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Archive for the ‘Unemployment Claims’ Category

Unemployment Claims: Back To Reality?

The Bureau of Lies and Scams reported this morning…

Total nonfarm payroll employment increased by 157,000 in January, and the unemployment rate was essentially unchanged at 7.9 percent, the U.S. Bureau of Labor Statistics reported today. Retail trade, construction, health care, and wholesale trade added jobs over the month.

That’s from the establishment survey.  Benchmark revisions are also this month (January), which means that the number is frequently full of “hair” and the headline has to be looked beyond — more than usual.

But even “sans hair”, there is little to cheer about — the employment rate did not go down and 157,000 — assuming you believe the number (and you shouldn’t, as I’ll get to shortly) isn’t good.  The workweek was unchanged overall and down for production and non-supervisory employees, now standing at 33.6 hours.  That is considerably below “full time, 40 hours” — still.

Average hourly earnings, on the other hand, was up 5 cents for production and non-supervisory employees.  That’s about the only good news, despite claimed revisions for November and December (which likely are where the spooge-fest came from in the futures.)

That’s where the good news ends.

Here’s the table from the household survey, unadjusted, which is what I use and always have.

Notice that both monthly and annualized are now headed southbound.  While annualized is still positive, it’s going the wrong way — and the monthly numbers are horrible.

How horrible?  Employed dropped by 1.446 million people!

Now to be fair this is usual for January to some degree.  But make no mistake folks — the layoffs this January were doublethat of last year, when January was -737,000.  The idea that this report is “strong” is just plain crap — or if you prefer, a lie.

Not-in-labor force moved too — the wrong way.  423,000 gave up last month alone.

The benchmark revision also added massively to population, taking it up 313,000 people, which is about double the monthly average.  If you want to look at employment including the change in working-age population it’s about 1,750,000 fewer employed, population-adjusted.

This is a serious deterioration and it showed up right here:

And worse, here:

We’re one tenth above last January in terms of the employment-population ratio.

In other words there has been no meaningful change in actual population-adjusted employment whatsoever over the last 12 months.

This report is a train wreck.

The Market-Ticker

Discussion (registration required to post)

It’s time to cut the crap on this so-called “help” and call it what it is: Welfare, then take it out back and shoot it.

About 2.1 million Americans receive payments through federally backed emergency unemployment programs, which Congress adopted starting in 2008 as a temporary supplement to state-level programs funded primarily with taxes on employers, which generally offer six months of benefits. That number has tumbled from more than 3.5 million at the start of the year and a peak of more than six million in early 2010, reflecting not just the gradual improvement of the job market but also new limits that have pushed hundreds of thousands of workers off the rolls before they could find jobs.

These programs are simple welfare, nothing, more or less.

As of last week’s report “EUC 2008″, which is the program in question, had 2.156 million “beneficiaries.”  To put this in context “regular” state unemployment had 2.956 million people receiving benefits as of November 3rd.

“Regular” unemployment (26 weeks) is an insurance program.  You, the employee, pay into it with a piece of every paycheck.  It is prohibited by law for your employer to itemize this as a deduction from your paycheck, but it is a fact that it comes out of your offered wage in each and every case.  In this regard it is a forced insurance program (gee, where do you think the Government got the idea that forcing people to buy insurance — like health insurance — was a good idea?) but the fact remains that “regular” 26-week unemployment compensation is something you paid into, although as an employee it is an insurance program you cannot opt out of.

EUC is a welfare program.  It is entirely unfunded and you paid nothing for it.  It was and is the clear intent of government to blur the line between the two, making you believe you were and are entitled to the latter benefit because “it’s something you earned” when in point of fact nothing of the sort ever occurred.

The problem is that not only does this form of welfare distort the job market, as it encourages people to “hold out” for a job they want rather than taking whatever they can get (or starting their own business, even if it is nothing more than doing odd jobs for money from people.)

It also distorts the picture that people have regarding work .vs. welfare, a hand out .vs. a hand up.

It is my considered opinion that unemployment insurance is something that you should have the right to either buy or not as an individual employee and your employer should have nothing to do with it.  The current system is rife with fraud; in Illinois, for example, it is virtually impossible to prevent someone from getting unemployment even if they are fired for cause.  I had multiple cases when I ran MCSNet where I terminated someone for a blatantly “for-cause” reason (e.g. not showing up for work on a repeated and notorious basis) and they would file for unemployment anyway.  We would protest and lose and the person who got canned would collect despite being outrageously ineligible.

This sort of abuse hurt everyone who legitimately wanted to work at the shop, since their wage offer was originally reduced by the amount that I would have to fork over for unemployment “insurance.”  The fact that any random employee could (and some did) claim this benefit illegitimately and got away with it meant that everyone in the place got screwed.  Oh sure, the amount of the screwing for each employee was relatively small, but that’s not the point — if you steal a dollar or $10,000 from someone the only thing we’re arguing about is the amount of damage, not whether the act was proper.

As a nation we need to fix these problems.  The best way to solve it in this case is to scrap the “unemployment” system entirely, and make unemployment a insurance program that employees can buy on their own initiative.  That in turn would make such a benefit entirely portable and entirely at the employee’s discretion; in some cases people would choose not to buy it at all (e.g. a teen taking a summer job or a second income in a household that is not necessary but enhances lifestyle) where others would want to buy it (e.g. a head-of-household.)  This would also allow private companies to price the insurance for the risk on an individual basis and they’d have a strong incentive to police fraud and claims for “benefits” where the person in question was fired for cause.

