NFP and Valuations

Nonfarm payroll employment changed little (+54,000) in May, and the unemployment rate was essentially unchanged at 9.1 percent. Job gains continued in professional and business services, health care, and mining.

Today’s employment numbers

From the BLS:

The unemployment rate fell by 0.4 percentage point to 9.4 percent in December, and nonfarm payroll employment increased by 103,000. Employment rose in leisure and hospitality and in health care but was little changed in other major industries.

Please don’t believe the hype. Unemployment went down because the labor participation rate went down. By that logic, we can stop including anyone without a job, and then the unemployment rate would be 0%. Just to put some numbers on it:

Assuming a reversion to the mean in the long-term average participation rate back to 66%, means that the civilian labor force, which in December came at 153,690, a drop of 260,000 from November, is in reality 157.6 million, a delta of 3.91 million currently unaccounted for. Maybe someone can ask Bernanke during his imminent presentation before Congress what happened to the unemployed population, which would have been 18.4 million if this labor force delta was incorporated, resulting in an unemployment rate of 11.7%.

Source: ZeroHedge.com

Unemployment at 9.8%

The numbers came out and depending on your interpretation…well, actually, it’s tough to interpret these positively:

(From BLS) The unemployment rate edged up to 9.8 percent in November, and nonfarm payroll employment was little changed (+39,000). Temporary help services and health care continued to add jobs over the month, while employment fell in retail trade. Employment in most major industries changed little in November.

CalculatedRisk.com did a great job of putting all the numbers into charts and I encourage you to look there, but I want to highlight one in particular and the summary:

This graph shows the number of workers unemployed for 27 weeks or more.

According to the BLS, there are 6.313 million workers who have been unemployed for more than 26 weeks and still want a job. This was up from 6.206 million in October. It appears the number of long term unemployed has peaked, however the level is extremely high – and the increases over the last two months is very concerning.

Summary

Perhaps the worst news was the jump in the unemployment rate to 9.8% without an increase in the participation rate. If the participation rate had increased, at least that would mean people were becoming more confident and rejoining the labor force. Instead the Labor Force Participation Rate was flat at 64.5% and this is a very low level. Note: This is the percentage of the working age population in the labor force (here is the graph in the galleries of the participation rate).

Most of the underlying details of the employment report were weak. The positives included small upward revisions to the September and October payroll reports, a slight increase in average hourly earnings, and a slight decline in part time workers.

The negatives include the unemployment rate increasing to 9.8%, few payroll jobs added (only 39,000 jobs), the decline in the employment-population ratio, the steady participation rate at a very low level, and the increase in workers unemployed for over 26 weeks.

10 o’clock check in

Where to begin today? We’re a little late on the uptake because so much is new and so much is old.

The dollar continues its downward spiral with Singapore joining the rest of the world against the USD and Bernanke’s campaign for inflation. The currency wars are raging, and I’m not sure if winning is good.

Meanwhile, August trade balance is at -$46.3 billion – worse than expected. Assuming it doesn’t get revised even lower, it will still have a negative impact on GDP revisions for Q3. At the same time, the China bashing continues in Washington (as if that’s the problem).

PPI came in a 0.4%. We have been discussing the duality of the market – inflation in expenses, deflation in wealth. Well, food and energy were the main drivers of the increase. Sans those, and PPI was only 0.1%. That being said, most people don’t exclude energy and food prices from their monthly bills, so the average person is feeling it in their pocketbook.

Jobless claims came in at 462K (up from 445K), and the prior number was revised higher (no surprise).

On the other side of sanity, Paul Krugman discusses the need to increase QE by $8-$10 Trillion, while on the same day, the St. Louis Fed comes out with a report on why QE is bound to fail. It’s a mad world.

Employment – no surprise

Unless you live in an extremely sheltered community, signs of difficult times are hard to miss. In New York City, there are stores closed on virtually every block along Madison Avenue.

From BLS:

Total nonfarm payroll employment declined by 131,000 in July, and the unemployment rate was unchanged at 9.5 percent. Federal government employment fell, as 143,000 temporary workers hired for the decennial census completed their work.
Private-sector payroll employment edged up by 71,000.

