The Jobs Report In Four Pictures

The recovery in employment has clearly faltered.

The most positive spin that can be put on it is that the rise and dip was caused by the secular hiring in census workers. But that removes the big increase, and leaves one with no recovery yet at all. Which is roughly the same thing as a recovery and a resumption, a dip.



Here is a comparison of the Seasonally Adjusted and the Raw Numbers

When the distortion of the imaginary jobs added and occasionally subtracted by the BLS 'Birth Death Model' are removed, the lack of recovery is made more clear. If one were to also subtract the temporary census workers which are the cause of that spike higher, the lack of recovery is even more apparent.



Here is the detail on the current shenanigans in the Birth Death Model. As previously discussed, the BLS shows dips in the imaginary jobs numbers around the big seasonality events in January and July. Since these birth-death jobs are added to the non-seasonalized raw number, the big seasonal adjustment blunts, if not largely negates, their impact.

But considering that the economy has undergone a sea change, an epic collapse in a credit bubble, the regularity of this metric should remove any doubts that it is at best largely 'a plug,' and at worst a means of distorting the numbers in the short term to make them look better.



Does this lack of recovery mean that stimulus has not had an effect? No. The results could have been much worse, and very likely would have been if the government had done nothing.

But it also shows that the actions have not had traction, are not yet creating jobs. Why should that surprise us? Subtracting out the bubble jobs in housing and servicing the financial frauds in mortgages, job growth in the US, and confirmed by the median wage, has been anemic for a long time.

This is what is called a structural problem. It is a problem that was caused by government policy decisions in deregulation, largely one sided free trade agreements trading jobs for cheap good and corporate profits, decisions that favored offshoring and importation, lack of a coherent immigration policy, taxation subsidies for the wealthy, lack of regulatory oversight, and an industrial policy of decline in favor of 'service jobs' that could be more properly be called 'servant jobs.'

What would we expect from a restoration of the status quo that does not include bubbles? A stagnating economy most likely at least from a wage and jobs perspective, with increasing disparity in income distribution.

The Inflation and Deflation Debate Deconstructed

'What most people call reason is really rationalization. Given a new set of data, most people will search through it only for those examples that support their existing beliefs. Their beliefs are really opinions, a tenuous collection of myths, anecdotes, slogans, and prejudices based largely on justifying personal fear and greed. This is what makes modern propaganda so powerful; people do not bother to think critically and objectively and act for the greatest good. And in their ignorance they can find the will to do increasingly monstrous things, and rationalize them.' Jesse

In a purely fiat regime, the question of a general (monetary) deflation and inflation is a policy decision. Anyone who does not understand this does not understand the modern mechanism of money creation. As the pundit said, "The mind rebels..."

But rather than engage in the usual facile intramurals about the topic, let's consider something more important. How does one 'play this' which is really what all these discussions are about: self interest.

The champion of deflation is the Treasury Bond (and the Dollar), and of the inflationists, Gold.

There are extremes on both sides, and probably more sense in the middle, since life rarely sustains the extreme unless there are people messing about with it. The only naturally efficient markets are in ... nature, and that only as measured over the long term.

Anyone who doesn't think Treasuries have been in a long bull market are blind fools.

But the same is true of gold.

I will leave the dollar aside for now to simplify the discussion, but it hardly lends itself to the deflationary theory.

People who have taken positions and held them in both Treasuries and Gold over the past ten years have made money, a very nice return. When one has a theory that consistently and reasonably encompasses that, you might have something worthwhile.

The deflationists will say that gold is a bubble fueled by mistaken speculators, and the inflationists will say that the Treasuries are being supported and manipulated by the Fed. Neither is able to look out from their deep wells of subjectivity.

You may wish to consider that the great part of this discussion, inflation versus deflation, is a diversion. But that is a discussion for another time.

The question for all failing theories is, as always, what next. What is the alternate count.

Oh boy oh boy, [our desired outcome] is finally coming and when it gets here its going to be good. We are finally turning [Japanese / Weimar].

Things are in bull markets, or bear markets, until they are not. The undeniable trend break is the best indication of change in momentum.

But things in the world of complexity are rarely as simple or straightforward as the average mind will allow, or can accept.

Anyone who thinks the Fed is impotent has not been paying attention to the last one hundred years. The Fed is not impotent, merely constrained. Their constraint is the policy arm of the government, the dollar, and the bond, in the absence of some external standards including external force.

Until one understands that, nothing can or will make sense. That is why the current discussion is so nasty and propaganda-like. It is not about what will happen, but rather about a public policy decision, about what people want to happen.

Consider that these debates are merely diversions, to distract people away from the most significant factors in their troubles, which are exploitation and fraud, and a military-industrial complex that is largely unproductive in terms of organic growth, and is quite simply no longer sustainable.

Paid professionals who were arguing the virtue of credit expansion as the bubbles blossomed are now arguing just as strenuously for austerity now that the bubbles are collapsing, their masters having taken their spoils. They will say for pay, without regard for the solutions that are in the best interest of the country. Few are thinking of their country anymore, as the individual is conditioned to think of themselves as globalized abstractions.

