Skip to comments.Unemployment Numbers Tell Us the Economy is a PERFECT TEMPERATURE?
Posted on 12/04/2011 3:21:31 PM PST by Razzz42
As the news came out on Friday morning, the headline reported that the unemployment rate dropped to 8.6% from 9%at first glance, the rate looked like 98.6 on the economic thermometer. The analysts are still arguing over the meaning of this data, but for traders and investors the real outcome is meaningless. It may lead to foreign investors purchasing U.S. equities as America is seen to be a relatively stronger economy, especially when compared with the EUROPEAN CREDIT-STRESSED environment.
The headline number is fraught with all types of data pollution as the bean counters strive to figure out how many workers have dropped out of the JOB POOL to create such a significant drop in the RATE when the net NONFARM PAYROLL GREW AT A TEPID NUMBER OF 120,000.
Prior to the U.S. release, the Canadian unemployment was disappointing but not nearly as weak as the headline suggested. The Canadian rate rose to 7.4% and there was 18,000 jobs lost versus the predicted increase of 18,000. Upon further review, the Canadians lost many part-time jobs but gained 36,000 full-time workers and many of the job losses were in services while the production workers performed relatively well. All in all, not a bad report and at 98.6 it seems the economic body is operating at a mild temperature.
The unemployment news was originally met with an EQUITY RALLY but by the close the rally in the U.S. was erased by weekend fears about Europe. There are still many contradictory statements emanating out of the European policy centers as Chancellor Merkel continues to press for a full-blown fiscal union, or what Mario Draghi refers to as a new fiscal compact. In a New York Times article by Jack Ewing, Draghi said,What I believe our economic and monetary union needs is a new fiscal compact. It is time to adapt the euro area design with a set of institutions, rules and processes that is commensurate with the requirements of monetary union.
It seems that Draghi has bought the German position of a promise for a real fiscal union must be agreed to before Merkel will allow the ECB to step up its role as LENDER OF LAST RESORT. Sarkozy and Merkel are meeting again on Monday to try to iron out any discrepancies between France and Germany over the next steps in FIREWALLING Spain, Italy and France from any further economic contagion.
Pressure is growing on Berlin as over the weekend there are rumors that COMMERZBANK, Germanys second largest banks, will have to be nationalized. Again, its rumors but it means the GERMAN banks solvency is being challenged. If COMMERZBANK fails then one of the most levered bank in Europe, DEUTSCHE BANK, will move to center stage.
It seems that if Merkel and Sarkozy can create some sense of agreement, then Draghi will be willing to push the ECB into a larger rate cut at Thursdays meeting, a day before the EU holds another one of its crisis conferences. Before Fridays European ECONOMIC SUMMIT, Treasury Secretary Geithner is heading to visit European Capitals ostensibly to remind the EUROCRATS that the Obama administration is adamant that Sarkozy/Merkel not fail to secure a significant bailout plan. The U.S. has been trying to get the EUROPEANS to understand the global significance of European muddling. It is no accident that the FED orchestrated Wednesdays action to push DOLLAR SWAP RATE LOWER. Also of paramount importance was that China and Brazil both added to the global efforts to create the image of liquidity enhancement and back off of their previous moves of austerity.
MONDAY NIGHT WE WILL HEAR FROM THE AUSTRALIAN CENTRAL BANK (RBA).It is expected that the Aussies will cut the overnight rate from 4.5 to 4.25%. It is important to see if the RBA actually goes further and cuts to 4% so as to stay in the SPIRIT OF THE SEASON.
Adding even more pressure to the European bailout plan, it has been reported that IMF MANAGING DIRECTOR Christine Lagarde has been in Latin America trying to secure support from the South American nations for a large role for the IMF in any global action. It seems that Geithner and Lagarde are stressing the urgency of the situation because it is important to act before the anti-IMF forces that is the U.S. CONGRESS can block the use of IMF funds.