There’s some good news in this release: government employment fell and private sector employment edged up. Can’t complain about that one. One other side note: temporary hiring was unchanged. Many people view temp hiring as a leading indicator and it had been rising in the past couple of months. This might just be a summer blip, but worth noting.

Around the world in 6 charts or less

As a value guy, I spend a lot of time trying to understand behavioral biases and my own limitations in analysis, so it is with skepticism that I write about a funny feeling I’m getting. I’ve been mulling it over for the past few days, trying to come up with the sources of this “feeling” and have come up with the following:

The numbers aren’t lying. The ECRI Leading indicators has been rolling over:

(source: zerohedge)

The baltic dry index looks like it might have just finished it’s triple top formation:

How about those unemployment numbers?

(source: Calculated Risk)

How about the Swiss Frank?

This is using the ETF as a proxy. If you drill down vs. the euro it’s even more extreme.

What about gold in euros?

q-ratio. CAPE. What else do I have to say?

This isn’t just a funny feeling. And I don’t think it’s just confirmatory bias. Global markets are signaling something that the equity markets are not factoring. The message is in the CRB complex, in CDS spreads, in intermarket relationships that are blowing out to new highs and lows. I know summer is starting and everyone is away for 8 day weekends, but the messages are there for all to see. And when equity prices reflect these realities, vacations will get cut short. (Come to think of it, maybe we should short luxury hotels in anticipation of bankers cutting family vaca’s?)

What to expect going forward

So much news, but let’s simplify:

1. Bankruptcies will continue to rise.
2. Rents will go down, causing owners equivalent rent to go down in the CPI, deflationary pressures continue.
3. Europe falls apart: Hungary needs a bailout. How much more will the German taxpayer take on? What about Austria? Remember Spain and Portugal and Ireland? Yikes. Additional deflationary pressures on the USD (devaluation vs. euro).
4. Europe is big problem for China. Net negative for UST, but we are early on our call to short the 10 year, but the end of the bond bull market is upon us.
5. Unemployment doesn’t look good. Weeks searching going up. Temp is the only work out there. Lots of people giving up makes the numbers look good, but watch out for credit card defaults going up. Negative for the big card issuers (C, BAC, COF, Mastercard/Visa/AMEX) and retailers.
6. Politicians will downplay all of it, talk about stability and strength. Increased stimulus? From where?
7. Look for additional municipal cuts in budgets, employees, etc. Again, negative for jobs outlook, real estate, etc.
8. Geopolitical risk remains high. Forget North and South Korea. Look for something like the conficker virus making big headlines. We are always fighting the previous war, in this case small-group, armed guerrillas, terrorists, etc. Cyberwars will make the big headlines soon.
9. Yen is toast. Again, I’m probably early, but the demographics make their debt load unbearable. Some serious restructuring will need to occur – and someone will have to lose.
10. BP is in so many pension funds, the month end and quarter end numbers will be painful.

These are not black swans. They are just a matter of timing.

Quick review:

1. Jobs numbers are not good:

Total nonfarm payroll employment grew by 431,000 in May, reflecting the hiring of 411,000 temporary employees to work on Census 2010. Private-sector employment changed little (+41,000). The unemployment rate edged down to 9.7 percent. (From BLS)

Thank god for the Census!

2. Euro is not well:

Euro below 1.21 today and the trillion dollars don’t seem to be enough to handle Spain. In the meantime, Hungary CDS spreads blew up this week and who knows what’s in store over the weekend.

Here’s the dollar index

3. UST 10 yr yield went up, then down. Thank god for the bad numbers because if yields continued to rise all the liability matchers who have been trying to squeeze out some levered yield from the 10 year would have had to cover. China raising rates? Canada raising rates? Who’s next?

Atlanta Fed President confirms: rates might rise with high unemployment

I have pointed out numerous times that the current zero-interest-rate environment has some quirky implications for policy makers and investors alike. For one, we might see a deflationary environment, with no wage pressures, yet face an increasing interest rate environment. However, for a long time I felt like I was on the fringe, with deflationists and inflationists agreeing on only half of my equations, just not the same halves.

