Unemployment

Private payrolls were a disappointment at just +83k, versus consensus of 112k. Birth-death added 147k. Census removed 225k, in line with consensus. Temporary help was another terrific "green shoot" increasing by +21k. And the Unemployment rate dropped to 9.5% because 652k people walked out of the labor force, which dropped from 154.393 million to 153.741 million. Another big miss for the recovery story and another confirmation of the data point. The only improvement was the percentage of those unemployed 26 weeks and longer dropped from 46% to 45.5%, or from 6.763 million to 6.751 million. Yet the most troubling indicator was the downward inflection in the average workweek, which once again dropped by 0.1 hours to 34.1 hours, while in manufacturing the drop was a severe 0.5 hours, following a rise of 0.4 hours in May. The slack in the laborforce is once again building up. Also, average hourly earnings declined by 0.1%, after an increase of 0.2% in May.

As we reported on Friday, a critical bill that was unable to pass this past week was the extension of unemployment benefits to millions of Americans currently collecting a $1,200 average monthly stipend from the US government for sitting on their couch and not paying their mortgage. As a result of this huge hit to endless governmental spending of future unearned money, the WSJ reports that "a total of 1.3 million unemployed Americans will have lost their assistance by the end of this week." Furthermore, the cumulative number of people whose extended benefits are set to run out absent this extension, will reach 2 million in two weeks, and continue rising: as a reminder the DOL reported over 5.2 million Americans currently on Extended Benefits and EUC (Tier 1-4). The net result is yet another hit to the US ledger, as soon 2 million Americans will no longer recycle $1,200 per month into the economy. In other words, beginning in July, there will be $2.4 billion less spent each month by America's jobless on such necessities as LCD TVs (that critical 4th one for the shoe closet), iPads and cool looking iPhones that have cool gizmos but refuse to hold a conversation the second the phone is touched the "wrong" way. As the number of jobless whose benefits expire grows, the full impact of lost money will progressively increase, and absent some last minute compromise, the monthly loss will promptly hit $5 billion per month. Annualized this is a hit of $60 billion to "consumption", and represents roughly 120 million iPads not purchased, and about half a percentage point of GDP (ignoring various downstream multiplier effects). Worst of all, as these people surge back into the labor force, the unemployment rate is about to spike by nearly 1%, up to 10.5%.

The BLS has released May unemployment data by state: nothing too notable - a slight decline in the overall unemployment rate: "Thirty-seven states and the District of Columbia recorded unemployment rate decreases over the month, 6 states had increases, and 7 states had no change." Nevada hit a new all time high rate of 14%, and surpassed Michigan at 13.6% as worst state in the continental US.Aside from that, the MoM change was not very material for other states. Where there is also no surprise is who the biggest source of state jobs was in May: out of 394 thousand jobs created in May (total at 130,197,600), 86% was courtesy of government hiring. This is not surprising as the bulk of the hiring was due to census, as was already reported. Losses were reported in Construction, Trade, Transportation, Financial Services, and Education and Health Services. Pick ups were seen in manufacturing, professional and leisure and hospitality services.

It was only a matter of time before the administration converted the Gulf spill tragedy into the latest unemployment stimulus program. The Unified Command in Mobile, Alabama announced today the first deployment of the Qualified Community Responder (QCR) program that will put unemployed individuals to work in the counties that may be affected by the oil spill. Working closely with the Alabama, Mississippi, and Florida unemployment offices, unemployed workers have been hired to help with the cleanup effort. There is no conformation yet whether any of these "unemployed" will be quintuple BLS-counted census workers, or just what death (birth, not so much) adjustment to crustacean wildlife the Department of Labor will apply in order to avoid a comparable overpromise/underdeliver gaffe as this Friday's NFP. And since the oilspill will likely reach Maine relatively soon, we expect the entire Eastern seabord to see at least half a million monthly pick up in temporary workers by the time there is no water left in the Oiltlantic Ocean, some time in September.

In light of today's [abysmal|terrific] NFP report, it is probably not a bad idea to take on unemployment propaganda, but from a slightly different angle. Below, courtesy of madatoms, is a chart summarizing the truth and myth about unemployment.Of course if you are Obama, unemployment is really employment, which brings this chart to a whole new level of David Lynch appreciation.

The Atlanta Fed's Dennis Lockhart had prepared remarks before the Atlanta Technical College, in which he said "I continue to support the current
stance of interest rate policy. But the time is approaching when it
will be appropriate to consider recalibrating interest rate policy. I
do not believe that time has yet arrived. The conditions that require a
change of policy are not yet at hand. However, as the economy continues
to improve and financial markets find firmer ground, extraordinarily
low policy rates will not be needed to promote recovery and will become
inconsistent with maintaining price stability. The implication is that the policy rate may have to begin to rise
even while unemployment is considerably higher than before the
recession." We don't believe it, but does it mean that with tomorrow's whisper 100 million in NFP additions on 200 million in birth/death and census, that someone will finally force the fed to put its fiat money where its corrupt mouth is? In the meantime, El-Erian's New Normal means tens of millions of previously happily employed people will likely never work in the US ever again.