As always, be careful what you wish for, because you may get it. In this current climate, this class warfare, the American nation is a house divided. And you know what happens to those.

And the winners may inherit the wreckage, a pyrrhic victory indeed, but they can console themselves with the satisfaction that they have won the irrelevant debate.

SP 500 September Futures Daily Chart; Gold Daily Chart

SP 500 September Futures



Gold Daily

Obama's Economic Advisor Romer Out Over Differences with Larry Summers (and Timmy)

Christina Romer is a fine economist, but she frankly does not have the skillset to deal with accomplished Tidal Basin pond snakes like Larry Summers and his sidekick Tim Geithner.

She is said to have left at her own request. It is nice to see a principled resignation once in a while. Good for her. I hope that is the case. In addition to pushing for more stimulus, I had also heard that Romer was promoting Elizabeth Warren as the head of the new Financial Consumer Protection Agency, a move that is adamantly opposed by Timmy and Larry, the Rubin twins.

If Obama asked her to leave then that should settle all questions about his policy, his relationships with his supporters, and his intentions.

I could not help but wonder if someone is falling on her sword ahead of tomorrow's Jobs Report, or Bernie Madoff's nomination to head the Financial Consumer Protection Agency.

Hotline On Call
Romer To Leave White House
By Kirk Victor
August 5, 2010 5:54 PM

Christina Romer, chairwoman of Pres. Obama's Council of Economic Advisers, has decided to resign, according to a source familiar with her plans.

Romer, an economics professor at the University of California (Berkeley) before taking the key admin post, did not respond to repeated calls to her office.

"She has been frustrated," a source with insight into the WH economics team said. "She doesn't feel that she has a direct line to the president. She would be giving different advice than Larry Summers [director of the National Economic Council], who does have a direct line to the president."

"She is ostensibly the chief economic adviser, but she doesn't seem to be playing that role," the source said. The WH has been pounded for its faulty forecast that unemployment would not top 8% after its economic stimulus proposal passed.

Instead, the jobless rate is 9.5%, after exceeding 10% last year. It was "a horribly inaccurate forecast," said Bert Ely, a banking consultant. "You have to wonder why Summers isn't the one that should be taking the fall. But Larry is a pretty good bureaucratic infighter."


Daily Finance
Is Christina Romer Out as Chief Economic Advisor?
By PETER COHAN
8:00 PM 08/05/10

Christina Romer, a Berkeley economics professor, is reportedly leaving the White House as Chair of President Barack Obama's Council of Economic Advisors, according to the NationalJournal.com, which cites an anonymous source. Is she taking the blame for policies hatched by director of the National Economic Council, Larry Summers -- policies that she disagrees with?

A source told NationalJournal: "She has been frustrated. She doesn't feel that she has a direct line to the President. She would be giving different advice than Larry Summers who does have a direct line to the President."

Romer could be the fall guy for the White House's forecast that unemployment would stay below 8% -- jobless rates blew through the projection to peak at 10.2% in October 2009 and now sit at 9.5%. Whether Romer is responsible for this forecast or not, her resignation would signal that she has taken the blame.

The NationalJournal quotes Bert Ely, a banking consultant: "You have to wonder why Summers isn't the one that should be taking the fall. But Larry is a pretty good bureaucratic infighter."

Far From a Fix

With a Labor Department jobs report coming out tomorrow -- experts predict a loss of 87,000 nonfarm payroll jobs for July 2010 and a boost to 9.6% in the unemployment rate -- the rumor of Romer's resignation could signal that tomorrow's numbers are going to be worse than expected. Regardless, Romer's departure will likely not go far enough to fix the policies that have been keeping the jobless rate so high.

Given Summers' direct line to the President, it's doubtful that Romer's departure will unleash a dramatic improvement in the administration's job-creation strategy.


NY Times
Romer Leaves as Head of Council of Economic Advisers
By GERRY MULLANY
August 5, 2010, 8:35 pm

Christina D. Romer, the chairwoman of the White House Council of Economic Advisers, will step down from the post next month, the White House announced Thursday night.

Her resignation comes as the Obama administration continues grappling with a choppy economy as it heads into the midterm elections.

The White House said that Ms. Romer was leaving to return to California “where her son will be starting high school in the fall” and that she would be teaching at the University of California at Berkeley.

Mr. Obama issued a statement praising Ms. Romer:

“Christy Romer has provided extraordinary service to me and our country during a time of economic crisis and recovery,” the President said. “The challenges we faced demanded more of Christy than any of her predecessors, and I greatly valued and appreciated her skill, commitment and wise counsel.”

There was no word on Ms. Romer’s successor. As head of the Council, she helps formulate the administration’s economic policy, often meeting daily with the President and his top economic advisers.

Ms. Romer is among the camp of advisers calling for more stimulus measures to boost the ailing economy, a position opposed by those concerned about the growing deficit.