Remember that Christine Lagarde is an international lawyer who previously working for Baker McKenzie in Chicago. So for Ms. Lagarde, turning the international laws into a world of grey is an art form. Many pundits are dismissing the IMFs ability to act because of codified legal guarantees. Watch how an international lawyer moves to soften the intent of IMF laws. As it has been said, FOR OUR FRIENDS WE INTERPRET THE LAW, FOR OUR ENEMIES WE ENFORCE IT.
***In another footnote to the EUROPEAN DRAMA THAT CONTINUES TO IMPACT THE MARKETS, THERE WAS A VERY POWERFUL EDITORIAL IN THE NEW YORK SUN yesterday titled, Bernankes Forgotten Footnote. It picks up from last weeks cited Ambrose Evans-Pritchard piece. In Bernankes famous speech on November 21, 2002, Deflation: Making Sure IT DOESNT HAPPEN HERE, the famous helicopter reference speech, Bernanke stated that the FED, has the authority to buy foreign government debt as well as domestic government debt. Potentially, this class of assets offers huge scope for FED operations as the foreign assets eligible for purchase by the Fed is several times the stock of U.S. government debt.
The SUN editorial makes that the FEDs publication of the speech has a footnote (#16) that the FED committed to Congress not to use this tool to bail out foreign nations. As Simon/Garfunkel might have advised, ALL MY WORDS COME BACK TO ME IN SHADES OF MEDIOCRITY.
***One blog site is always quick to point out when the CME raises margin requirements and its potential detrimental impact on markets. The author raises the possibility of a selloff in the Canadian dollar, Australian dollar and Chinese RMB as margins were raised 18%. As a long-time member of the CME, I can say that the automated SPAN system is a very good tool at keeping the markets traded at the CME secure. (OTC ISSUES LIKE EUROPEAN DEBT ARE ANOTHER ISSUE.) It seems by using the headline-grabbing 18% margin increase, it makes the impact severe. For example, the Canadian margins increase to $2300 from $2000 for maintenance of an open position. The Aussie margin for maintenance increased to $3200 from $2600. These are not significant and they are the same for long and short positions.
IF YOU ARE AN INVESTOR AND CANNOT MEET THE MARGIN INCREASE, YOU ARE EITHER TRADING TOO BIG FOR YOUR CAPITAL OR SIMPLY SHOULD NOT BE CARRYING OVERNIGHT OPEN POSITIONS. This idea that margin increases will dramatically affect open positions is to my mind ludicrous, especially in a ZERO INTEREST RATE ENVIRONMENT. IT SEEMS THAT THE EARLY TRADING CENTERS IN ASIA PROMOTE THIS HOGWASH TO GET VOLATILITYCAVEAT EMPTOR. The ability to control a $102,000 AUSTRALIAN DOLLAR CONTRACT will not be bothered by a $600 margin increase. The CME should be applauded and vilified by its margining system.
The lowered employment figures do not make the employment picture look better. This increase in employment always occurs during the holidays starting with Black Friday. When January rolls along, employment drops like a rock.
Then that means the employment pictures is really sick besides the ones that dropped out of the job hunt. Notice the government didn’t bother to release the supporting figures on Friday.
Yup. Expect next year to be total hell. The Marxist Muslim is done.
Besides the impact of temporary holiday hires, if the size of the labor force (employed + those who are unemployed but looking for a job) was the same in Nov 2011 as it was in Oct 2011, the unemployment rate would currently be 8.9%.
If the labor force today was as big as the labor force when Obama took office, the unemployment rate would be 11%! That means millions of people have left the labor force and have not been replaced in the last 3 years.
FR is acting up and the above posted before I was done preparing it. But you get the idea. If you click on that above link, it will explain what the (3) chart lines are composed of. Other than that is it a subscription based website but their home page offers many teasers with graphs.
The underemployment number is what really matters...
We are close to 50% capacity...anything with 50% waste in their productive capacity is doomed to fail.
Possibly the only person to believe the figures released by the government is some third grader from Detroit and Slow Joe ... Slow Joe will believe anything!
For boiling frogs
Lets talk in January and February.