Unemployment

Virtually every US media continues to ignore the situation in Algeria and now Tunisia, where rioting predicated by high unemployment (read massive economic slack) and surging cost of living (but, but, didn't you just say massive slack??? how the hell can cost of living be up if you have "massive" slack? that's unpossible - the San Fran Fed has said so repeatedly), especially food prices, has just escalated once again. According to RFI, Tunisian rioting has spread to the capital, following more protesters (killed by the Police), and where a curfew has just been imposed. "Weeks of unrest in Tunisia have spread to the capital, where the heaviest protests took place on Wednesday. Police opened fire on a demonstration in the central town of Douz, killing two, the AFP wire service reports." And, lo and behold: even in Tunisia politicians are accountable when surging prices lead to death: the Tunisian interior minister was sacked earlier in an attempt to placate the rioters. Alas, no such luck: "The sacking of the Tunisian interior minister and the deployment of troops has failed to bring calm to the capital Tunis which again erupted on Wednesday. Security forces fired tear gas on hundreds of demonstrators in the heaviest protests yet in the capital after weeks of demonstrations since December." What fools: do they not realize that Core CPI in the US is pretty much at the lowest it has ever been? They should all just disperse and eat 50% off LCD TVs post haste.

The fundamentals of the last PIG country, which has so far avoided the bond carnage of its peripheral peers, reported that while broad unemployment was 8.7%, the "highest since the beginning of the beginning of the time series in 2004" it is youth unemployment which, like in Spain, is becoming a few bigger issues. Corriere Della Sera announced that youth unemployment has hit a record of 28.9%: "Youth unemployment, however, did rise as the rate climbed to 28.9%, up 0.9 percentage points on October and 2.4 points higher than in November 2009. This, too, is the highest level since time series were introduced in January 2004." Yet even at these levels, this is still modest compared to countries like Spain, where the same metric was trending around 40% and is expected to remain there through 2011.

Hooray…Happy days are here again! That is exactly what the elite would have us believe with the 9.4% unemployment number in this huge CONfidence game otherwise known as the USEconomy. We were having dinner at my in-law’s house and I had overheard the TV playing in the back ground. At one point, I thought I had heard the squealing of teenagers who were fawning over Justin Beiber. Instead, it turned out that it was someone on the news reporting the new, much lower 9.4% unemployment rate. I could hear the panting of excitement spoken by the breathless reporters who were interviewing very serious economists about this new 9.4% rate. The news aired their personal interest piece about a girl who was just hired at an internet company. She commented with the utmost confidence that the economy was getting better!! You have all heard that saying, “it is a recession when your neighbor loses a job, but when you lose a job it is a depression.” Well, according to her, we are out of her depression. But alas, this is all a dream and the media is using their very best, tried and true propaganda to keep the people from getting too upset with reality.

While today's unemployment number came at a low 9.4%, well below expectations, the one and only reason for this is that the labor force in America has plunged to a fresh 25 year low. Assuming a reversion to the mean in the long-term
average participation rate back to 66%, means that the civilian labor force, which in December came at 153,690, a drop of 260,000 from November,
is in reality 157.6 million, a
delta of 3.91 million currently unaccounted for. Maybe someone can ask Bernanke during his imminent presentation before Congress what happened to the
unemployed population, which would have been 18.4 million if this labor force
delta was incorporated, resulting in an unemployment rate of 11.7%.

Immediate market reaction is not pretty as everyone's completely ridiculous expectation that Barclays' "95% confidence interval" of a 480,000 print ends up being that much hot air.

Summary:

• Change in Private Payrolls (Dec) M/M 113K vs. Exp. 178K (Prev. 50K, Rev. to 79K)
• Change in Manufacturing Payrolls (Dec) M/M 10K vs. Exp. 5K (Prev. -13K, Rev. to -8K)
• US Average Hourly Earnings (Dec) Y/Y 1.8% vs. Exp. 1.8% (Prev. 1.6%)
• US Average Weekly Hours (Dec) M/M 34.3 vs. Exp. 34.3 (Prev. 34.3)
• Labor force participation plunges to multi year low: 64.3%
• 24 thousand added from Birth-Death

From the report:

Following this week's ebullient ADP private payrolls report, the sellside has succumbed to an orgiastic frenzy suggesting that tomorrow NFP number may be as high as 580,000 (as reported earlier). While there is no chance on earth of that happening absent all of US data gathering to have been outsourced to Beijing, what is more interesting, is that organizations which track employment trends in real time have found that neither is ADP's optimism justified, nor is there absolutely any basis to expect a blow out NFP number tomorrow. Gallup has found that not only did the unemployment rate increase in December from 9.4% to 9.6%, that disgruntled part-time workers who want full-time work increased from 8.6% to 9.4%, the highest since September, but that the most important metric in a labor force increasingly consisting of part-time workers, underemployment, has surged to 19%, the highest since June!

