Posts Tagged ‘unemployment rate’
From our recent reader survey, I see our readers are not that concerned about what happens in the eurozone. But there’s a phenomenon occurring there that I believe every investor who is interested in gold bullion should be aware of.
Let me explain…
It’s a known fact that when central banks print more of their paper money, it’s usually bullish for the yellow metal. We saw this after 2009, when the Federal Reserve started to print more paper money; gold bullion prices skyrocketed.
In the eurozone, there continues to be major economic problems in the region. Italy, the third-biggest economic hub in the eurozone, has reported its unemployment rate hit 13% in February—the highest unemployment rate ever recorded in the country. (Source: Reuters, April 1, 2014.)
To help countries like Italy, Greece, Spain, and Portugal with their economic woes, the European Central Bank (ECB) has lowered its benchmark interest rate—but that hasn’t spurred bank lending as bad debts on the books of major eurozone banks keep piling up. Even once-strong eurozone countries like France are under economic scrutiny.
Now, as no surprise, the ECB has started talk about following the same route the Federal Reserve has taken—printing paper money.
At a conference last week, one of the ECB’s Executive Board members, Yves Mersch, said the ECB is ready to turn on its printing presses. The president of the ECB, Mario Draghi, has also said quantitative easing in the region may be needed if inflation in the eurozone continues to remain subdued. (Source: Reuters, April 7, 2014.)
Hence, to the printing presses of the Federal Reserve, the Central Bank … Read More
This past Friday, the Bureau of Labor Statistics reported 175,000 jobs were added to the U.S. economy in the month of February. (Source: Bureau of Labor Statistics, March 7, 2014.)
The way the media reported it…
“Friday’s jobs market report caught the market by surprise,” was what most media outlets were telling us via their untrained reporters. The expectation was an increase of 149,000 jobs in February (after a dismal December and January jobs market report) and so the usual happened—stocks went up and gold went down on a jobs market report that was only slightly better than what was expected.
The consensus, from what I read, is that the jobs market in the U.S. economy is getting better. Of course, I think of this as hogwash. And as I’ll tell you in a moment, this is the kind of misinformation that is characteristic of what happens in a bear market in stocks, not a bull market.
Within February’s jobs market report, we find:
The long-term unemployed (those who have been out of work for six months or more) accounted for 37% of all the unemployed in the U.S. economy. The longer a person is unemployed—likely because that person has not been re-trained for the jobs market—the less likely it is that person will eventually find work.
Today, once a person becomes unemployed in the U.S. economy, that person remains unemployed for an average of 37 weeks! This number remains staggeringly high. Before the financial crisis, this number was below 15 weeks. (Source: Federal Reserve Bank of St. Louis web site, last accessed March 7, 2014.)
When you have a … Read More
The stock market in France has been on a tear! Below, I present a chart of the French CAC 40 Index, the main stock market index in France.
Looking at the chart, we see the French stock market is trading at a five-year high. With such a strong stock market, one would expect France, the second-largest economy in the eurozone, to be doing well. But it’s the exact opposite!
As its stock market rallies, France’s economic slowdown is gaining steam. In January, the unemployment rate in France was unchanged; it has remained close to 11% for a year now. (Source: Eurostat, February 28, 2014.) Consumer spending in the French economy declined 2.1% in January after declining 0.1% in December. (Source: National Institute of Statistics and Economic Studies, February 28, 2014.) Other key indicators of the French economy are also pointing to an economic slowdown for the country.
Chart courtesy of www.StockCharts.com
And France isn’t the only place in the eurozone still experiencing a severe economic slowdown. In January, the unemployment rate in Italy, the third-biggest nation in the eurozone, hit a record-high of 12.9%, compared to 11.8% a year ago.
I have not mentioned Greece, Spain, and Portugal because they have been discussed in these pages many times before; as my readers are well aware, they are in a state of outright depression.
Just like how investors have bought into the U.S. stock market again in hopes of U.S. economic growth, the same thing has happened in the eurozone. Investors have put money into France’s stock market in hopes of that economy recovering—but it hasn’t. We are dealing with a … Read More
Just as the majority of Americans think the U.S. jobs market is improving, there’s a notion in the air that the U.S. housing market has rebounded and is healthy again. I don’t believe this to be true.
Just like the government’s official unemployment number is manipulated because it excludes people who have given up looking for work, when we took a closer look at the stats we hear about home prices, new home sales, and existing home sales, we didn’t like what we found in them.
