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With the recent unemployment numbers coming out, the Obama Administration is in full SPIN mode right now attempting to convince the country that the unemployment problem is getting fixed and the stimulus package is working.  Unfortunately, it looks like this is the furthest from reality and this has been my concern all along.  This massive spending program doesn’t fix the unemployment problem in America as advertized.  

Obama has claimed that as many as 150,000 jobs have been saved or created by his stimulus plan so far, even as government reports have shown the economy has lost more than 1.6 million jobs since Congress approved funding for the program in February.  He has invented this new way of analyzing the unemployment situation by citing jobs “saved.”  How do you count jobs saved? 

This might be the newest fantasy accounting method for the Government to use to make employment look however they would like.  Don’t forget that every month they “estimate” the number of jobs created or lost that is missed by the Department of Labor.  Consider that the Government has “estimated” that, over the last 13 months, 1,163,000 jobs were created that the Department of Labor missed.  Last month’s “better than expected” jobs report that the Government is touting as progress increases 226,000 jobs that the Government “estimates” were created.  Now we can add another column to the monthly report called the jobs “saved” category.  Leave it up to the Government to come up with a way of determining employment that no one can dispute. 

The Government is spinning everything that they can get their hands on right now.  The problem is that the American people are going to start seeing through all of this nonsense and see that this stimulus package is all about agenda and not about the business of the American people.

We are going to need much more than the 600,000 summer jobs for teenagers and construction jobs that the President estimates will be created in the near term to fix the problem.  The bottom line is that the problem is much bigger than the Government is reporting and much bigger than the Government has answers for.

Obama thought the unemployment rate would top out around 8%.  It begs the question, “Out of touch or was that sound bite the spin for the moment?”  This is a serious issue that this administration has no answers for. 

It is estimated that 25 million people are being affected by the unemployment problem in America.

Tags: Bob Brooks, Congress, Deceptive Money, funding program, Government, jobs, Obama, Obama Administration, President, Prudent Money, stimulous package, Unemployment

I wrote about this on the stock market alert and thought it was worth repeating here, on the main blog.  The Government has a formula called the birth/death model.  This model “estimates” (note dangerous liberty to give any government based accounting system) how many jobs were either created or lost, that the Department of Labor measuring system didn’t count.

The economists felt that the job losses for April would be greater than 500,000.  Low and behold, the Government reported a better than expected job loss of only -345,000.  However, let’s take a look at how many jobs were added back into that number to get that “better than expected” number.  The Government estimated that 220,000 jobs were created last month.  That is on top of the 226,000 jobs that they estimated the prior month.

So over the last two months the Government “estimated” that 446,000 jobs were created that the Department of Labor missed.  How convenient for the message of recovery.  Realistically, I don’t see anything occurring that would account for a pick up in hiring.  I don’t see the layoff’s slowing down.  I see a lot of people depending on the Government for unemployment benefits…ah, the smell of socialism. 

I have to point to my favorite category of the “estimated” job creation number.  Let’s walk through a scenario for a second.  I think you would agree that people have a ton of discretionary income.  I don’t know about you but this recession has made me more likely to spend money on leisure activities.  In fact, I think that I am going to sign up for a new cruise.  After all, prices are low on cruises right now.  I know that you are probably thinking the same thing.  So, let’s just hope that the leisure and hospitality industry is ramping up employment for all of this new found demand.

Oh this is good. The Government estimates that 77,000 leisure and hospitality jobs were created last month.  That is on top of the 76,000 they estimated were created the prior month.  These types of numbers are an ultimate insult to intelligence.  It is amazing how dumb the Government actually thinks the American people must be to buy this garbage.

Well, the unemployment rate is now 9.4%.  Remember that the “stress tests” of the banking system looked at a worst case scenario of 10% unemployment and we are getting very close.  I still firmly believe that the stress test will play a big part in the Government’s move to nationalize the banking system.

Tags: American people, Banking System, Bob Brooks, Deceptive Money, Department of Labor, discretionary income, economists, employment, Government, job losses, nationalize the banking system, Prudent Money, recession, socialism, Stock market alert, stress tests, Unemployment, unemployment benefits

When I talk about the economy or post charts, there is the tendency to automatically think that it will be hard to understand.  This concept is not too difficult to understand and I encourage you to try.  It is important.

