Unemployment

Goldman is known for changing its estimates within 24 hours of an NFP number. Today, there is no change, and it stays at -25,000, coupled with an estimation of the unemployment rate at 10.1%. Additionally, some bearish observations on the US economy via Goldman uber economist Jan Hatzius, who is now convinced this is a U- and not a V-shaped recession, follow.

Zero Hedge recently highlighted the ever increasing Federal outlays on unemployment insurance, leading to questions on whether the true unemployment rate, as indicated by actual cash outlays, may be materially higher than indicated in increasingly dubious governmental reports. One proposed alternative has been that the Federal government is directly subsidizing standalone states' depleted unemployment insurance trust funds. Using data provided by ProPublica we have been able to confirm that indeed standalone states are for the most part now bankrupt and have no reserves left in their coffers when it comes to funding ever increasing insurance benefits. As ProPublica indicates, there are now 26 states which have depleted their trust funds, among these are the usual suspects including California, Michigan, New York, Pennsylvania and Ohio, which now rely exclusively on borrowings from the Federal government to prevent the cessation of insurance payments to recently unemployed workers. Currently all states collectively posses $10.7 billion in trust fund assets(with the bulk held by less impacted states such as Washington ($2.6 billion), Louisiana ($1.1 billion) and Oregon ($1.1 billion). On the other hand, 26 states currently rely exclusively on the Federal Government, and have borrowed a combined $30 billion through December to fund payments. ProPublica estimates that another 8 states will be insolvent within 6 months, as their trust funds also approach 0.

The BLS today released yet another data point confirming the double-dip is finally here: in December 44 states reported a statistically sginficiant decline in employment. "Over the year, 44 states experienced statistically significant changes in employment, all of which were decreases. The largest statistically significant job losses occurred in California (-579,400), Texas (-276,000), Illinois (-237,300), Florida (-232,400), and Michigan (-207,100). The smallest statistically significant decreases in employ- ment occurred in South Dakota (-10,900), Delaware (-12,100), and Montana (-13,700)."

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. 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.

The notable fudge factor in today's initial claims report had nothing to do with EUCs or continuing claims (people are now rolling off both faster than ever), but the spread between the Seasonally and Non-Seasonally adjusted insured unemployment rate. As the DOL indicates, the Seasonally Adjusted Ins. Unemployment rate was 4.6%, while the Non-Seasonally Adjusted equivalent came in at 3.5%: a 110 bps spread. The last time the delta was so wide was back in January 1992!

Nonfarm payroll employment edged down (-85,000) in December, and the unemployment rate was unchanged at 10.0 percent, the U.S.

Nonfarm payroll employment edged down (-85,000) in December, and the unemployment rate was unchanged at 10.0 percent. In December, both the number of unemployed persons, at 15.3 million, and the unemployment rate, at 10.0 percent, were unchanged. Among the unemployed, the number of long-term unemployed (those jobless for 27 weeks and over) continued to trend up, reaching 6.1 million. In December, 4 in 10 unemployed workers were jobless for 27 weeks or longer. About 2.5 million persons were marginally attached to the labor force in December, an increase of 578,000 from a year earlier. Among the marginally attached, there were 929,000 discouraged workers in December, up from 642,000 a year earlier. In December, the average workweek for production and nonsupervisory workers on private nonfarm payrolls was unchanged at 33.2 hours. The change in total nonfarm payroll employment for October was revised from -111,000 to -127,000, and the change for November was revised from -11,000 to +4,000. In December, average hourly earnings of production and nonsupervisory workers on private nonfarm payrolls rose by 3 cents, or 0.2 percent, to $18.80. The civilian labor force participation rate fell to 64.6 percent in December. The employment-population ratio declined to 58.2 percent.

Yesterday's post on documented Treasury outlays for unemployment insurance benefits, spurred various questions which we wanted to shed some light on. To recap: the gist of the post was that the divergence of average monthly premia paid by the Federal government, superimposed with actual changes in the population of those collecting unemployment insurance (per the government's data) has diverged dramatically. The key premise in the analysis is that average monthly "allowance" paycheck has been relatively flat, and while there have been marginal changes ($25 dollar increases to a fraction of the population eligible for such increase), the core of the problem is captured by the chart below. As one can see, the average monthly payment since the beginning of Fiscal 2008 has been $1,207. If one excludes the divergent period since March of 2009, the average was just $1,109 per month. Yet the most recent data indicates that in December, according to the government's data, the actual outlay came down to $1,536, 21% higher to the total average, and 28% to the narrower average payment of $1,109. Is the government engaged in another, stealth stimulus by gradually padding unemployment insurance benefits? After all the money printer is on, and with banks not lending, what easier way to get the money straight to the (unemployed) population.

