Announcement

Collapse
No announcement yet.

Next Wall Street surprise: More bad employment news

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • Next Wall Street surprise: More bad employment news

    Next Wall Street surprise: More bad employment news

    Today investors were again surprised by a Labor Department report that showed a gain in jobless claims and a drop in factory orders.

    The Associated Press reports today that "Wall Street appears optimistic the Labor Department report Friday will indicate a rebound from August and include revisions to that month's dismal numbers. August's job creation report showed a decline in payrolls when economists had predicted a rise, and sent the Dow Jones industrial average down nearly 250 points the day it was released."

    AntiSpin: We've been tracking the duration of unemployment numbers because they, combined with other data, are a decent leading indicator of future unemployment, especially at turning points.

    Early in an economic slowdown, six months or more before companies lay off employees, they slow then stop new hiring. As thousands of employers reduce then stop hiring as the economy slows, anyone who is laid off experiences finding a new job takes longer and longer.



    The economic factors causing employers to reduce hiring are causing the rise in duration of unemployment. At some point the process becomes self-reinforcing; the longer more people stay unemployed, the more spending and consumption is reduced, the more demand declines, the more pressure on firms to reduce head count rises, and so on.

    A rising trend change in the duration of unemployment does not, of course, in itself indicate a future recession. Since 1980 duration of unemployment has turned up as much as it has today four times without a recession before reversing.



    One of the reasons a trend change in duration of unemployment does not always correlate to recession is Fed policy. The chart below shows the past two Fed tightening induced recessions. Even aggressive rate cuts following a tightening cycle in the presence of rising duration of unemployment failed to prevent recession. The Fed's tightening certainly put the kibosh on the real estate sub-sector of the FIRE Economy, but did little to blunt inflation in the Production/Consumption Economy, as indicated by rising oil and commodity prices.



    Duration of unemployment when plotted with declines in housing permits issued produces a chart that shows that for all recessions since 1970, with the exception of the post stock bubble recession in early 2001, whenever permits issuance falls as long as hard as it has while duration of unemployment has risen as much and as long as it has, recession has not been far behind.



    We expect Wall Street to be surprised again on the downside on Friday with worse than expected payroll numbers, and that may get priced in tomorrow.

    iTulip Select: The Investment Thesis for the Next Cycle™
    __________________________________________________

    For a book that explains iTulip concepts in simple terms see americasbubbleeconomy

    To receive the iTulip Newsletter or iTulip Alerts, Join our FREE Email Mailing List


    Copyright © iTulip, Inc. 1998 - 2007 All Rights Reserved


    All information provided "as is" for informational purposes only, not intended for trading purposes or advice.
    Nothing appearing on this website should be considered a recommendation to buy or to sell any security or related financial instrument. iTulip, Inc. is not liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. Full Disclaimer
    Last edited by FRED; 10-04-07, 02:17 PM. Reason: Spelling and stuff.

  • #2
    Re: Next Wall Street surprise: More bad employment news

    EJ I donít remember giving anyone at iTulip permission to use photographs of me on your site. U can PM me for permission and I will look at it. If my wife sent this photo in please advise as it could lead to devorce thanks.

    Comment


    • #3
      Re: Next Wall Street surprise: More bad employment news

      Originally posted by RickBishop View Post
      EJ I donít remember giving anyone at iTulip permission to use photographs of me on your site. U can PM me for permission and I will look at it. If my wife sent this photo in please advise as it could lead to devorce thanks.
      Ha ha! Nice try. That's me in the picture.
      Ed.

      Comment


      • #4
        Re: Next Wall Street surprise: More bad employment news

        Originally posted by EJ View Post
        Duration of unemployment when plotted with declines in housing permits issued produces a chart that shows that for all recessions since 1970, with the exception of the post stock bubble recession in early 2001, whenever permits issuance falls as long as hard as it has while duration of unemployment has risen as much and as long as it has, recession has not been far behind.
        What seems to be different this time is median duration of unemployment never reached 5-6 weeks during the real estate boom. The turning point now seems to be 7-8 weeks and if history repeats it should spike up to a minimum of 15-17 weeks. Permits will continue to free fall and should test 750. The Fed’s response should be, continue to cut until the spike of unemployment levels (15-17+ weeks), and then the next fire economy starts. 09?

        Last edited by bill; 10-04-07, 05:05 PM.

        Comment


        • #5
          Re: Next Wall Street surprise: More bad employment news

          Originally posted by Fred View Post
          Ha ha! Nice try. That's me in the picture.
          That's odd. I always assumed you looked like Aldous Huxley.

          Comment


          • #6
            Re: Next Wall Street surprise: More bad employment news

            if I
            lost 30 pounds,
            grew a full head of hair
            shaved my belly hair

            It could be me.

            Originally posted by Fred View Post
            Ha ha! Nice try. That's me in the picture.

