?" as
excerpted below.
A recent zero-hedge article rightly questioned the
reliability of the reported unemployment figures by comparing the
reported increase in the unemployment benefits paid with the reported
increase in the number of insured unemployed. According to the figures
reported by Department of Labor (DOL), the total number of insured
unemployed in the US has risen by nearly 400% since September 2007 and
has reached nearly 10.5 million as of Dec 19, 2009. However, if we look
at the monthly withdrawals on the unemployment insurance account
(according to the Daily Treasury Statement prepared by the Financial
Management Service), the expenditure has risen by nearly 550%.
The difference has been widening since April 2009 (coincidentally,
right about the time the S&P 500 rocketed skywards, and the housing
market made several month to month gains [see If
Anybody Bothered to Take a Close Look at the Latest Housing Numbers..."])
and has increased substantially in Dec 2009.
With
no reason to believe that the average payouts increased dramatically
(that could have otherwise explained this variation), the article
rightly points out the huge discrepancy that is creeping in the
reported figures. According to Zero-hedge, the insured unemployed are
understated by 32% and estimate the insured unemployed at nearly 14
million. The Bureau of Labor Statistics reported the total number of
unemployed at 15.6 million and the unemployment rate at 10% in Dec 2010.
With serious doubts being raised about the reported figures of the
insured unemployed that forms a substantial portion of total unemployed
(nearly 69% in Dec 2010, based on reported figures), the total
unemployment figures reported by the government is most likely
severely understated.
The grave unemployment situation not only undermines the
economic health and recovery hopes, but is also acting as a major
source of financial strain on the Fed's books. The Fed has been
spending huge amounts of money in the form of UI (unemployment
insurance) benefits. In 2009, the government paid about $139 billion in
UI benefits. Based on the figures for total unemployed by Bureau of
Labor statistics and total insured unemployed by DOL, the total insured
unemployed which are being supported by the government under the
various state and federal programs have risen to 69.0% of the total
unemployed as of Dec 2009 from just 29.0% in Sep 2007. Further it is
observed that the Fed has been taking in huge deficits on its books
because of UI programs. The total UI withdrawals on Fed books in 2009
were $139 billion against deposits of just $31 billion received from
states for unemployment. While the withdrawals in 2009 have increased
by 320% when compared with withdrawals in 2007, the deposits have
declined by 6.6%. The deficit has increased to nearly $107 billion from
nearly no deficit, two years ago.
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Brilliant blog and analyses, Mr. Reggie!
You be the man of the hour. This AM I heard Bernie Sanders (whom I do like) argue that the Prez's appointments were being held up by scumbag Shelby of Alabama.
Like we should care -- who else is he going to appoint to his administration worse than those neocon swill such as Diana Farrell ("let's offshore all American jobs"), Laura Tyson (likewise, I'm sure), Larry Summers, Tiny Timmy Geithner, Gary Gensler, etc., etc., etc.
Huh.....so they offshore all those jobs, then suddenly there aren't any jobs -- and definitely no economy.
Duuuuhhhh.....Virginia Postrel, a firm believer in offshoring America, still has a job?????
Too many senators who have supported the offshoring of America, still have their jobs????
Anyway, thanks again, Reg.
Census hiring over the next three months could partially negate this, temporarily, until late Summer/early Fall. But the bigger they are...
the political will to confront the new jobless society does not yet exist.
Administrators in the Murrieta Valley Unified School District will take a 7.25 percent pay cut, following a unanimous vote by the school board members during Thursday night’s meeting.
http://www.swrnn.com/southwest-riverside/2010-02-05/news/pay-for-murrieta-valley-usd-administrators-cut-by-725-percent#ixzz0eh6h5i7mLies and more lies from Obama. First off if you are unemployed and stop looking for work, you are no longer considered unemployed. Many thousands are running out of their benefits. They are no longer counted as unemployed. What about the 800,000 that bloomberg talked about? They are not being counted even today. The lieing teleprompter is talking now about creating jobs. $5000 for each new employee isn't going to creat many new jobs when the government is ready to raise taxes on all of us. Its a big lie. I know it and you know it.
Add in the $20+ billion for borrowing to the states (which at least is accrueing 5% interest) and you are over $150 billion in unemployment spending for 2009!
And 2010 will be another massive increase unless they refuse to extend benefits past the current drop dead date of July 31, 2010. A person could get approved for 99 weeks of unemployment on July 20th but not get anything because once the drop dead date hits.....all Federal benefits end!
But Congress will probably extend it again.
You need to factor in the unemployed that are receiving extended benefits.
Very smart stuff, Mr. Middleton. Is that what's behind this morning's announcement of "the incorporation of annual benchmark revisions," to wit, there are 1.3 million fewer people working than we've been saying, but they've run out of benefits so the overall rate goes down, seasonally adjusted, of course?
Or are the states just pocketing the difference so soak up a bit of their own red ink?
It could be explained by the fact that more and more states can no longer fund their portion of the insurance so they are borrowing the full amount from the government for the payments. I think that should explained part of it, the rest I agree with you is clear underepresentation by our new office of Statistics Management and the Numbers Czar
Reggie, maybe you could wake Leo up.
Thanks for intelligent forward-looking analysis...