Home prices increased to unprecedented levels in 2005. At social events back then, everyone talked about how much their home or vacation property had gone up in value and how they were getting deeper into the housing market. Few talked about the reckless lending activities of the banks that were the cause for the rise in home prices.
We now hear new homes are being sold at a new record pace. Buyers are apparently rushing to buy houses again, and the housing market is hot once more. Sadly, underlining the strong sales of homes, the number of cancelled sales orders compared to overall sales (commonly referred to as the cancellation rate) is going through the roof.
In 2013, D.R. Horton, Inc. (NYSE/DHI) had more cancelled orders than it did in 2012—7,751 cancelled contracts to buy homes compared to 6,657 in 2012. The cancellation rate for this homebuilder in 2013 was 24%. (Source: D.R Horton, Inc. web site, last accessed February 18, 2014.)
Other homebuilders are having the very same problem. KB Home (NYSE/KBH) reports its cancellation rate in 2013 reached 32%—that means one out … Read More
As I have been pointing out to my readers, the “official” unemployment numbers issued by the government are misleading because they do not include people who have given up looking for work and those people with part-time jobs who want full-time work.
In January, there were 3.6 million individuals in the U.S. economy who were long-term unemployed—out of work for more than six months. (Source: Bureau of Labor Statistics, February 7, 2014.)
Those who are working part-time in the U.S. economy because they can’t find full-time work stood at 7.3 million people in January.
Add these two numbers into the equation and the real unemployment rate, often called the underemployment rate, is over 12%. Meanwhile, the official unemployment rate from the Bureau of Labor Statistics sits at 6.6%—that’s the number you will hear politicians most often quote.
But if there’s a group of policymakers that looks past the “official” unemployment numbers, it’s the Federal Reserve.
At her speech before the Committee on Financial Services, U.S. House of Representatives in Washington, D.C. last week, Fed Chief Janet Yellen said, “Those out of a job for more than six months continue to make up an unusually large fraction of the unemployed, and the number of people who are working part time but would prefer a full-time job remains very high. These observations underscore the importance of considering more than the unemployment rate when evaluating the condition of the U.S. labor market.” (Source: “Semiannual Monetary Policy Report to the Congress,” Federal Reserve, February 11, 2014.)
Like all economists, Yellen knows that when an individual has a part-time job then their income isn’t as … Read More
On Friday, we learned that the U.S. economy added a lower-than-expected 113,000 jobs in January and the “official” unemployment rate had dropped to 6.6% from 6.7% in December. (Source: Bureau of Labor Statistics, February 7, 2014.)
How can we create so few jobs and have the unemployment rate improve? It’s because the way the government calculates the unemployment rate is skewed. (It gets me outright mad to listen to politicians tell us the jobs market is getting better, when in fact, it’s not.)
The most obvious problem with the government’s way of calculating the unemployment rate is that it excludes people who have given up looking for work and those who have part-time jobs but want full-time jobs. If we were to include those two groups, the underemployment rate (as it is referred to) sits at 12.7%—and it’s been above 12% for a very, very long time. (This is something you didn’t hear President Obama talk about in his State of the Union speech two weeks ago.)
Now if we look a little deeper, we discover a much bigger problem in America. People who have the ability to work are leaving the jobs market!
What I’m talking about is the catastrophic decline in labor force participation in the U.S. economy.
Take a look at the chart below. It illustrates the labor force participate rate.
You will note that from about 2002, which is the same year gold prices started moving up, the percentage of the U.S. population in the labor force started to collapse.
Labor force participation is simply the number of people who are employed plus those people looking … Read More
The Bureau of Labor Statistics (BLS) reported this morning that only 74,000 jobs were added to the U.S. economy in December. Most economists were expecting 200,000 jobs to be created in December—way off reality. The December increase in U.S. payrolls was the slowest pace in almost three years.
But it gets worse…
The underemployment rate, which I consider the “real” measure of the jobs market in the U.S. economy, was unchanged in December at 13.1%. The underemployment rate includes those people who have given up looking for work and those people who have part-time jobs but want full-time jobs.
The table below shows the official unemployment rate versus the underemployment rate for 2013.
U.S. Official Unemployment Rate vs. Underemployment
Rate, January-December 2013
|Month||Revised Official Unemployment Rate (U3)||Underemployment Rate (U6)|
|% Change Jan.-Dec.||-15.19%||-9.03%|
Data source: Federal Reserve Bank of St. Louis web site,
last accessed January 10, 2014.