The Government states that unemployment is 8.9%.  Of course, that doesn’t count everyone.  There are many who fall out of the system and are not counted.  The Bureau of Labor Statistics gets a little more precise.  They estimate that 15.8% are unemployed.  The guys at www.shadowstatistics.com do an excellent job of staying on top of what is really happening. 

What concerns me is the ultimate effects on investments and your money.  The Government is working over-time to create the illussion that the economy isn’t as bad as one would think.  The Great Depression saw 25% unemployment and it appears we might be getting close to that number.   Take a look at this chart originally posted on www.shadowstats.com.

unemployment

The bottom red line on the chart is what the Government reports.  The top blue line on the chart is what www.shadowstats.com reports. 

If you consider that Shadowstats’ analysis could be off even a little, there is a shocking difference in the two numbers.  The chart reads 20% of the country is unemployed!!  (Based on the chart and not their official reading to the decimal point)

I have said all along that the economy won’t recover unless you fix the unemployment problem.  As I wrote yesterday, making up jobs out of thin air is not a solution.  The real concern is what happens to consumer confidence when this illusion shatters.

Tags: Bob Brooks, Bureau of Labor Statistics, Deceptive Money, economy, Government, Great Depression, investments, Prudent Money, stress test, Unemployment, unemployment numbers

It wasn’t 2 months ago that President Obama sounded the dire warning concerning the economy.  Listening to him you would have thought that the world was coming to an end.  All of the sudden, we are on our way to recovery.  I wrote a week ago that I felt the unemployment report would be taken as a positive. It is almost as if the Government is doing everything in their power to make the once dire economic situation that we faced not even two months ago look like everything is OK again.  

A few weeks ago, the consumer confidence number reportedly increased by 50% in one month.  Right before the banks reported their earnings numbers, the government changed the accounting system enabling the banks to hide many of their losses.  Citibank, who was on the verge of going under not even a few months ago, is in all of the sudden in great shape and making profits.  Then there is the unemployment report. 

I am hard pressed to find any news outlet that is not reporting that employment is recovering based on Friday’s report.  

The Worst May Be Over – Job Losses slow to six-month low, raising hopes – Dallas Morning News Front Page 5/9/09

 They point to the ”not as bad” as expected employment numbers are starting to look pretty good.   Well, they should when you consider how much the Government tinkered with this set of data. 

Each month the Department of Labor “estimates” how many jobs were created or lost by businesses that the unemployment numbers didn’t reflect.   It is called the birth/death ratio.  Well, imagine that, the Department of Labor showed the largest number of imaginary jobs reported in over a year.  I looked at the data back to April 01, and this last “estimate” was the fourth highest during that time period.

They ”estimated” (out of thin air) that the US economy created 226,000 jobs last month.  Wow, just like that, we did better than expected.  It is Obama magic.  Meanwhile, people are still losing jobs by the 100,000’s and besides the 66,000 Government jobs created last month in order to take the consensus next year, the Obama administration is doing nothing to create jobs.

My favorite part of the birth/death “estimates” are the sectors that showed job growth.  This time around there were 75,000 jobs created in the leisure and hospitality sector.  I didn’t realize that there was such a demand for jobs in this sector.  I guess they are thinking about all of the spending that will result from all of the disposible income that consumers have lying around.  

It also doesn’t seem to matter that the past two months unemployment numbers were revised showing 66,000 more jobs lost than previously reported. Don’t be fooled by these numbers.  This is the world that the Government wants you to believe is real.  The Government is playing a dangerous game that could possibly destroy ALL confidence when it is all said and done.

This blog was posted on the Stock Market Outlook blog. If you have not been reading that blog I would encourage you to take a few minutes to read it.

“Investors hope that the worst is behind us”

Give one good bear market rally and all of the problems in the world are fixed.  This morning highlights the risk that plagues this economy and the stock market.   Hope is what you have when you pull the handle on the slot machine.  You hope to hit the jackpot.  Investing in hope is dangerous.  Going with the opinions of Wall Street and politicians are even dangerous. 

The headlines are there to lead people to believe that the risk is gone and now you don’t have to think about it.  This morning’s unemployment numbers put an explanation point behind the problem in America.

Even most analysts believe that we are looking at these horrible numbers for the entire year.  We are losing in excess of 600,000 jobs a month right now.  This morning it was announced that we lost 663,000 jobs this past month.  There are an estimated 13.2 million people out of work (at least that the Government will acknowledge). The unemployment is sitting at 8.5%.  The real unemployment is around 15% when you add everybody in that is not being counted.

