Markets Are Misreading the Data

By Graham Summers – Re-Blogged From Gains, Pains & Capital

The US markets are in a quandary.

On the one hand, some of the data (GDP growth, unemployment, etc.) suggests the Fed should continue to hike rates. On the other hand, other data points (food stamp usage, labor participation rate) suggest the US never actually entered a real recovery.

More importantly, how can the jobs data suggest such a strong employment situation… when one in seven Americans are on food stamps?

Let us, consider how the Labor Department calculates the unemployment numbers… those same numbers that the ENTIRE stock market reacts to every few weeks.

Every month, the US Government conducts a “Current Population Survey” through which it calls or visits 60,000 US households and asks them questions about their current employment or lack thereof. This usually occurs on the week of the month containing the 12th.

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Happy New Employment

cropped-bob-shapiro.jpg   By Bob Shapiro

As we are about to ring in the new year, we can give thanks for the “Full Employment” Economy. That big Thank You needs to go to the manipulators of the official statistics over at the Bureau of Labor Statistics (BLS) and elsewhere in our government.

It should be remembered that the Participation Rate among working age Americans is at a multi-generation record low. 10 Million Americans or more burned through over a year’s worth of unemployment benefits, and still could not find a job which payed more than Welfare and Food Stamps.

These people, who have given up hope, were re-defined out of the ranks of the officially unemployed. Too bad for them, but they no longer count – or rather no longer are being counted.

However, some people were able to find full time jobs, even if the skill level – and pay level – was far below what the had become accustomed to. Too bad for them, but having to accept half of what they used to be paid, doesn’t mean they are unemployed. Under-employed people don’t count – or don’t get counted by the BLS.

Some formerly unemployed Americans have accepted part-time jobs. Checking the official numbers, part-time positions have skyrocketed while full-time openings have plunged. (The surge in part-time vs full-time jobs must be one of the hidden “Benefits!” of ObamaCare.) But again, a job is a job, so no use complaining about it. And, no use expecting to be counted as unemployed.

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The Minimum Wage

cropped-bob-shapiro.jpg   By Bob Shapiro

The push to raise the Minimum Wage refuses to die, both the Federal Rate and Rates in the various States. Supporters say that poor people need to earn enough to support themselves and their families, and nobody – certainly not I – can argue with that sentiment.

However, I think that it is valid to explore the actual effects of a Minimum Wage hike. I’d like to suggest three examples to consider in this quest – two may seem unrelated at first, while the third will use extreme numbers.

Example 1: Suppose you are considering the purchase of a new computer. In your locale, you find you have two choices. The first is a fully loaded, name brand PC with a selling price of $5000. The other choice is one assembled at a local shop to your specifications. For what you need, the price will be $1000.

The $5000 box is appealing, but your budget pushes you toward the $1000 option. Before you can make your purchase, the government (at whatever level) issues an order saying that “No computer may be sold for less than $4000.”

You still may opt for the lower cost choice, but relatively, the $5000 price is not so bad. Of course, your budget still is your budget, so you may just forget the purchase altogether.

Example 2: Your roof leaks. One contractor offers to repair your roof for $5000, while another will do only a full new roof, and the charge will be $50,000. Before you can choose, the government declares that roof work may not cost less than $40,000.

Once again, the law is discouraging the lower price option, while encouraging either the higher priced work or letting the leak continue.

Example 3: Putting food on the table, clothes on your back, and a roof overhead are serious needs. Nobody should have to make do with less than everything he desires. So, let’s raise the Minimum Wage to $100 an hour, so that every wage earner can afford to live in dignity. </sarc>

As it turns out, very few employment opportunities can repay the hiring business enough to be able to pay the $100 per hour tab. So, almost zero new jobs appear. Many previous tasks that people could do become automated. With less business competition, the few remaining companies are able to raise their prices to offset the higher Minimum Wage.

Existing jobs also are affected by the same burden of $100 per hour wages. Many (most?) existing jobs disappear and unemployment goes up. Jobs are traded in for automation where possible.

Image result for $100 minimum wage clipart

The net effect is that a few businesses, and a few people, benefit from the new $100 Minimum Wage. However, the business must pay more, many people become unemployed, consumers must pay more, and taxpayers now must support a larger population of out-of-work people.

So, how do these three examples apply to a raise only to $15 over several years? It’s all the same!

A few people benefit. The few who get hired benefit. The few who get a raise will benefit. And because of reduced competition, higher wage employees also may get a raise.

BUT!! Many more people will be unemployed. Taxpayers will have to pay more. And, consumers will have to pay more.

So, why would anybody support this nonsense?

As it turns out, Democrats are favored by several voting blocs, two of which are unions and poor people. We’ve seen that higher wage earners benefit from reduced competition, and indeed, unions are the driving force behind the push for a higher Minimum Wage.

Poor people will be hurt as their already high unemployment rate becomes even higher due to a higher Minimum Wage. But the socialist left which makes up the majority of the Democrats are telling the poor that they’ll get paid more – and yes, those who do get new jobs (and those not being fired from current jobs) will be helped.

But, the socialist left is committing a lie of omission by not telling the poor how the higher Minimum Wage will hurt them.

The Democrats had to choose between two constituencies – unions and the poor. They’ve made their choice and have thrown the poor under the bus. They’ve covered it up with the lie that they’re helping the poor.

Image result for unemployment clipart

It’s not like the ill effects of raising the Minimum Wage have been kept a secret. Anybody with average intelligence who has seen the kinds of examples I’ve laid out can understand the concept.

To me, the Democrats (and not a few Republican socialists) are doing evil. They are stabbing the poor in the back and then bragging how their stupid policies are helping the poor.

The Warren Buffett Economy——Why Its Days Are Numbered (Part 4)

By David Stockman – Re-Blogged From http://davidstockmanscontracorner.com

….As reviewed in Part 3, the very idea that 12 people sitting on the FOMC can adroitly manipulate an economic ether called “aggregate demand” by means of falsifying market interest rates is a bad joke when in it comes to that part of “potential GDP” comprised of goods production capacity. In today’s world of open trade and massive excess industrial capacity, the Fed can do exactly nothing to cause the domestic steel industry’s capacity utilization rate to be 90% or 65%.

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