Business/Finance – Page 2

December 5, 2008

Unemployment Rates 12-5-2008

Image via WikipediaWhat’s In A Number?

Every month the Bureau of Labor Statistics releases its jobs report. It is read to the members of the Joint Economy Committee on Capitol Hill. When Keith Hall, Commissioner of BLS, read the latest report to Congress this morning, he made an interesting remark, as reported by ABC News:

In an exchange with Rep. Elijah Cummings, D-MD, Hall said , “If I were to characterize this jobs report I would say it’s very dismal… it’s maybe one of the worst that the BLS has ever produced.”

“Ever?” asked Cummings.

“Ever,” replied Hall.

Cummings asked how long the BLS has been around and the answer was 124 years.

Below are some excerpts from the latest report from the Bureau Of Labor and Statistics, released on December 5th 2008. Since most folks don’t know where to go to read it themselves, and even if they do, don’t have the time to read and decipher the report, I wanted to put at least these small parts in front of your eyes for a minute or so.

Please take the time to scan through this… you won’t hear or see this on CNN or Fox or MSNBC.

Among the unemployed, the number of persons who lost their job and did not expect to be recalled to work increased by 298,000 to 4.7 million in November. Over the past 12 months, the size of this group has increased by 2.0 million.

…

The number of long-term unemployed (those jobless for 27 weeks or more) was little changed at 2.2 million in November, but was up by 822,000 over the past 12 months.

…

Over the month, the number of persons who worked part time for economic reasons (sometimes referred to as involuntary part-time workers) continued to increase, reaching 7.3 million. The number of such workers rose by 2.8 million over the past 12 months. This category includes persons who would like to work full time but were working part time because their hours had been cut back or because they were unable to find full-time jobs.

…

About 1.9 million persons (not seasonally adjusted) were marginally attached to the labor force in November, 584,000 more than 12 months earlier. These individuals wanted and were available for work and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. Among the marginally attached, there were 608,000 discouraged workers in November, up by 259,000 from a year earlier.

Discouraged workers are persons not currently looking for work specifically because they believe no jobs are available for them. The other 1.3 million persons marginally attached to the labor force in November had not searched for work in the 4 weeks preceding the survey for reasons such as school attendance or family responsibilities.

…

Total nonfarm payroll employment fell by 533,000 in November, bringing losses to 1.9 million since the start of the recession in December 2007. Two-thirds of these losses occurred in the last 3 months. In November, employment declined in nearly all major industries, although health care continued to add jobs.

Scrolling down about two-thirds of the way through the report we find the complex set of data neatly dispayed as percentages. Note the measure of Total Unemployment, labeled U-6, and remember, these are the government’s numbers:

Table A-12. Alternative measures of labor underutilization (Percent)

U-1 Persons unemployed 15 weeks or longer, as a percent of the civilian labor force …. 2.6

U-2 Job losers and persons who completed temporary jobs, as a percent of the civilian labor force … 3.9

U-3 Total unemployed, as a percent of the civilian labor force (official unemployment rate) …6.7

U-4 Total unemployed plus discouraged workers, as a percent of the civilian labor force plus discouraged workers …7.0

U-5 Total unemployed, plus discouraged workers, plus all other marginally attached workers, as a percent of the civilian labor force plus all marginally attached workers … 7.8

U-6 Total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers … 12.5

NOTE: Marginally attached workers are persons who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the recent past. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not looking currently for a job. Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule. For more information, see “BLS introduces new range of alternative unemployment measures,” in the October 1995 issue of the Monthly Labor Review. Updated population controls are introduced annually with the release of January data.

Total unemployed – 12.5%

That’s 1 out of every 8 folks in America. They want to work – there’s just nothing there to work with.

For comparison, the unemployment rate about a year into the Great Depression, in mid-1930, was about 12.5%, eventually climbing to around 25%.

I am Jon. Thanks for stopping by.

December 5, 2008

FDIC Chairman Sheila Bair on CRA

Image by Getty Images via DaylifeCommunity Reinvestment Act – Not Guilty!

Since the crisis began, there’s more finger pointing that you can shake a stick at. At least some of that pointing has been at the CRA. The chairman of the FDIC has come out recently with a statement on the subject.

As she explains in the quotes below, the CRA was NOT the cause of the current crisis. I particularly like this part:

“Where in the CRA does it say to make loans to people who can’t afford to repay? Nowhere.”

From HousingWire.com via TheBigPicture:

“I want to give you my verdict on CRA: NOT guilty,” said FDIC Chairman Sheila Bair, according to a press release by the Federal Deposit Insurance Corporation. Before the Consumer Federation of America, Bair said Thursday she wanted to clear up the “myth” that the Community Reinvestment Act caused the financial crisis — and she set out to do so with vigor.

The Community Reinvestment Act — or CRA — is a federal law designed to encourage commercial banks and savings associations to meet the needs of borrowers in all segments of their communities, including low- and moderate-income neighborhoods. It has largely been criticized by conservative members of the GOP as promoting predatory lending practices.

“Point in fact,” she said, “only one in four higher-priced first mortgage loans were made by CRA-covered banks during the hey-day years of subprime mortgage lending. The rest were made by private independent mortgage companies and large bank affiliates not covered by CRA rules.