Yesterday, Dennis Lockhart, president of the Atlanta Fed made a speech in which he mentioned just such a scenario. The full speech is below, but here is the important (second to last paragraph):

I’ve put forward the view that inflation is not currently a major concern. So one might ask, do you believe the base interest rate must remain near zero—at its current level—until unemployment is reduced substantially and most of the employment lost in the recession has been restored?

I’m not convinced that will be necessary. I continue to support the current stance of interest rate policy. But the time is approaching when it will be appropriate to consider recalibrating interest rate policy. I do not believe that time has yet arrived. The conditions that require a change of policy are not yet at hand. However, as the economy continues to improve and financial markets find firmer ground, extraordinarily low policy rates will not be needed to promote recovery and will become inconsistent with maintaining price stability.

The implication is that the policy rate may have to begin to rise even while unemployment is considerably higher than before the recession. I’m very concerned about unemployment, and certainly employment trends should be a critical consideration in setting policy. But I accept that good policy, even in circumstances of unacceptable levels of unemployment, may incorporate higher interest rates.

For the full speech:

Sources of Employment Uncertainty

Dennis P. Lockhart
President and Chief Executive Officer
Federal Reserve Bank of Atlanta

Atlanta Technical College
Business and Industry Breakfast
Atlanta, Ga. June 3, 2010

Thank you for the opportunity to speak at the college’s annual business and industry breakfast. I want to congratulate Atlanta Technical College on being named the best community college by Washington Monthly. ATC certainly deserves such praise, but I think community and technical colleges in general deserve praise for their essential role in so ably preparing students for America’s always fluid and still weak employment market. I am aware that a high percentage of community and technical college students are older than 30. In the case of ATC, almost 45 percent are over 30 and more than 21 percent are over 40. ATC and its sister institutions do a tremendous service in upgrading the skills and retooling workers in our economy and smoothing the adjustments—both macroeconomic and personal—that are necessary in a dynamic, open economy.

This morning I want to focus on what might be viewed as a puzzling and frustrating aspect of the economic recovery that is under way. Most indicators suggest that overall economic activity stopped contracting and began growing again starting around July 2009. So the economy is approaching 12 months of sustained recovery, and yet not much has happened in employment markets to reduce the high level of joblessness. How can that be? During the last three quarters, gross domestic product (GDP) has expanded at an average annualized rate of 3.6 percent. Current estimates point to GDP growth of around 3 percent in the current quarter. These numbers are not off-the-charts strong, but they represent solid aggregate economic performance. Why haven’t we seen rehiring accompany this growth? Why hasn’t employment recovered at the same pace as the overall economy? Well, employment always lags recovery to some extent. Following the previous two recessions, where recovery has been modest, we’ve seen weak job growth.

The answer also lies in a surge in labor productivity growth, that is, output per hour of work. This productivity growth has allowed the economy to expand and firms to record better sales and profits without yet adding many workers to payrolls. Historically, productivity has always been strong just after recessions. So the pattern we’re seeing is not abnormal.

Recently my staff and I have been trying to gauge the sustainability of recent strong productivity growth and its impact on prospects for reduction of unemployment. In the long run, labor productivity growth is the friend of all of us. It fuels broad-based improvement of living standards. Short term, productivity gains may be the nemesis of those whose prospects depend on job creation.

The Federal Reserve’s monetary policy mandate from Congress is to pursue both maximum employment and low inflation. The possible tension between productivity and employment is a subtext of the larger story of economic growth and inflation and the question of whether there is a short-term tradeoff between the two. So I will try to connect the employment and productivity outlook to my views on appropriate monetary policy.

I should emphasize that what you’ll hear this morning are my personal views. They are not necessarily shared by my colleagues on the Federal Open Market Committee or in the Federal Reserve System.

Economic summary
Let me set the scene with a quick summary of current economic conditions. As stated earlier, the broad national economy is in recovery as indicated by GDP growth for almost a year.