Let the hate mail aimed at me for the termerity to suggest that people should work for what they get, and that the scam level in our system be reduced, no matter how slightly, begin.

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I am amused by the Shadow Weekly Leading Index Project which claims the probability of recession is 31%. I think it is much higher.

When the NBER, the official arbiter of recessions finally backdates the recession, May or June of 2012 appear to be likely months. Let’s take a look at why.

US Manufacturing PMI

Markit reports PMI signals weakest manufacturing expansion in 11 months

Key points:

• PMI lowest since July 2011, suggesting slower rate of manufacturing expansion
• Rate of output growth broadly unchanged
• New orders rise at weakest pace in four months
• Input costs fall for first time in three years

Durable Goods Orders Plunge

Those numbers do not look good but they are hardly disastrous. Here are some numbers that are disastrous.

Philly Fed Survey

For the second consecutive the Philly Fed Survey has been solidly in the red.

Those numbers are nothing short of a disaster.

 The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, fell from a reading of ‐5.8 in May to ‐16.6, its second consecutive negative reading. Nearly 40 percent of the firms reported declines in activity this month, exceeding the 22 percent that reported increases in activity.

Indexes for new orders and shipments also showed notable declines, falling 18 and 20 points, respectively. Indexes for current unfilled orders and delivery times both registered negative readings again this month, suggesting lower levels of unfilled orders and faster deliveries.

Firms’ responses suggest steady employment this month but shorter hours. The percentage of firms reporting higher employment (14 percent) edged out the percentage reporting lower employment (12 percent). The current employment index increased 3 points this month. Firms indicated fewer hours worked this month: the average workweek index decreased 14 points and posted its third consecutive negative reading.

Misguided Optimism

Note the misguided optimism about six months from now. It’s not going to happen.

Why?

1. Europe is a disaster.
2. US manufacturing is cooling rapidly
3. China is cooling rapidly: China Manufacturing PMI 7-Month Low, Sharpest Decline in New Export Orders Since March 2009
4. US Monetary policy is at best useless, but more likely net harmful, especially to those on fixed income.
5. First year presidential politics are frequently recessionary
6. US still needs fiscal tightening
7. Unemployment insurance has expired for millions: 200,000 Lose Unemployment Benefits This Week, Nearly Half From California
8. Self-Employment desperation: 100% of U.S. Jobs Added Since 2010 Have Been Self-Employment, Contractor, or Other Jobs Without Unemployment Insurance Benefits
9. Last two jobs reports have been dismal: Another Payroll Disaster: Jobs +69,000, Employment Rate +.1 to 8.2%, April Jobs Revised Lower to +77,000; Long-term Unemployment +310,000
10. The 4-week moving average of weekly unemployment claims is at the highest rate of the year, at 386,250.
11. New home sales cannot gain significant traction: New Home Sales Hype vs. Reality
12. Tax Armageddon

Deficit spending has carried this “recovery” further than I thought it would, but the party is now over.

It will be difficult if not impossible to overcome the above set of circumstances regardless of what anyone feels about economic back-tested recession probabilities.

Taxmageddon

Please consider Taxmageddon

 The Tax Foundation reports that because of higher federal income and corporate tax collections, Tax Freedom Day came four days later this year than last. And the bad news is that unless Washington takes action, it will take working Americans 11 more days to meet next year’s tax burden.

That’s all due to Taxmageddon — a slew of expiring tax cuts and new tax increases that will hit Americans on January 1, 2013, amounting to a $494 billion tax hike. Heritage’s Curtis Dubay reports that American households can expect to face an average tax increase of $3,800 and that 70 percent of Taxmageddon’s impact will fall directly on low-income and middle-income families, leaving them with $346 billion less to spend.

Taxes Will Go Through the Roof

PolicyMic reports When the Payroll Tax Holiday Ends in 2013, Taxes Will Go Through the Roof

 Without significant tax code changes, in 2013, America is scheduled to get hit with what would be the largest tax increase in our history.

Not only will the $1,000 per year tax holiday for a $50,000 income household disappear, come 2013 all Americans will see the tax on their first $8,700 of income jump from a 10% rate to 15% rate.

That hike will cost the majority of filers an additional $435.

For those eligible for child care tax credits that deduction will drop from $1,000 to $500. The marriage penalty will roar back into effect. The AMT, alternative minimum tax, will finally kick in.

Roll those changes up and a family filing as married with two children making $50,000, will see their taxes increase by basically $2,700.

Regardless of whether or not you feel taxes need to be raised, a big set of tax hikes is scheduled to happen.

To be sure, some of those hikes will be undone in compromises,  but many if not most will sneak through.

Who is to blame for Taxmageddon?

Republican are to blame. They accepted this silly deal instead of a far better one that Obama would actually have signed.

But No! Republicans insisted on no tax hikes at all in 2012, putting everything off until after the election, believing Romney would win in a cake-walk.

However, if President Obama wins, certainly not at all an unlikely possibility, he is going to drive a much harder bargain this go around.

Regardless of tax consequences, the US is headed for recession, if not already in one. 2013 rates to be a disaster regardless who wins.

Mike “Mish” Shedlock

Global Economic Analysis