Bureau of Labor Statistics
With all eyes hope-full-y transfixed on tomorrow's non-farm payrolls data and its confirmation-biased 'select-a-headline' post-data farce, we thought it worth a look at the noise in the signal and a reminder, as Bloomberg's Joseph Brusuelas notes, the annual benchmark revisions that will be published and likely obliterate everything we thought we knew about job growth (or lack of). As Brusuelas notes, the January jobs report is likely to be better-than-forecast because the weather-impacted December estimate will see upward revisions as firms probably made up for hiring postponed during the previous month. While weather effects may dominate the topline estimate, the underlying trend in hourly and weekly earnings is likely to remain quite weak since it’s not contingent on swings in seasonal patterns.
Following the evaluation of liquidity needs (and availability) for the Commonwealth of Puerto Rico, S&P has decided that "it doesn't warrant an investment-grade rating":
- PUERTO RICO GO RATING CUT TO JUNK BY S&P, MAY BE CUT FURTHER
- GOVT. DEVELOPMENT BANK FOR PUERTO RICO CUT TO BB FROM BBB-:S&P
- PUERTO RICO GO RATING LOWERED TO 'BB+': S&P
- PUERTO RICO REMAINS ON WATCH NEGATIVE FROM S&P
Both the G.O.s and the Development Bank have been cut. Note that 70% of muni mutual funds own this - and it is unclear if a junk rating forces (by mandate) funds to cover. Worst of all, S&P warns Puerto Rico could now face a $1 billion collateral call on short-term debt - the same waterfall collateral cascade that took down AIG.
Miserable? Feeling like you want to turn the corners of the smiley down so it reflects your current mood? Believe you would get the lead role in the Les Misérables?
The President will do his best to put a positive spin on the current economic environment and the success of his policies to date when he gives his speech tonight. However, how you define the current environment may have much to do with where you fall in current income distribution. This was a point made by Mr. Boyer: "In 2012, the richest 10 percent of Americans earned their largest share of income since 1917, said Emmanuel Saez, an economist at the University of California at Berkeley. Meanwhile, Census Bureau statistics showed that real average income among the poorest 20 percent of families continued to fall each year from 2009 to 2011." As with all things - it is the lens from which you view the world that defines what you see. In the end, it will be whether we choose to "see" the issues that currently weigh on economic prosperity and take action, or continue to look the other way. History is replete with examples of the demise of empires that have done the latter.
Put down that prom dress. It seems, as ConvergEx's Nick Colas notes, Retail isn’t the only service moving from the brick and mortar world to the virtual one. Online high schools have been popping up (on the internet, of course) more and more often in the last few years: even Stanford University started a program in 2006. Of the 22 million high-school aged (14-18) population in the US, about 1 million are estimated to be enrolled in a class or a full-time high school online. That said, virtual schools are unlikely to replace traditional classrooms anytime soon: they’re still used mostly for supplemental or make-up courses rather than a complete education. But, Colas adds hopefully, the technology points in a positive direction: free high school education means more high school diplomas, which could lead to a higher labor force participation rate, lower unemployment, and higher earnings for those who might have otherwise dropped out.
Of the various flavors of government interventionism in our lives, the minimum wage is perhaps the most welcomed. It appeals not only to our innate sense of “fairness” but also to our self-interest. Its allure may erroneously lead us to the conclusion that because “it is popular,” ergo “it is right.” The more astute proponents of the minimum wage, however, immediately point to the obvious; namely, that an extreme minimum wage ($1,000 per hour) would be unequivocally detrimental. However, the proponents quickly turn to dismissing this fear by asserting that, empirically, no such job loss occurs when the minimum wage is slowly raised. This is akin to arguing that although fire can boil water, a small fire won’t heat it up.
Retiring workers? Really?
In 1970, when 11% of adult Americans had bachelor's degrees or more, degree holders were viewed as the nation's best and brightest. Today, with over 30% with degrees, as the WSJ notes, a significant portion of college graduates are similar to the average American - not demonstrably smarter or more disciplined. Furthermore, declining academic standards and grade inflation add to employers' perceptions that college degrees say little about job readiness. As we noted recently, change is coming as more and more realize college may not be worth it. Educational entrepreneurship offers hope that creative destruction is coming to higher education. The cleansing would be good for a higher education system still tied to its medieval origins - and for the students it's robbing.
There are millions of people in that category. And their numbers are growing, not diminishing.
It’s ironic that in a day and age where Keynesian economics is the “accepted view” we still don’t pay enough attention to what Keynes said about inflation: "By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some..." The problem today is that some people believe inflation is lower than it actually is. The Consumer Price Index CPI is used to measure the cost of maintaining a certain standard of living. Now it measures the cost of maintaining a certain level of satisfaction. You can argue the magnitude of the inflation understatement but you can’t argue that the official numbers are accurate. Under reporting inflation has led to many predictable outcomes.
All it took was a year or two of extremely obvious "catches" of leaked data for the government to begin to decide that perhaps, just perhaps, it is time to end the press lockup for each week's initial jobless claims data. As the WSJ reports, the original idea behind lockups was to give reporters time to digest complicated economic reports to produce accurate reports for the public. In the past decade, news organizations have also built expensive networks to send government data to high-speed investors who can make trades on the data before members of the public can react. Now, however, the BLS believes, "government data is for the public good and it is paid for by taxpayer dollars. There must be a commitment to a level playing field."
What do the social classes owe each other? Do people on public assistance really take advantage of the system ?
This past Friday the Bureau of Labor Statistics released the November jobs report which sent the mainstream analysts and economists into an ecstatic state as the numbers were substantially stronger than estimates. However, in reality, the employment report continues to show that employment is being driven almost entirely by population growth rather than real economic strength. The long term implications of these secular shifts are crucially important to the future of everything from investing, to living and the future of our economy. It is not too late to change our future, but it eventually will be if we do not begin to make changes soon.
While much has been said about the benefits of Bernanke's wealth effect to the asset-owning "10%", just as much has been said about the ever deteriorating plight of the remaining debt-owning 90%, who are forced to resort to labor to provide for their families, and more specifically how their living condition has deteriorated over not only the past five years, since the start of the Fed's great experiment, but over the past several decades as well. However, in the case of America's "servant" class, Al Jazeera finds that their plight is now worse than it has been at any time over the past century, going back all the way to 1910!
When the US government said the sequester would cripple its ability to single-handedly rule over the world, it wasn't kidding. Either that, or Joe Biden's Joint Strategic Plan to "curb" copyright infringement was just a case of very confused humor by the vice president gone badly wrong, and he meant to "encourage." Whatever the reason, the fact that the Obama administration was just busted with a $50 million case of software piracy involving none other than the US Army, is indicative that while the Bureau of Labor Statistics was adopting all the best features of the Chinese Department of Truth, the US government was busy copycatting China's respectful approach toward intellectual property. Yet what is even worse, is that the software that was pirated managed the US army's troop and supply movements: in other words, the US government relied on pirated software to prepare for and engage in eventual war.