In the middle of last year government spending stimulated most of the economic growth. In the fourth quarter of 2009 and the first quarter of this year, inventory adjustments drove a lot of economic activity. Consumer activity over the last few months has exceeded the expectations of many analysts. This activity has occurred even while American households continue to deleverage, that is, pay down their debt. Business investment in equipment and software has been surprisingly strong considering the consensus forecast of modest growth ahead. Both consumer spending and business investment in capital goods may just be evidence of short-term and temporary satisfaction of pent-up demand following deferral of spending during the recession. The end game of this evolution is solid and broad-based final demand.

Although, as I have suggested, risks remain to a forecast of sustained growth, I think confidence is warranted. The mix of sources of strength underpinning the recovery will evolve. Former contributors to growth will beget new contributors.

As a consequence of the growth we’ve seen and the positive outlook, employment market conditions have begun to improve. Payroll employment is estimated to have risen by about 560,000 during the first four months of this year.

We will get another important reading on employment markets tomorrow. Even if that report shows further gains in employment (some forecasters expect 500,000, with 400,000 being U.S. Census jobs), it’s fair to say there will remain a large excess of workers looking for jobs relative to the demand for workers in the economy. Total jobs lost in the recession and immediate aftermath approach 8 million. This gap is likely to close only gradually. And, further, the resulting slow growth of wages and salaries has the potential to limit growth of consumer spending for a while.

I’ll round out this snapshot of the economy with a couple of comments on inflation. Because of the downward pressure exerted by the recession and the relatively modest recovery so far, the rate of consumer price inflation has slowed quite a lot. This recent disinflation has not yet translated into decline of longer-term inflation expectations. Most measures of inflation expectations have remained pretty stable. Overall, for now, the inflation picture is not a major concern, in my view.

So, to sum up, we’ve had growth of the economy and improvement in jobs markets. Among the factors pushing the economy forward—along with personal consumption, business investment, and inventory effects—is labor productivity. I’d like to take a deeper look at this element of economic progress and its relationship to employment.

Role of productivity as an element of economic growth
To simplify a bit, there are two causes of labor productivity growth. The first is improvements to technology that help people work better. The second is people working harder. People might be working harder because the companies they work for have cut employees in response to tough economic times and are trying to keep production levels, revenues, and earnings up with fewer people. Technological improvements tend to be durable, but squeezing more and more out of a diminished and, in many cases, reorganized workforce may not be sustainable.

In recent months, the U.S. economy has enjoyed especially strong productivity growth in the business sector (averaging 6 percent per quarter over the last three quarters versus the long-run average of 2.6 percent). I suspect that much of this productivity growth is of the second, work-harder type. Many employers reacted to the downturn by aggressively cutting their workforces, reorganizing remaining workers, and cutting other costs. They have reacted to the upswing by holding employment at or near recession levels, seeking efficiencies in supply chains, investing in labor-saving automation, and generally tweaking their business models to operate more efficiently than before the recession. We’ve heard this story frequently in anecdotal accounts of our directors and business contacts across the Southeast.

As long as efficiency and productivity gains can be achieved in this way, employers may remain hesitant to hire. So a key question with immediate relevance for the recovery and employment is, how long can firms ride this productivity growth before having to yield to new hiring to support greater activity?

International comparison
Before venturing a view on that question, let me frame an international context for better perspective on the ups and downs of labor productivity in this country. Even though the timing and extent of the economic downturn were similar in most advanced economies, resulting labor productivity patterns have varied widely. For instance, in the United States the level of GDP declined by 3.7 percent, while the unemployment rate rose 4.5 percentage points during the recession. By contrast, in Germany the cumulative GDP decline was about 6 percent, while unemployment rose by only about 1 percentage point. Germany—and several other advanced economies—experienced a serious recession but a significantly smaller increase in unemployment in comparison with the United States.

It’s striking that the United States, even in good times, tends to see much greater flows into and out of unemployment rolls than other countries. This is an aspect of the vigorous turnover of jobs in our economy—the regular destruction and creation of jobs in a dynamic market economy. Other countries tend to experience relatively less such movement in labor markets over time. Their experience probably reflects institutional factors such as social laws that make separating employees more expensive and lower quotients of entrepreneurial activity.