One service that tracks these economic numbers attempts to get the real number.  The last estimate I saw was an unemployment rate close to 19%.

The following is an excerpt from a letter I wrote to my clients yesterday:

I think that we will all agree that unemployment is the biggest problem that faces the economy.  In normal times, an employment rate that rises to 7 or 8% creates a recession.  Today the employment rate could go north of 10% (using the Government’s inaccurate data). 

 

So when unemployment starts to improve and the rate drops all the way down to 7 or 8%, does the economy really get any better? 

 

If the plan to fix the unemployment problem consists, for the most part, of a bunch of construction jobs, where the bulk of which don’t start until next year, what is going to fix the unemployment problem? Further, of those construction jobs that have to be filled, how many will really go to Americans when there are countless numbers of  illegal aliens ready to take them?  Remember, they are not checking government ID’s on these jobs.

This is the problem that is not being addressed.  I suggest it is the problem that will further plague this market and economy. 

The unemployment numbers were worse than the headline would suggest.  January’s unemployment was revised, adding another 100,000 plus people to the unemployment ranks.  Then you have the Government’s “estimated” job growth. This is my favorite.  Each month they apply a ratio called the birth/death ratio to the unemployment numbers. 

This number “estimates” the number of jobs created that the Department of Labor can’t get data for.  They are assuming these are created by small businesses.  This month they added 141,000 jobs to the total number.  So before that “estimated” number was added, the actual job loss was close to 800,000 jobs. You add in the downward revisions for January and you are getting close to 1,000,000 jobs. 

The Government “estimated” that 41,000 jobs were added in the Leisure sector.  Yes, that is realistic since so many people have a lot of money to spend on leisure activities. I can see where that sector would be booming.

There is no doubt about it.  Risk is still real in this economy and market.  Approach your investments cautiously.

Tags: Bear Market Rally, Bob Brooks, Deceptive Money, economy, Investing, investing in hope, Prudent Money, risk, Stock Market, the problem in america, Unemployment, Wall Street

I think that our current situation could feel like we are in a depression at some point.  However, I doubt that you could hardly compare this to the Great Depression. Michael Panzner wrote in his blog (www.financialarmageddon.com) a great illustration of those times.

“But then the world seemed benign enough in early 1931. It is the second phase of depression that does terrible things.

Roosevelt took over a country where the economic machinery had completely broken down. The New York Stock Exchange and the Chicago Board of Trade had closed. Thirty-two states had shut their banks. Texas had restricted withdrawals to $10 a day.

Few states could borrow on the bond markets. Illinois and much of the South had stopped paying teachers. Schools closed for months. An army of 25,000 famished war veterans squatting in view of Congress had been charged by troopers of the 3rd US cavalry with naked sabres - led by a Major George Patton.

Armed farmers threatening revolution had laid siege to a string of Prairie cities. A mob had stormed the Nebraska Capitol. Minnesota’s governor was recruiting Communists only for the state militia. Lawyers attempting to enforce foreclosures were shot. More than 100,000 New Yorkers applied to go to the Soviet Union when Moscow advertised for 6,000 skilled workers.

We forget how close America came to open revolt. Eleanor Roosevelt feared the country was beyond saving. Her husband kept the faith. He channelled the anger against Wall Street, diffusing it. “The practices of the unscrupulous money-changers stand indicted in the court of public opinion,” he began his presidency.

The Fed was an ideological deadweight. Bowing to pressure from Congress it began to purchase bonds in mid-1932 to boost the money supply, but then recoiled, before retreating into pitiful self-justification. A third of the rescue funds in Hoover’s Reconstruction Finance Corporation had been embezzled. “

Things could get bad enough for this time period to garnish its own depression label.  However, the Great Depression was not called “Great” for nothing.  Unemployment was 25%.

Tags: Bob Brooks, Deceptive Money, Depression, Great Depression, Prudent Money, Unemployment

I have heard time and time again that the Government has to do everything in its power to prevent a deflationary recession.  They desperately want you to think that we they are winning the fight against deflation.  What they don’t want you to know is that deflation is here and that battle has been lost.