            Comment


            • #7
              Re: Next Wall Street surprise: More bad employment news

              Originally posted by Andreuccio View Post
              That's odd. I always assumed you looked like Aldous Huxley.
              I quit smoking. Look what happened.
              Ed.

              Comment


              • #8
                Re: Next Wall Street surprise: More bad employment news

                Originally posted by Fred View Post
                I quit smoking. Look what happened.
                Scary. You went downhill pretty quick. You still have a full ashtray in front of you.

                Comment


                • #9
                  Re: Next Wall Street surprise: More bad employment news

                  Bill -

                  You are the odd man out here. Everyone else is posting like they are a bunch of real cards, and you are dead serious. Even Fred seems to have lost hold of his customary dignity.

                  Comment


                  • #10
                    Re: Next Wall Street surprise: More bad employment news

                    Originally posted by Andreuccio View Post
                    Scary. You went downhill pretty quick. You still have a full ashtray in front of you.
                    That's not a ash tray. Those are little bread sticks.
                    Ed.

                    Comment


                    • #11
                      Re: Next Wall Street surprise: More bad employment news

                      Originally posted by Lukester View Post
                      Bill -

                      You are the odd man out here. Everyone else is posting like they are a bunch of real cards, and you are dead serious. Even Fred seems to have lost hold of his customary dignity.
                      Well, you have to keep your sense of humor when the inflation, employment, and other government numbers either don't add up or reflect ever increasing government and FIRE sector growth while US assets are sold off one company and building at a time. It's depressing.
                      Ed.

                      Comment


                      • #12
                        Re: Next Wall Street surprise: More bad employment news

                        Originally posted by Fred View Post
                        That's not a ash tray. Those are little bread sticks.
                        Mmmmm. Yummy.

                        Comment


                        • #13
                          Payroll employment projection post-mortem

                          We dig into the Labor Department's numbers to see where all these jobs came from, but the fact is that our projection was wrong.
                          The good news: unemployment is only slightly up. The bad news: the Banana Republicization of America is proceeding apace.
                          Payrolls Pick Up by 110,000 but Not Enough to Stop Jobless Rate From Rising to 4.7 Percent

                          The new job market snapshot released by the Labor Department on Friday showed that employers boosted payrolls by 110,000, the most in one month since last May. In an encouraging note, the economy actually added 89,000 jobs in August. That marked an improvement from the net loss of 4,000 that the government first estimated.

                          To be sure, the ill effects of these problems are showing up at some companies. Construction firms cut 14,000 jobs in September, Factories slashed 18,000. Retailers got rid of just over 5,000 jobs. Financial services companies eliminated 14,000 slots.

                          However, gains in education and health services, professional services, leisure and hospitality, and in government work more than offset those losses, leading to a net gain in new jobs in September.
                          The magic of a depreciating currency is working. Foreign investors are buying US stocks and other assets at fire sale prices. Tourism is up as visitors from Asia, Europe, Canada and all other countries whose currencies have appreciated against the US$ flock to visit the US for a cheap United Banana Republic States of America vacation, driving leisure and hospitality jobs within the service sector where most of the job growth occurred.

                          Like all banana republics, the government of the United Banana Republic States of America is employing more and more of its citizens as private sectors–especially the goods producing sector–of the economy shrink.



                          The payroll numbers today extend a trend that started with post 2000 stock market crash re-inflation policies. Of 140 million jobs in the US economy, approximately 50 million, or 36%, are in the goods producing, construction, and manufacturing sectors. The rest are in finance, retail, services, or government. At 22 million, total government employment is now at parity with the goods producing sector.

                          There is little reason to believe that the Banana Republicization of America will not continue. As long as it does, the US may be able to avoid recession.

                          But there is one fly in the tropical rum drink. Today's labor department report also showed: "Wages, meanwhile, rose solidly."

                          Suppression of wage increases has been the centerpiece of monetary and government policy to manage inflation in the Production/Consumption Economy since 1980. Given the difficulty in acquiring legitimate measures of actual inflation rates in the US economy, there is no way of telling whether these wage increases translate into increased purchasing power. Given the rise of oil and other commodity prices, it seems doubtful. In fact, it looks like the US is going full-bore banana republic, including wage and price inflation to maintain employment going into an election year.
                          Last edited by FRED; 10-05-07, 01:08 PM.

                          Comment


                          • #14
                            Re: Next Wall Street surprise: More bad employment news

                            Originally posted by ej
                            At 22 million, total government employment is now at parity with the goods producing sector.
                            There is little reason to believe that the Banana Republicization of America will not continue. As long as it does, the US may be able to avoid recession.
                            emphasis added

                            ej, are you retracting your recession prediction? and if so, do you think it's possible we saw the bottom for equities on 8/16?

                            Comment


                            • #15
                              Re: Payroll employment projection post-mortem

                              Why are the Labor Department reports on wages so often good, while the less frequent Census Bureau reports on wages are always grim? Or is my impression wrong?

                              Comment

                              Working...
                              X