What the above chart shows is that despite what we heard about the U.S. economy improving in 2013 and despite the Federal Reserve creating over $1.0 trillion in new money in 2013 to help the economy, the “real” unemployment rate declined by less than 10% in 2013, from 14.4% at the beginning of the year to 13.1% by the end of the year. The number of unemployed people in the U.S. stands at a still-staggering 10.4 million.
Of the 74,000 new … Read More
Federal Reserve Chairman Ben Bernanke did something that many on Wall Street including myself did not believe he had the inclination to do: he began the tapering process in his final meeting as the head of the most powerful central bank in the world.
The Federal Reserve will cut its bond buying by $10.0 billion each month, which I believe is a sensible move at this point, given the economic renewal and jobs market growth.
Markets surged to new record-highs for the S&P 500 and Dow Jones Industrial Average, as now there’s a sense that the ongoing uncertainty of when the Federal Reserve will begin to taper has finally been removed, and traders like certainty.
In addition, by reducing the stimulus by just less than 12%, the Federal Reserve can also gauge the market reaction and any negative impact tapering may have on the economy.
The intense buying following the announcement was based on the premise that the economy was moving along pretty well, and this could fuel consumer spending and gross domestic product (GDP) growth. The market was also pleased to hear that the record-low near-zero interest rates could remain, even if the unemployment rate fell below 6.5%.
With Christmas in a few days, it was nice that Bernanke graciously began to rein in the easy money flow. Now a plan has been put into place and the incoming Federal Reserve Chair Janet Yellen will continue it based on how the economy and jobs market progress.
In the meantime, the news also means potentially more stock market gains for investors—albeit, at a slower pace than this past year.
Bernanke … Read More
Finally some good news in the U.S. jobs market?
The Bureau of Labor Statistics (BLS) reported Friday that, in November, 203,000 jobs were added to the U.S. jobs market. As a result, the unemployment rate went down to 7.0% from 7.3% in October. In addition to this, the BLS also revised the job numbers from October and September, saying 20,000 more jobs were created than previously reported. (Source: Bureau of Labor Statistics, December 6, 2013.)
Yes, the jobs market report for November is a step in the right direction. And, while I’m certain the politicians and the mainstream will have a field day with this news, the underlying statistics in the jobs market are not improving.
The underemployment rate, which includes people who have given up looking for work and those who have part-time jobs that want full-time jobs, still sits at 13.2%.
In addition, the number of long-term unemployed, those who are out of work for more than six months, made up 37.3% of all unemployed in November! There are 4.4 million long-term unemployed people in the U.S. and the longer they stay out of work, the harder it will be for them to get back into the market.
Finally, the majority of jobs created in the U.S. economy continue to be created in the low-wage-paying sectors.
The bottom line here is that the “official” unemployment numbers do not reflect what’s really going on in the jobs market. But the official rate is going in the right direction…and moving close to the point (6.5% unemployment) where the Federal Reserve said it would start pulling back on its money … Read More
The International Monetary Fund (IMF) expects the global economy to increase by 2.9% this year and 3.6% in 2014—forecasts which I believe are too optimistic. Why?
First of all, we have the Japanese economy, the third-biggest in the global economy, suffering an economic slowdown. Tertiary industry activity (activity in the service businesses) slowed in September from a month ago. (Source: Japan Ministry of Economy, Trade and Industry, November 12, 2013.)
Then there’s Germany, the fourth-biggest economy in the global economy. Once believed to be immune to the economic slowdown in the eurozone, seasonally adjusted manufacturing output in the country declined 0.8% in September from August. As of September, year-to-date manufacturing output in the German economy has increased only 1.2%—a much slower growth rate than in the same period of 2012. (Source: Destatis, November 8, 2013.)
Earlier this month, in a statement about its monetary policy decision, the central bank of Australia said, “In Australia, the economy has been growing a bit below trend over the past year and the unemployment rate has edged higher. This is likely to persist in the near term… Public spending is forecast to be quite weak.” (Source: “Statement by Glenn Stevens, Governor: Monetary Policy Decision,” Reserve Bank of Australia, November 5, 2013.)
To fight the economic slowdown in the country, the Reserve Bank of Australia is using easy monetary policy measures. The central bank has reduced its benchmark interest rate in the country by more than 40% since the beginning of 2012. The cash rate, the overnight money market interest rate, sits at 2.50% compared to 4.25% in early 2012. (Source: Reserve Bank of Australia … Read More
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