There are 26.2 unemployed or underemployed workers in America today. And the labor participation rate (percentage of employed to total workforce) has gone backwards for the past 10 years. There are forces that continue to discourage job growth and will hinder economic growth for years. Apparently your government hates workers because it is doing everything is can to discourage job growth.

There are 26.2 unemployed or underemployed workers in America today. And the labor participation rate (percentage of employed to total workforce) has gone backwards for the past 10 years. There are forces that continue to discourage job growth and will hinder economic growth for years. Apparently your government hates workers because it is doing everything is can to discourage job growth.

The Fed's monthly statement on the economy was out today and it was more redundant than a repetitive semantic pleonasm and less telling than a gay soldier (though it's not clear that anyone asked).

Private payrolls +50K on expectations of +160K! Manufacturing payrolls plunge 13K on expectations of +5K. Previous revised down to -7K. As Zero Hedge expected the ADP was totally and completely off. And so the myth of the recovery can suck it.

The negative incentive effects of unemployments are well known. What's maybe not discussed enough are the less visible effects of jobless benefits, which include reduced productivity on the job, not to mention reduced savings thanks to it being known that unemployment brings with it a check from the government

With unemployment stuck at 10% for about a year now, and with the real unemployment rate probably well over 20% if one removes all the BLS gimmicks, by now it is rather clear even to 2 year olds, that the New Abnormal is one where unemployment of 5% is merely a pipe dream, and that the Fed's attempt to revert to an abnormal mean, and blow the biggest bubble ever in the process, will do nothing to fix what is now a new structural baseline unemployment level. And yet, just to prove that the Fed will take taxpayer money and spend it on the most Captain Obvious topics ever, has just released a paper titled "Is Structural Unemployment on the Rise?" Adding insult to monetary injury, paper authors Rob Valetta and Katherine Kuang conclude that not only are worries about a "new normal" misplaced, but that jobs will promptly revert back to old levels. Sure why not - as we showed recently, it will only take the creation of 240,000 jobs a month for about 6 years straight to get back to the old unemployment level. It will also mean that luckily, at some point California will not have to borrow $40 million a day to fund its unemployment insurance payments. Lastly, with one brief paper the San Fran Fed has proven that all is good in the world, and those traitors responsible for 26 weeks of constant equity outflows, just like the 42 million Americans subsisting on food stamps, are complete morons for being "timid" in light of these stunning results. We expect as this paper's findings are broadly disseminated for world peace to finally break out, FX wars to end, consumer confidence to jump by 100%, and gold to drop to its Fed mandated price of $35/ounce.

Fitting in perfectly with the previous article by Ron Paul suggesting the dissolution of the US welfare state, we now read that insolvent California is borrowing $40 million each day from the Federal government to pay for unemployment insurance. And while we won't comment on the ethics of all of America paying for one insolvent state's unemployment problems, what does need to be highlighted is that California, which already owes $8.6 billion to the government will have to cut a check for $362-million to Washington by the end of next September. As California, as pointed out earlier, is insolvent, it will never make this payment. Which means that we now have a timeline of when the Fed will start bailing out bankrupt states, and that QE3 will next focus monetizing on municipal debt.

A review of employment data shows some good signs, but not enough to overcome the negative headwinds.

Not even two full days have passed since the announcement of what will become the single biggest monetary stimulus/experiment in the history of the world (since anything that never ends is by definition "biggest"), and here come the fiscal aid panhandlers. In an email just sent out by the Derpatment of Labor, Hilda Solia has officially requested an extension of the EUC program which is expiring in November and which will leave 2 million unemployed Americans without insurance benefits after November (and 6 million by the end of next year). Obviously this plea for fiscal heroin will be granted: how else can the country that has now become a utopian experiment in socialist-fascist fusion, supposed to delude the world that 42 million Americans on food stamps are actually not going to benefit from Ben Bernake's actions? And after all, if the DOL is denied, how else will the bankers defend themselves when 60 million cold and hungry Americans come knocking on their door, asking for a little of that $3+ trillion of Fed luvin'?