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3 Things: The Labor Hoarding Effect
Submitted by Lance Roberts via STA Wealth Management,
The Claims Problem
This morning initial jobless claims plunged to the lowest level in the last 42 years. The chart below shows the weekly claims as compared to the 4-week moving average.
Surely, this must be a sign that the economy has turned the proverbial corner as full-employment has finally been obtained. Right? Maybe not.
As discussed earlier this week:
"That really is the point that the majority of analysis misses when they point to jobless claims and the U-3 or U-6 unemployment rates. IF, and that is a big IF, employment was as strong as suggested by headlines then wage growth would be rising sharply and economic growth would be running near levels historically associated with 'full employment rates.'
However, the chart below, which is the labor force participation rate of 16-54-year-olds as a percentage of just that age group, is representative of the real problem. Just because the BLS chooses not to "count" those individuals, it DOES NOT mean that they have ceased to exist.(The percentage of workers participating in this age group as has fallen for the past 3 months.)"
However, I am not suggesting there has been NO JOB growth. There has. However, it has been a function of hiring due to the increases in population growth, which creates incremental demand, rather than an organically driven surge in overall economic growth and prosperity.
It is there that we find the problem with the reports on jobless claims and the actual economy.
Labor Hoarding
Since the end of the financial crisis, businesses have been increasing bottom line profitability by massive cost cuts rather than increases in revenue. Of course, one of the highest "costs" to any business is labor. One way that we can measure this view is by looking at corporate profits on a per employee basis. Currently, that ratio is near its highest level on record. (Scale below is inverted for clarity)
The problem that businesses are beginning to face is while they have slashed labor costs to the bone there is a point where businesses simply cannot cut further. At this point businesses have to begin to "hoard" what labor they have, maximize that labor force's productivity (increase output with minimal increases in labor costs) and hire additional labor, primarily temporary, only when demand forces expansion.
This issue of "labor hoarding" also explains the sharp drop in initial weekly jobless claims. In order to file for unemployment benefits, an individual must have been first terminated, by layoff or discharge, from their previous employer. An individual who "quits" a job cannot, in theory, file for unemployment insurance. However, as companies begin to layoff or discharge fewer workers the number of individuals filing for initial claims decline. This is shown in the chart below which shows the 4-month average of layoff and discharges versus the 4-week average of initial jobless claims.
However, the mistake is assuming that just because initial claims are declining, the economy and specifically full-time employment is markedly improving. The next chart shows initial jobless claims versus the full-time employment to population ratio.
Obscuring Reality
The issue of "labor hoarding" is an important phenomenon that is likely obscuring the real weakness in the underlying economy. Without an increase in the demand part of the economic equation, businesses will continue resorting to productivity increases to stretch the current labor force farther to protect profitability. The effect is a decline in real median incomes which negatively impacts future demand.
While massive binges in stock buybacks and accounting gimmicks have continued to blur the actual profitability of businesses, the decline in jobless claims suggests that there is little room from further reductions in body counts. However, that does not mean that businesses must begin rapidly increasing employment and wages.
The "good news" is that for those that are currently employed - job safety is high. Businesses are indeed hiring, but prefer to hire from the "currently employed" labor pool rather than the unemployed masses. The "bad news" is that for those unemployed, full-time employment remains elusive, and wages remain suppressed due to the high competition for available work.
The current detachment between the financial markets and the real economy continues. The Federal Reserve's interventions continues to create a wealth effect for market participants. However, it is unfortunate that such a wealth effect is only enjoyed by a small minority of the total population - those at the upper end of the pay scale that have jobs.
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I think more and more people are working for cash only. Let's starve the Beast. That's how we beat the Banksters and our fucked-up government. Obvious really.
The Internet can shrink the size of Government to pretty much nil.
The Government has chosen it's pensioners over everything else...and yes that does include not just a "jobs recovery" but recovery PERIOD.
Go ahead...blame the taxpayer!
They are dumb enough to pay!
Fucking Amtrak, the Post Office, public education past grade 4...give me a break. "Free money for Wall Street." Plus the printing presses no less.
Worst recovery in post World War II history and absolutely NOT a surprise.
Once you become unemployed they never, ever, count you again.
Unemployment could be 40% but the bullshit .gov charts will never show it.
They have us right where they want us: desperate for cash, under the thumb of the IRS (taxes and healthcare), feeding the corporatocracy either via jacked up prices or EBT, and corralled by the police state.
They just want to be needed.
ALMOST got us where they need us for hypocritical judgement day bloody profits of those robbed hypocritically of all good things as a reason for the victimizer so to feel good about continuing the victimization so engrained... Though they fear the monster in which they can not ride down the drain for profit as gnashing teethers afraid of those who hope for more than bloody hands reaching out mocking those they kill.
Completion of anything else had to die to bring us right here as tragedies too good to pass up for hearts on yoyo strings as a matter of national security.
There's a common theme running through these posts; it's not just that the politicians are lying sociopaths, it's that the american sheeple take comfort in being lied to. A large percentage of kidnapee's fall in love with their kidnappers. Just Sayin . . .
