Bureau of Labor Statistics
A month ago we reported that US fast food workers in several US cities, namely New York City, Chicago, St. Louis, Detroit, Milwaukee, Kansas City, Mo., and Flint, Mich., walked out Monday in a one-day strike demanding a doubling of their pay. Not unexpectedly, even though the president himself has been a strong proponent of rising the minimum wage, the corporations balked and the strikers achieved nothing and just in case there is some confusion, there is a lot of minimum skills, minimum wage applicants (not to mention robots) out there which translates into two words for the strikers: no leverage. However, these concepts may be foreign to a fast-food labor force that probably just wants a day out in the nice weather and to take a break from hard work for a change.
Albert Einstein, a man who knew a thing or two about celestial mechanics, supposedly once called compound interest "the most powerful force in the universe." While the remark was likely meant to be funny (astrophysicists can be hilarious), it sheds light on the often overlooked fact that small changes, over time, can yield enormous results. The same phenomenon may be at work in our economy. A minor, but persistent under-bias in the inflation gauge used in the Gross Domestic Product (GDP) may have created a wildly distorted picture of our economic health. So the next time you see a GDP report remind yourself that the "deflator" should really be called the "distractor." It's there to distract you from the truth.
During the NBC Nightly News segment last week about one of the unintended consequences of the Affordable Care Act (ACA), Lisa Myers reported speaking with "almost 20 small businesses and other entities around the country" and that "almost all said that because of the new law, they’d be cutting back hours for some employees." But the Obama administration doesn’t see why there’s such a fuss. According to Myers: The White House dismisses these examples as “anecdotal.” The president’s top economic advisor [CEA Chair Jason Furman] told us “he sees no systematic evidence the health care law is having an adverse impact on the number of hours employees are working.” So, should we take our government’s word and dismiss the examples as anecdotal?
Numbers, Numbers Everywhere...are any true?
So let's pretend for the moment that the Federal Reserve gets everything it has stated it wants. And even further: that Washington, D.C. gets everything it wants, too. The credit markets are repaired, and massive new loan growth flows out the door. Loans are made to businesses that hire gobs of new people. Consumers borrow and borrow some more to go to school and buy homes, cars, and gadgets. Inflation remains low and job growth explodes. Tax receipts climb and the deficit falls. The stock market goes higher and higher, gold falls and then falls some more, as confidence in the system, its masters, and its institutions grows. The Fed wins and D.C. wins. But in reality, we all lose. It's all just a matter of timing (and un-sustainability).
The housing market. It would be the done-thing normally to imagine that one might learn from mistakes that have been made in the past; and not only learn from them, but make sure that they don’t happen again.
So is President Obama the worst President in history?
For the first time in 2016 according to estimates, the US will not be the most economically-powerful country in the world, but the second since World War II.
In April, according to JOLTS, there were 108K job additions. According to the NFP data, the job gain was 199K or 84% more than per JOLTS
In May, according to JOLTS, there were 109K jobs additions. According to the NFP data, the job gain was 176K or 62% more than per JOLTS
In June, according to JOLTS, there were 120K jobs additions. According to the NFP data, the job gain was 188K or 57% more than per JOLTS
Adding across for all of 2013, JOLTS would have us know that only 837K jobs were added (or 140K per month average). Compare this to the 1,185K new jobs according to the Establishment Survey (198K per month average).
-> A 42% difference!
Bullish on one, no so much on the other.
The media, the financial markets and investors have become fixated on the unemployment rate, as reported by the Bureau of Labor Statistics, particularly since it was directly linked by the Federal Reserve to its current bond buying program. What is clearly evident is that, despite the headline reports, there is clearly an alarming divergence in employment from the long-term trend. The structural shift in employment away from manufacturing and production to a service and outsourced based economy has clearly created a deviation that will not likely be corrected for decades to come. The implications for the Federal Reserve, and the economy, should be concerning. While the hope is that the economy will suddenly spark back towards stronger growth; the supply/demand imbalance suggests otherwise.
Are American workers paid enough? That is a topic that is endlessly debated all across this great land of ours. Unfortunately, what pretty much everyone can agree on is that American workers are not making as much as they used to after you account for inflation. Back in 1968, the minimum wage in the United States was $1.60 an hour. That sounds very small, but after you account for inflation a very different picture emerges. Using the inflation calculator that the BLS provides, $1.60 in 1968 is equivalent to $10.74 today. According to the Social Security Administration, 40.28% of all workers make less than $20,000 a year in America today. So that means that more than 40 percent of all U.S. workers actually make less than what a full-time minimum wage worker made back in 1968. That is how far we have fallen.
The American Petroleum Institute said last week the U.S. oil and natural gas sector was an engine driving job growth. Eight percent of the U.S. economy is supported by the energy sector, the industry's lobbying group said, up from the 7.7 percent recorded the last time the API examined the issue. The employment assessment came as the Energy Department said oil and gas production continued to make gains across the board. With the right energy policies in place, API said the economy could grow even more. But with oil and gas production already at record levels, the narrative over the jobs prospects may be failing on its own accord.
The real wages of the typical working man in the US have gone down for the last 60 years. In terms of his time, his most important purchases are more expensive today than they were in 1950. How did American workers survive with lower real wages and higher living costs? First, they began to work longer hours. Wives went to work. Husbands worked a second job. Now Americans work more hours than any other group. Second, and most importantly from our point of view, they began to borrow. Aided, induced and bamboozled by the feds’ EZ credit policies... they went deep into debt to keep up with their own standards of living.
Elliott Management's 22-page letter to investors has something for everyone as Paul Singer ascribes his uniquely independent wisdom. From the fragility of the financial system to the hubris of academic pretenders; from inflation's various devious impacts on assets and reality to the floundering of the world's bankers; from America's "cooked data" to the pending social unrest in Europe and the perils of centralized power, Singers stresses "the temptation to debase fiat currencies... means owning claims on paper money is an act of either faith or denial." Recent market movements, Singer warns "indicate a world on life-support," and "for every day, month and year that policymakers try to substitute failed, inappropriate and risky QE policies for pro-growth policies, the debt mounts, as does resentment among middle-income families that their situation is not improving." The fact of the matter is that "no government has ever reached fiscal 'nirvana,' yet our central bank (and its peers) continues to push the envelope of risk, confidence and inflation." Despite the confident and brave words in which they are wrapped, central bank actions currently seem underscored by quiet panic.