It can be argued that the comparative absence of labor market rigidity in the United States results in comparatively large movements over time of workers between industries and sectors and across geography. We in the United States simply have more flexible employment arrangements across the economy, allowing employers to adjust rapidly and aggressively to downturns and requiring workers to be agile in response to changing conditions.

There is a point to be made for the benefit of ATC students here: Beyond the specialized skills you are acquiring in the college’s excellent programs, there will be a high return to work skills that make you versatile and mobile—for example, computer and IT skills.

Outlook for labor productivity and employment
To return to the question I posed earlier, slightly rephrased: Will high productivity growth continue and have the effect of impeding employment growth?

I do not expect the recent outsized productivity growth to continue indefinitely and become a new, permanently higher trend rate. Some degree of “wait and see” behavior is at work and is no doubt reflected in the productivity numbers. With growing economic momentum, deferral of hiring will become riskier.

Some employment gains should result as labor productivity levels out and falls back over time to something resembling the historic trend rate. But the pace of hiring is likely to be gradual. Current data on the use of part-time workers suggest that businesses have some scope to increase hours without hiring new full-time employees. And there are other, more structural obstacles to the rapid reemployment of the jobless. Some jobs in the construction sector and certain manufacturing industries are likely permanently lost, requiring some amount of migration of workers to other sectors. And, for a time, skill and geographic mismatches may frustrate employers willing to hire.

Also, the weight of uncertainty about the future business environment makes a gradual pace of employment progress a reasonable assumption. I hear often from members of the business community that uncertainty regarding federal, state, and local fiscal fundamentals and regulatory rules-of-the-game are feeding reticence to pull the trigger on new ventures, new hires, and new investments. The recent European sovereign debt and banking pressures have added to uncertainty in financial markets.

Sizing all this up, I expect recovery in the medium term to be neither jobless nor job rich.

Appropriate monetary policy
As the recovery proceeds—as I believe it will—a central concern of monetary policy will be when and by how much the Federal Reserve raises the base level of interest rates.

The Fed has held its interest rate policy at close to zero for about a year and a half. This has been done to foster conditions that would end the contraction of the economy and then encourage recovery. Again, I believe a modest recovery has been under way for almost 12 months.

As I stated earlier, the Fed has a dual mandate from Congress to keep inflation low and promote maximum employment.

I’ve put forward the view that inflation is not currently a major concern. So one might ask, do you believe the base interest rate must remain near zero—at its current level—until unemployment is reduced substantially and most of the employment lost in the recession has been restored?

I’m not convinced that will be necessary. I continue to support the current stance of interest rate policy. But the time is approaching when it will be appropriate to consider recalibrating interest rate policy. I do not believe that time has yet arrived. The conditions that require a change of policy are not yet at hand. However, as the economy continues to improve and financial markets find firmer ground, extraordinarily low policy rates will not be needed to promote recovery and will become inconsistent with maintaining price stability.

The implication is that the policy rate may have to begin to rise even while unemployment is considerably higher than before the recession. I’m very concerned about unemployment, and certainly employment trends should be a critical consideration in setting policy. But I accept that good policy, even in circumstances of unacceptable levels of unemployment, may incorporate higher interest rates.

Again, I want to acknowledge the vital role that Atlanta Technical College plays in our community in equipping young people, and some slightly older people, to prosper even in difficult times. You do important work.

Conflicting data and the hard trade

The past couple of days, we here at The Hard Trade have been trying to figure out what is actually the HARD TRADE, namely, which trade looks painful from a psychological perspective but may yet reveal itself as the most rewarding?

