All Things to All Souls - or Pick any Number

A few days ago the unemployment report came out. Many commented about it. Most were favorable - "Looks like things are bottoming", "It's getting better", "Lets go get a drink and celebrate". A few thought it was worse.

Really, the US unemployment report has so many figures,  that you can pick whatever few you choose and make up whatever story you want. Good, bad, the same. Actually like all other economic indicators, the best that can be said about the report overall,  is that things are getting worse more slowly. That's the best that can be said.

With certain areas of the economy improving in the last quarter due to the Federal stimulus < like cash for clunkers temporarily hiring people >, it is no surprise that the unemployment report was "less worse". The big question is what happens when the stimulus effect ends. Many, including Guido, are not hopeful.

One economist named Roger Kubarych,  who was interviewed at Bloomberg.com < you can see the video on Youtube >, gave what appeared to be the most insightful analysis. Basically he said the unemployment report was "humbling", which in Rogerspeak Guido interrupted as  horrid. Mr. Kubarych  then went on to say the job market is "lousy". < Which I'm sure those processing unemployment claims would agree >.

The interview is very pithy, and Guido would suggest everyone watch it. However a few points Mr. Kubarych made are -

1. - The proportion of industries raising employment vs reducing jobs is small. Which means few are hiring workers, many are shrinking staff. < This would seem to confirm Guidos' guess about the Federal stimulus like "cash for clunkers" making things less worse at the moment >.

2. - Mr. K seemed to imply  2,000,000 + people are still being laid off each month. < Oh my goodness, doesn't that sound  encouraging. >

3. - Job openings are over half down from their peak. Voluntary quits are down 1 million.

4. - Business is getting the same production with less workers because "they can get away with it". Which is another way of saying "You already went to the toilet twice this week, slave. Only eight times allowed per month during working hours." < Think I'm exaggerating? >

5. Many states are technically bankrupt. Part < much? > of the stimulus is being used to maintain the salaries of local government workers < as a whole the less efficient area of the labor force >. Businesses are already over invested in high tech. Exports are "iffy".

"Gosh", said his hypertalking interlocutor  toward the end. "We're really in a pickle." Mr. Kubarych did not disagree with her.

One unrelated thing Mr. K said at the close, was that he thought there would be another stock market bubble. His reason being cheap money. Bear in mind that Mr. K used to be an economist at the NYSE, and Guido will be pondering his comment. < We can learn much from others who think differently. >

Notwithstanding Mr. Kubarych's cheap money hypothesis, deflationists would disagree. They argue that  the central banks can't pump money out fast enough to stop the overall monetary supply from shrinking due to debt deflation. This, they reason, will not be auspicious for markets.  Keep also in mind that  it has been excessive liquidity during the last 10+ years, in Guido's opinion, that has kept the real estate and financial markets from sinking on a debt foundation of sand . One thing is sure. For the average Joe and Jane, it's no longer that easy to borrow money < almost impossible? >.

Employment is the key for the US and other world economies. If people aren't working, less goods and services are demanded, less employees then needed, more unemployed, and the vicious cycle continues to spiral down. In Guido's view, all the other economic figures being mentioned are dependent on employment. Without good paying jobs and low unemployment, hope that we are ascending again is a delusion.  < Again this is Guido's thoughts, not his recommendations. >

To put it metaphorically, the general working  public is an economic resource. Government, business, even banks, depend on this resource  for their funds. If the public has loads of money, they will spend more and be able to be taxed more. For many years in the US, many ruthless businesses have been able to financially squeeze what they pay this public resource < their workers >  due to globalization. Most governments in the US, including but not only the Federal, have allowed the labor laws to be ignored. < so much for Bush's free markets > It is like a forest, with trees either being cut in sustainable harvesting and the resource being  maintained. Or the quick buck in clear cutting, where the resource is completely destroyed and will take many years to recover, if it ever does.

 Sadly there has metaphorically been a lot of clear cutting in the US..

"No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable." - Adam Smith from the Wealth of Nations