The minutes from the last Federal Reserve Board meeting revealed some deep concern.  Their notes signaled that “the recession could be longer and deeper than officials previously thought, with unemployment rising into next year and inflation slowing substantially” (another way of saying deflation).

First, a few definitions would be helpful.

A normal recession is one in which the economy goes through a period of weakness and then bounces back and starts a brand new growth cycle.  The growth in the economy contracts for two quarters at a minimum.  There is some pain for the economy.  However, it is not that bad. 

A deflationary recession is a much bigger recession.   Deflationary recessions are characterized mainly by falling prices and values of everything.  Think of a normal recession as a Category 3 hurricane and a deflationary recession as a Category 4 hurricane.

We should not be hoping we avoid a deflationary recession.  We should be hoping that the deflationary recession that is already here does not take hold like the one did in the 30’s in the US and the 90’s in Japan or transition from a deflationary recession into a depression (Category 5 hurricane).

It is hard to understand how any economist can look at this current environment and not come to the conclusion that we are in a deflationary recession.  You can see deflation in the stock market, real estate, the destruction of credit, the unwinding of the debt bubble, consumer prices on retail goods, the price of oil, consumer confidence, etc.

The unemployment numbers that came out on Friday emphasize the problem that we are facing.  We lost 524,000 jobs in December.  They revised the numbers for the prior two months and added another roughly 160,000 in losses.  This made 2008 the worst year since 1945.  We lost over 2.5 million jobs in 2008 and that was after the Government estimated in their numbers that we had created 904,000 jobs.  The unemployment rate stands at 7.2%.  Unfortunately, I think that this unemployment rate will easily be north of 10% before this is over.

The work week is averaging 33.3 hours.  That is the lowest on record.  Another sign of deflation came out on Thursday with the consumer borrowing numbers.  In November, consumer borrowing contracted by 7.4 billion dollars (another record).

My biggest concern is that the investor is drinking the Kool-aid that the worst is behind us and this is the greatest buying opportunity ever for the US investor.  Financial media is acting as if this is a normal situation where everything is at the bottom and it only gets better going forward.  

Continue to be careful with the risk that you take.  It looks to me like the bear market rally that started in November ended at the end of December and we are heading back into the bear market again.  

Tags: Bob Brooks, consumer confidence, credit, Deceptive Money, deflation, Deflationary recession, Depression, detb bubble, economist, Federal Reserve Board, Government, inflation, jobs, Newsletter, normal recession, Prudent Money, real estate, recession, Unemployment, unemployment rate

Last Friday’s unemployment report sent the stock market into a tail spin with the markets losing over 3%. Are those unemployment numbers accurate? Can the Government manipulate those numbers making them look a certain way? Well we will take a look at some funny accounting and what this might mean for your investments.

Friday was a tough day for Wall Street. The big economic news that rocked Wall Street was the unemployment report. There is always two parts to the report. First Wall Street looks at total jobs gained or lost. Then Wall Street looks at the unemployment rate.

The economy lost 49,000 jobs this past month continuing a string of job losses that started in January of this year. That was a mild number. In this type of environment, the numbers should be much higher.

It was the second number that really rocked Wall Street. The rate of unemployed Americans jumped ½% to 5.5%. That was the largest jump since 1986. That got the attention of investors because that was the first economic report that clearly demonstrated that this economy is looking recessionary. .

Ironically, economic weakness and job lay-offs have been embedded in this economy now for at least the past 8 to 9 months. In my opinion, the monthly job losses seem low.

Well you can thank your Federal Government for a little funny accounting. The Government figures in their own estimates as to how many jobs are gained or lost. They have a formula where they figure out how many jobs are created by new businesses that aren’t yet being counted. It is called the birth/death ratio.

Last year, it was reported that 1,096,000 jobs were created in the US. What was the Government’s contribution to that million plus job gain? The Government estimated that 1,130,000 jobs were created. If you take out the Government’s estimates, you then have a total job loss of -34,000 for 2007. Thus far this year, the Government has created 383,000 jobs and added them to the employment numbers.

According to the department of labor, 50,000 new construction jobs were created. I didn’t realize that construction was all of the sudden booming.

I often wonder, “What would it be like without Government intervention or manipulation or whatever you want to call it?” That will just have to remain a dream.

Tags: Bob Brooks, Deceptive Money, economic report, economy, Government, manipulation, Prudent Money, Stock Market, unemployment numbers, unemployment rate, unemployment report, Wall Street