There is an old saying, "when in doubt follow the money." These days investors have lots of doubt about pretty much everything (if not so much money). And with data from the government increasingly bearing the Quality Control stamp of approval of the Beijing Communist Party, there is much doubt in store courtesy of an administration which will stop at nothing in its competition with China as to who can blow the biggest asset bubble the fastest, data integrity be damned. Undoubtedly, of all government released data, the most important is, and continues to be, anything relating to unemployment. This is precisely where the government's propaganda armada is focused. Yet in matters of (un)employment, the ultimate authority is, luckily, the Treasury, and not the Fed. "Luckily," because when it comes to making money "difficult to follow" Tim Geithner's office still has much to learn. Which is why when we looked at the Daily Treasury Statement data we were very surprised: because it indicates that the government could be underrepresenting employment data by up to 32%!

The fabulous news of the day undoubtedly will be the latest release from the Dept of Labor: Initial Claims for the week ended December 26 came in at 432,000, a 22,000 decline from the prior week, and below consensus. The number was sufficient to prompt Bloomberg's Courtney Schlisserman to come up with the following observation, "Fewer Americans than anticipated filed claims for unemployment benefits last week, pointing to an improvement in the labor market that will help sustain economic growth next year." Perhaps Courtney and Steve Liesman should sit down in a corner and finally figure out what this whole EUC (Emergency Unemployment Compensation) business is - trust us, it is not that difficult. And for the week ended Dec. 12 it surged by 191,669 to almost 4.5 million, another all time record. Three weeks ago we were shocked when this number hit the all time high of 4.2 million: in a mere 21 days it has added a whopping 8% to the total. Unfortunately, at this point we have gotten a little desensitized to new EUC records. We ask Ms. Schlisserman what happens to the "sustainable economic growth" when there are 0 Initial Claims (hurray!!) and a million EUC claims weekly (uhh)? Again, a simple question. Luckily for Bloomberg, the DOL and the BLS there is no consensus number for EUC, as the downside surprises there would have been staggering, if anyone actually cared to report those on the front pages of the even impartial mainstream media.

Latest data out of the BLS is in tune with the most recent miraculous reading of national unemployment, a number which as highlighted allows more ways to be gamed than not. In any case, for those who believe BLS data, here are the most improved states (those farmers must sure be hiring ahead of the winter season): Louisiana: from 7.4% to 6.7%, Nebraska: from 4.9% to 4.5%, Kansas: from 6.8% to 6.3%, Connecticut: 8.8% to 8.2%, and Kentucky: 11.2% to 10.6%.

Economic data adjustment/recasting/proforma expert, and the government's favorite mouthpiece (aka CNBC Senior Economic Reporter/Producer), Steve Liesman, apparently has never heard of EUC. In the clip below we were much amused as the COMCASTIC ones were trying to make yesterday's Dept of Labor data into something positive, when instead the influx of 328k into EUC programs weekly, demonstrated the complete lack of hiring and the roll of hundreds of thousands from continuing into EUCs on a weekly basis (592k in the last two weeks alone). Please see 2'40" in the attached clip.

The ABC Consumer Confidence index was just released, and is notable as it is the first confidence read since the NFP/unemployment number was released last week by the BLS. And despite all expectations, and proddings by the Comcastic ones that the presumed drop in unemployment would boost sentiment and confidence, the index in fact dropped by two points from -45 to -47. Could people just be smarter, and finally better at seeing through the BS, than the mainstream media gives them credit for?

Japan has been the poster child of what not to do. They are a textbook case for the failure of Keynesian stimulus. After 20 years of repeating the same mistakes with the same results, you would think they would learn. They haven't. Now they may enact a policy that will lead to depression level unemployment. Remember the definition of insanity: do the same thing over and over and expect a different result?

Even as the BLS and the administration are trying to cover up the real state of unemployment affairs using assorted semantic gimmicks of just what it means to be unemployed, and as companies provide adjusted EPS numbers, while actual earnings continue to collapse, the true barometer of spending, provided by the Financial Management Service, tax withholdings (net of refunds), continues to paint the truest picture of just what is really happening with both America's consumer and the corporate world. And it ain't pretty. On a rolling 12 month basis, individual tax withheld has dropped by nearly 8% YoY, from $1.42 trillion to $1.31 trillion, while company witholdings are down a whalloping 64%, from $274 billion to just under $100 billion! This is money that will never be used to pay down the skyrocketing US deficit, because both the US consumer and average US company are simply not collecting the required cash to line the Treasury's pockets with the one traditional way to pad the deficit: taxes. Expect much, much, much more debt issuance in America's short, medium and long-term future.