And “Let me ask you,” she proceeded. “Where in the CRA does it say to make loans to people who can’t afford to repay? Nowhere.” The facts are simple, Bair said. The lending practices that are causing problems today were driven by a desire for more market share and revenue growth, not because the government encouraged certain lending practices.”

3 Out Of 4 Subprime Loans

Three fourths of those subprime loans were made by companies NOT COVERED by CRA rules. If you’re looking for something – or someone – to blame, you’ll just have to look somewhere else.

The CRA was not at fault.

I am Jon, and that’s a fact.

December 5, 2008

Dow Rallies To Close Down For The Week

Image by Aaron Edwards via FlickrDo You Still Feel Good?

The Dow Jones Industrial Average climbed sharply late this afternoon to close up for the day. Nevertheless, that close finished a topsy-turvy (pun intended) week which shows a net decline in the Average of -2.19%.

I’ve been sitting back and just watching this thing all week, this jigsaw mess of a market. Horrible numbers are released and folks just pour cash into stocks. Perceived ‘good’ news is released and the whole country grabs as much as they can to hide away.

Talk about a lack of confidence… it’s almost as if the market has decided just to disbelieve every piece of news that comes out. What’s up, people? Did the last 8 years make you that greedy? You’re all out there trying to ‘out-think’ each other. Only problem is – you’re ALL doing the same thing.

Sell into rallies, buy into dips. What hogwash. When everyone has the same strategy, isn’t it time to think of something else? I’m not saying do the opposite just for the sake of doing something different, but geez! This is like watching a bunch of keystone cops running around on ice.

You might be better off just taking a vacation.

Go ahead – criticize me for not buying OR selling. Tell me to keep my mouth shut if it has no cash in it. Choose to only listen to folks who have a position to push, a book to talk.

I’ll just remind you of Jon’s Rule Of Investing In Markets #’s 1 and 11:

1. Everybody is always in the market, whether they know it or not.
11. I do not have to be actively trading in the markets to gain a profit.

It’s Basic Math – So Easy A Schoolchild Could Do It

I firmly believe that we will most likely be enduring a full depression. The actions of the Fed and the Treasury have almost guaranteed it. Instead of letting the market work as it was designed, the Fed and the government have thrown debt-dollar after debt-dollar to correct an excess of already toxic debt. (You can trade that market if you want to.)

Any schoolchild with a basic knowledge of negative numbers can work this math. If you add a negative to another negative, what do you get?

A Bigger Negative.

You cannot create a positive balance by throwing even more negative at it. This entire thing was caused by excessive leveraging. Creating debt without assets to back it up. All of the failed and bailed companies were leveraged at about 40 to 1.

The Fed, and hence our Treasury, is now leveraged at about 51 to 1, and everyone who reads this is probably hoping for Another $600 Billion when Obama takes office next month. Folks, it’s really simple math: This is not the answer.

If the market had been allowed to work the way it was designed to work, the toxic debt would have been forced out into the open sometime during 2008. Huge losses would have become known, mega corporations would have defaulted and disappeared. The folks at fault would have been outed by those who were close to them, charges would have been filed, trial dates set.

It Would Have Been Awful Really Fast

It would have been just awful for the world to see, for us to live through. Most of the banks we knew would have disappeared. Our 401k’s would have evaporated, our savings accounts worrisome. Jobs would have been lost as the entire mess caused by the banking industry rippled like a shock wave through the global economy. Unemployment would have already topped 20%.

There would have been panic, maybe to the point of riots. The Dow wouldn’t have stopped falling until it hit something we could all have confidence in, and even then it would have overshot the real value point due to panic. It probably would have gone well below 5000, maybe as low as 2000.

We’d be right in the middle of that right now, if the markets had been allowed to work. The Middle of it. The so-called ‘bottom’. We’d be seeing the glimmer of recovery at the end of a fairly short tunnel and by the middle of next year, we’d be talking about it in the past tense. But we’re not at the bottom.

We’re not there yet because the folks in the Fed and the Treasury are the same folks as in the banking industry. Specifically, both places a simply filled with people with strong ties to Goldman Sachs. Follow the money. You will see what I mean. But that’s a different story.

It’s Gonna Be Awful A Really Long Time – Thanks Hank!

Instead of letting the market work, our leaders stepped up and started throwing more cash, aka – DEBT – at the mess. As of today, Dec 8th 2008, the total is somewhere north of 8 TRILLION dollars. When you consider that the entire supposed increase of the DOW over the last 8 years is estimated at 12 trillion, you start to see how bad this really is. (Interestingly, the GNP of the US is just about 12 trillion.)

Already, our government alone has poured two thirds of the supposed gains of the entire bubble at the problem, and things are steadily getting worse. The stimulus package Obama is expected to announce will probably be on the order of about a trillion dollars.

That’s a full three quarters of the total gains thrown at the problem, by January 2009. And yet, nearly everyone agrees that even with Obama’s stimulus package, things are only going to get worse throughout next year. Unemployment will rise, companies will fail, bailouts will continue to funnel cash to fat cats who probably deserve prison time instead of a bailout. Nobody really expects any kind of recovery next year, with some saying this will last well into 2010 or beyond.

I am Jon, the optimist.