It must have been at least a week without the US government announcing some stimulus, subsidy, tariff or other protectionist measure, because today the government just passed yet another$79 billion stimulus bill, extending unemployment benefits and restoring expired tax breaks. The net cost to the deficit: around $30 billion. This really is a drop in the bucket: so far in fiscal 2010, the US budget has already spent over $ 107 billion on unemployment benefits, and $30 billion is less than the government raises in one of its three biweekly coupon auctions. On the other hand, when Obama next wonders why nobody in America works any more, he may want to reevaluate that 6 million unemployed people in the US are now encouraged to be on government payrolls for two years.

With Greece now a distant, proforma bankrupt memory, rubberneckers have finally started paying far more attention to the Spanish slow motion trainwreck. And things in the Pyrenean country are deteriorating: earlier, Market News reported that the market's reaction to Spain's austerity package was one of ridicule, and its credibility will be further eroded now that Spanish bilateral labor reform talks have ended unsuccessfully , leading the way for general strikes as early as next week. Pouring even more gas into the fire is the just released announcement by the Spanish government that earlier economic forecasts were too optimistic: a hallmark of any floundering Keynesian state (and all of this even without the ongoing liquidity crisis as seen by rumors about BBVA's CP access and the ongoing flash merger rage among all the insolvent savings banks). The government, which is currently saddled with 20% unemployment, said that the economy will grow by 2.5 percent in 2012, down from its previous forecast of 2.9%. GDP growth in 2013 is seen at 2.7%, down from 3.1% previously. And while a realistic unemployment picture courtesy of austerity is now in the upper 20% range, a step in the right direction was the revision to the unemployment forecast, which was pushed higher to 18.9 percent in 2011, up from the 18.4 percent previously seen.

Courtesy of Economic Policy Journal we now know that the majority of American states are currently insolvent, and that the US Treasury has been conducting a shadow bailout of at least 32 US states. Over 60% of Americans receiving state unemployment benefits are getting these directly from the US government, as 32 states have now borrowed $37.8 billion from Uncle Sam to fund unemployment insurance. The states in most dire condition, are, not unexpectedly, the unholy trifecta of California ($6.9 billion borrowed), Michigan ($3.9 billion), and New York ($3.2 billion). With this form of shadow bailout occurring, one can only wonder how many other shadow programs are currently in operation to fund states under the table with federal money.The full list of America's 32 insolvent states is below, sorted in order of bankruptedness.

One of the more peculiar phenomena in the current Great Recession has been the persistent drop in the Civilian Labor Force Participation Rate, after averaging around 66.5% for the past 20 years, in the past 18 months it has plunged, and despite a marginal improvement over the past several months, is still at 65.2%. This is counterintuitive when one analyzes the data side by side with the overall civilian population in the United States. An indexed chart, using the January 2000 level as a baseline demonstrates that while the US population has been climbing at a fairly steady arithmetic growth rate, the civilian labor force, which should track the changes in the actual population, has been behaving in an erratic pattern, having more to do with BLS data interpretation and the nuances of the business cycle than demographics. Which is why when reindexing data for nominal changes in the US rate of population growth, yields some troubling variations from the just disclosed 9.9% unemployment rate. Basing the adjustment to the unemployment rate on nothing but a statistical regression to the growth of America over the past ten years, would yield an unemployment rate of 12.7%. More troubling is that the underemployment rate would be a number far higher than the 17.1% disclosed for April. According to our calculations, a reading closer to 22% would be more appropriate to represent the level of real joblessness in the US. A number, which is higher than the corresponding metric in austerity-ridden Spain.

290K of which census was 66k and Birth Death was 188k. Hurray -the economy added a real 36k in jobs in April. Still, we are curious how the Chairman will not be forced to discuss tightening after this B/D adjustment inspired number (188K in April B/D, 81K in March). And in the meantime, headlines will read Unemployment back to 9.9%, and Underemployment back to 17.1%. Record jittery market bounces than calms down again.

Jan Hatzius, who along with Erik Nielsen, knows what the DOL and the IMF will announce and do about two weeks before the respective agencies do, has come out with his most recent preliminary NFP number. The verdict: +175,000, consisting of 125,000 from the Census. The unemployment rate will remain at 9.7%, unchanged from March's hilarious 9.749% (the gov't just like goldman rounds down the nearest trillion). Still, a bit off from VP Biden's prophecy of half a million jobs created each month "very soon."

A freak leak of the Spanish unemployment number by the National Statistical Institute (INE), the equivalent to the DOL, was captured by Spanish daily ABC.es, according to which for the first time since 1997, the unemployment rate in the country that was notched by S&P today, will surpass 20%. This number was supposed to be under embargo until Friday. According to the temporary leak which was subsequently promptly removed, the number of unemployed in Spain increased from 4.3 million to 4.6 million between the end of 2009 and March 31, 2010. What's worse is that the unemployment among Spain's youth is reaching epidemic proportions: "the unemployment rate for those under 25 years in the first quarter of 2010 was 40.93% and 18.02% in those over 25 years. In the group of 16-19 years, the rate is 59.79% and 13.1% among the unemployed aged 55 and older." Dealing drugs is probably a more lucrative job than working for the government anyway. No taxes either.

The poor are suffering Depression-level unemployment, while the well-off aren't feeling a thing ..

How to read the unemployment numbers in a world where the major media are cheerleading their coverage.