We’ll get to get to that in a moment, but first, here are just some of the cross currents we have read in the past 2 days (in no particular order):

• Insider’s kicked up their selling. Read the article here. You can get the details in the article, but the gist is that the ratio of sellers to buyers is relatively high. Not a great sign.
• While The World Was Focused On The Yuan, Everyone Missed The Real Tectonic Landmark. Read the full article here. Competitive devaluations? Nope. Singapore might be leading the Asian currencies up in a bid to buy up resources around the world. Should the US worry? Yup. Let’s see: higher Asian currencies means less money flowing into Treasuries as their trade surpluses drop and strategically dangerous as US loses access to raw materials globally.
• In the meantime, foreclosures jump 7% (click here for the article) but we also read that strategic defaults increase consumer spending (click here for the article). Much like the theory that broken windows and natural disasters increase GDP (Broken Window Fallacy), this doesn’t seem like a sustainable trend that can be relied on.
• In the meantime, weekly initial unemployment claims rise to 484,000. For a good summary and chart, click here.
• I follow the technicals a little less than valuation and fundamental data, but seeing the extremes on the put/call ratio certainly doesn’t add to my comfort level. Read it here. On top of that, shorts have been squeezed out already, so the support they provide is gone. Read the numbers here.
• Not that I trust these types of headlines, but heck, I was already wondering: George Soros Warns Of Biggest Market Crash To Come, As “We Are Facing A Yet Larger Bubble” Than During Credit Crisis (Click here for story.)
• Earnings wise, Bloomberg ran a story (click here) that showed how bank earnings (you’d have to be dumb to be a bank and not make money in this environment with the yield curve as it is) are driving the earnings recovery of the market. Check out this chart:

• We’ve got Albert Edwards warning of deflation (click here) and Morgan Stanley exploring the breakup of the euro (click here), while Richard Koo from Nomura compares the US real estate to Japan’s in the 1990′s and it ain’t pretty (click here).

All against a backdrop of a market that is grinding higher and grinding up shorts every day, making hedging or negative directional bets incredibly costly and painful.

The hard trade: is it harder to stay long given all the negative news out there or to go short as the market continually moves against you?

TrimTabs CEO interview

TrimTabs provides some of the better statistics on tax collection, employment, etc., so when the CEO doesn’t understand the government statistics and feels like there may be some manipulation going on, it’s at least worth listening to and taking into consideration.

To hear the interview, click here.

Statement from BLS

Here’s the full statement. The interesting thing, beyond the numbers are the following paragraphs…

Turning to the measures from our survey of households, the unemployment rate held at 10.0 percent in December, and the number of unemployed persons was unchanged at 15.3 million.  A year earlier the jobless rate was 7.4 percent.  Among the unemployed, 39.8 percent had been jobless for 27 weeks or more in December, up from 22.9 percent a year earlier.

The employment-population ratio, at 58.2 percent in December, declined by 0.3 percentage point over the month and by 2.7 percentage points over the year.  The number of discouraged workers rose over the year by 287,000, to 929,000 in December (not seasonally adjusted). Discouraged workers are persons outside the labor force who are not looking for work because they believe their job search efforts would be unsuccessful.

The number of persons working part time who would have preferred full-time employment was about unchanged in December at 9.2 million.  During the first quarter of 2009, the measure rose by more than 900,000, but it has been relatively flat since March.

Full Statement:

Statement of

Keith Hall
Commissioner
Bureau of Labor Statistics

Friday, January 8, 2010

Nonfarm payroll employment edged down in December (-85,000), and the unemployment rate held at 10.0 percent.  In 2009, payroll employment declined by 4.2 million.  Over the course of the year, job losses moderated substantially.  In the first quarter of 2009, job declines averaged 691,000 per month, compared with 69,000 per month in the last quarter.  In December, job losses continued in construction, manufacturing, and wholesale trade, while employment continued to rise in temporary help services and health care.

Over the month, construction employment fell by 53,000, in line with average monthly job losses since May 2009.  Over the year, the industry shed 934,000 jobs.  Nonresidential and heavy construction accounted for the majority of the loss in 2009.  In contrast, residential construction accounted for the majority of the loss in 2008.

The manufacturing sector continued to contract in December (-27,000), although average monthly job losses in the second half of 2009 were about one-fourth as large as those in the first half of the year.  In December, the factory workweek was unchanged at
40.4 hours, remaining a full hour above its recent low in May.