Its no accident that we only elect the very best liars. People, when given the choice will almost always choose the lie over the truth, because lies are always better than the truth, yet the lies always have an element of truth. Yes, we want to be lied to but don't want it thrown in our face. We want them to at least try to act like they mean it.
This is now what we lack. The liars are so full of themselves with their victories that they no longer see the need to try to make their lies believable. Their proclamations of love to us ring hollow now, where they used to seem sincere. This is where They are making their mistake. Sure, lie to us, but at least show us a little respect. We apparently respect those who make the effort to lie convincingly and they are now losing that respect. Hopefully (for their sake) their calculations are accurate and they are able to adequately corral us in before we go all pitchforks and torches on them.
Upped you Oldwood but i don't appreciate being lied to. If you have the truth then it gives you a much better opportunity to react accordingly; in a way it would be more refreshing.
That's why i have all the time for Ron Paul.
When Cameron says ' we're ALL in this together ' the lie is much harder to swallow.
Do you have a method to prove "we" elected these people? One theory is we choose them, and you elect them. I don't suscribe to that theory. My personal theory is we choose them, and we elect them. The election is just too important for the TPTB.
Deflationary death spiral in full swing. 100 million swinging dicks dying off slowly. The stock buybacks will continue until morale improves.
There is only one sustainable path.
Lots of people will need to die in a slow and orderly way.
Now, how can that happen?
What is BIG: Pharma, Agro, Oil, Chemical, Cable and Military, for a buck-three-fiddy Alex?
ooooh..
the question was What is BIG Nuclear..
...I know shit's bad right now, with all that starving bullshit, and the dust storms, and we are running out of french fries and burrito coverings. But I got a solution. Now I understand everyone's shit's emotional right now. But I've got a 3 point plan that's going to fix EVERYTHING. Number 1: We've got this guy Not Sure. Number 2: He's got a higher IQ than ANY MAN ALIVE. and Number 3: He's going to fix EVERYTHING. [/President Camacho, Idiocracy]
I'm on the lookout for Camacho '16 bumperstickers and T-shirts..
The Senate is hiring ....sheephurders.
ha! i first saw sheep-HURTERS..
ahahahhhaaahaha!
Where do they find these authors? They are about on par with Market Watch. Of course the ZH perma-bears deserve no better. Why is it so f ---ing hard to understand massive Fed money creation and its massive impact on the markets? If they let this fall apart, it will be the end. The cities will burn and there will be a real chance of no recovery at all. They have to support the markets and the economy with more and more debt. Rates will never again rise in any meaningful way, the federal budget will continue to increase, more deficit spending by everyone will keep the party going a while longer. If it starts to come apart there will be more QE, they have no choice. The Fed Bank balance sheet can double. So what? With deflation they can keep printing.
Millions have put their faith in Fed and could not handle a meltdown...no way. Every stock fund, every pension fund, every investor everywhere, now depends upon the Fed. Do you really think you can time the market top and final collapse? Even if you make a few bucks shorting, if you don't cover quickly you will have your face ripped off. Every dip is bought by people certain others will pay more and that it is their path to easy riches.
How big can a bubble get? Real big...and this one has unlimited money printing to support it. Good luck!
I actually think commercial banks create more money than the FED. Think about it. FED Balance sheet is $4.4 Trillion in assets from commercial banks. And DTCC has created like $1.7 Quadrillion in Derivatives as a Holding Company.
But everyone is looking to China these days. If China is only at the beginning of this Debt, then perhaps Chinese Yuan or Renminbi Financing can be the world focus.
I'm not clear if SDRs or a new currency would change the dynamic of US Total Debt in any way. Unless old Debt could be either wrote off or else marked down in comparison to 'new' Debt in a second currency.
Seriously if Europe and Anglophiles have had enough of US Markets... why wouldn't they all join Chinese Bond Hubs and Renminbi Exchanges for new capital??
After Sucking the blood out of America, Anglophiles can just move on now... leaving US Households poor.
Labor Hoarding Effect isn't that where i have a hotel or restaurant... and I keep my employees from another country away from other employers and from government people and inspectors... especially if I live in San Fransisco where it is well known to have illegal workers kept in small rooms.
KROGER PARKAIR: Based on my limited hours at work; this week I get 30! I believe that it is the median that has to stay below 29 hours per week, while some in my department get close to 40 hours in any given week, but a lot of our employess get, a lot less per week. If we averaged the total hours it would be 29 or less per week. Our store has ONE store manager and 3 co-managers on salary; they get a set pay amount and have to work 50+ hours per week, and all co-managers make less than all of the department managers, but the department managers can only work up to 40 hours per week. Im in the BEST store in our ATLANTA Division, that also happens to be it's home terroitory. We have a Customer First strategy, yet employee last mentality, the TWO don't work. Fuck it!
The real rich are those technical staff, government employees and resource industry grunts...who never suffered in the great recession, never lost their jobs and never lost salary...and now are hogging all the available work and pay, to the detriment of we the unemployed.
The real problem is those damned part time workers.
Those A-Holes take up 2 or 3 job apiece, no wonder there aren't enough to go around.
I think we should limit people to just one job. You aren't entitled to more than one, and you don't deserve it.
ONE JOB PER PERSON!!!
Now how do I get my congressman to take my call?