Wholesale trade employment declined by 18,000 in December, bringing the total job loss in the industry to 232,000 for 2009.
In retail trade, employment in general merchandise stores fell by 15,000 over the month.

Temporary help services continued to add jobs in December (47,000).  Since a recent low point in July 2009, employment in the industry has risen by 166,000.  Health care employment also continued to expand over the month, with gains in doctors’
offices and in home health care services.

Average hourly earnings of production and nonsupervisory workers in the private sector rose by 3 cents in December to $18.80.  Over the past 12 months, average hourly earnings have risen by 2.2 percent.  From November 2008 to November 2009, the Consumer Price Index for Urban Wage Earners and Clerical Workers
(CPI-W) increased by 2.3 percent.

Turning to the measures from our survey of households, the unemployment rate held at 10.0 percent in December, and the number of unemployed persons was unchanged at 15.3 million.  A year earlier the jobless rate was 7.4 percent.  Among the unemployed, 39.8 percent had been jobless for 27 weeks or more in December, up from 22.9 percent a year earlier.

The employment-population ratio, at 58.2 percent in December, declined by 0.3 percentage point over the month and by
2.7 percentage points over the year.  The number of discouraged workers rose over the year by 287,000, to 929,000 in December (not seasonally adjusted).  Discouraged workers are persons outside the labor force who are not looking for work because they believe their job search efforts would be unsuccessful.

The number of persons working part time who would have preferred full-time employment was about unchanged in December at
9.2 million.  During the first quarter of 2009, the measure rose by more than 900,000, but it has been relatively flat since March.

Data users are reminded that seasonal adjustment factors for the household survey are updated each year with the release of the December data.  Seasonally adjusted estimates going back 5 years–to January 2005–were subject to revision.

In addition, BLS will introduce several changes to the Employment Situation news release text and tables with the release of January 2010 data on February 5, 2010.  Information about those changes is available on the BLS Web site (www.bls.gov/bls/upcoming_empsit_changes_htm).

To summarize December’s labor market data, nonfarm payroll employment edged down (-85,000), and the unemployment rate was unchanged at 10.0 percent.  In 2009, payroll employment declined by 4.2 million, and the Nation’s jobless rate increased by 2.6 percentage points.

Mike Shedlock – a breakdown of the unemployment report

Previously, we highlight Mish’s great analysis of the current unemployment situation. In a current post, he analyzes the current unemployment report.

http://globaleconomicanalysis.blogspot.com/2009/12/jobs-contract-23rd-straight-month.htm

Notes from underground – Yra Harris

If you can keep your head when all about you

are losing theirs and blaming it on you;

If you can trust yourself when all men doubt you

but make allowance for their doubting too;

For those who don’t see deflationary forces…

For those out there who think the case for inflation is clear cut due to monetary and fiscal policies, I recommend heading over to your nearest retailer this holiday season – Target is offering 32″ flat screen TV’s for $250!! Prices for electronics are coming down in most categories, but flat screen TV’s are as good an indicator as any. Even the larger models are coming down in price by 20-30%. Earlier this week, we noted that the Blackberry Storm is now selling for a few pennies on Amazon. And the signs continue. Check out this article on cnn.com:  http://money.cnn.com/2009/11/13/news/economy/retail_holidayshopping_pricewars_television/index.htm.

So I’m still not seeing price stability, certainly not seeing upwards price pressure in technology, real estate, and – at least at this stage – most consumer goods (cyclicals, staples, etc.). That actually bodes very poorly for the equity markets. Without pricing power, companies will not be able to grow top line revenue, which is what this current rally has going for it, since margin expansion is pretty much over. Separately, for historical reference – and I’m not in the Great Depression II camp – in 1930, the market rallied over 40% from it’s 1929 bottom, before eventually going down 84% (yes, 84%). By the way, in 1930, unemployment stood at 10%, and eventually went to 25% (true, the entire measurement system was different, but the orders of magnitude give us a sense). I’m not saying we’re going down there, but I wouldn’t be surprised if this rally turns out to be a dangerous bear market trap.