All courtesy of zerohedge.com.












Math and Delusions

Two big financial bits from last week- the Dow and jobs. One hit a record, the other, not so much, but that hasn’t stopped the hysteria surrounding both. But first, there has been a lot of hype over Friday’s job numbers. 30 second “economists” in the MSM are touting the strong growth to the economy and how we are “obviously” in a strengthening recovery. Of course, all it takes is about three minutes of perusing through the subterfuge to find that things in Oz are not all the rosy.


So straight to the hype: the BLS reported Friday that February created 236,000 jobs. If you stopped thinking at this point—as most liberals and journalists seem to do—then you’d be happy. This was one of the highest job gains in a month for the Obama Administration (ever), which is frankly pretty pathetic considering Biden’s promise of 500,000+ jobs per month during the “Summer of Recovery” in…2010…that never happened. But this is the kicker: 296,000 left the labor force in February taking us to a record 89,304,000 out of the labor force. For those not challenged by Math, that’s 60,000 more people leaving the labor force than joining it in February. Now, not all of those leaving the labor market were job losses, after all, some people retired—whether they wanted to or not—and certainly some found that the pay for being unemployed is better than the pay for being employed. Regardless, we’re at a net negative in February—minus 60,000 workers—versus the mythical positive of 236,000 jobs. Of course, it is how you count the “jobs”, which means you ignore the workers, and therefore don’t count their decline, resulting in the exuberance of …wait for it…7.7% unemployment. Where’s the bubbly?



Well, before we pop the top, let us do a little more in qualitatively looking at the job numbers. The chart above shows the number of multiple job holders—that’s people with more than one job—which is important because in February (that magical month of 236,000 jobs, remember) saw the largest rise (340,000) in multiple job-holders. The number of full time jobs in February declined by 77,000 and the number of part-time jobs surged by 102,000. So, an honest question would be to ask: of that 236,000 “jobs” in February, how many are held by one person?



You can go here for a break down, specifically, of the job gains in the sectors, but I want highlight a couple things. As you can see from the chart above, the biggest gainer was in Professional and Business Services, which sounds great! That is, until you read this:


Professional and business services added 73,000 jobs in February; employment in the industry had changed little (+16,000) in January. In February, employment in administrative and support services, which includes employment services and services to buildings, rose by 44,000. Accounting and bookkeeping services added 11,000 jobs, and growth continued in computer systems design and in management and technical consulting services.


Yes, employment and building services are low wage positions, with a healthy chunk being part-time labor. And those 11,000 accounting and bookkeeping positions, well, it is tax season, so those will almost certainly be temporary, and most likely part-time or commission positions. Really, the only positive from this chart is the decline in government jobs, of course, those are states and counties who actually have to live within their means, versus a bloated federal work force that can—and does—just print more money to pay for its excess.



Regardless, again, we have a long, long ways to go before we’re back to the unemployment numbers of the previous Administration. But then, this love fest with the numbers will be short lived, mostly because they’ll be forgotten, or worse yet, the fallacy will be perpetuated. For instance, folks who follow this remember that in January, we added 157,000 jobs… or did we? How many people know that the January number was revised down to 119,000. That’s 38,000 fewer jobs, or a decline of 25% from the initial stats. Hell of a rounding error. But here is the humdinger: in January 2012 we added 311,000 jobs. The fact of the matter remains that the single greatest contributor to a declining unemployment rate is people abandoning the labor force all together, and thus not getting counted in the first place.


We continue to fail to add enough jobs to meet the death rate, let alone grow the economy, and this Administration continues to add road block after road block to the highway of employment. I firmly believe that we will be (officially) in a recession by the end of this year. I sincerely hope not, but I have no confidence that this Administration is interested in helping the economy. Not even a little…

…which brings us to the Dow. At one point, perhaps, there was some equivalency between how the stock market did and the health and strength of the economy. Those days seem to be long gone. There is so much gaming and blatant intellectual dishonesty that it is hard to fathom where lies the road and the edge of the cliff. Without belaboring the point, Zero Hedge did a fantastic job of pointing out the context surrounding the euphoria of the record Dow. Frankly, it speaks for itself…


  • Dow Jones Industrial Average: Then 14164.5; Now 14164.5
  • Regular Gas Price: Then $2.75; Now $3.73
  • GDP Growth: Then +2.5%; Now +1.6%
  • Americans Unemployed (in Labor Force): Then 6.7 million; Now 13.2 million
  • Americans On Food Stamps: Then 26.9 million; Now 47.69 million
  • Size of Fed’s Balance Sheet: Then $0.89 trillion; Now $3.01 trillion
  • US Debt as a Percentage of GDP: Then ~38%; Now 74.2%
  • US Deficit (LTM): Then $97 billion; Now $975.6 billion
  • Total US Debt Oustanding: Then $9.008 trillion; Now $16.43 trillion
  • US Household Debt: Then $13.5 trillion; Now 12.87 trillion
  • Labor Force Particpation Rate: Then 65.8%; Now 63.6%
  • Consumer Confidence: Then 99.5; Now 69.6
  • S&P Rating of the US: Then AAA; Now AA+
  • VIX: Then 17.5%; Now 14%
  • 10 Year Treasury Yield: Then 4.64%; Now 1.89%
  • USDJPY: Then 117; Now 93
  • EURUSD: Then 1.4145; Now 1.3050
  • Gold: Then $748; Now $1583
  • NYSE Average LTM Volume (per day): Then 1.3 billion shares; Now 545 million shares


Bottom line: when the economy collapses into recession, the market correction is going to be astronomical. Warren Buffet and George Soros aren’t pulling their money out of stocks for nothing—they see a massive correction coming and the fear is that it’ll wipe out the retirement savings of so many in the middle class. Be afraid, very afraid.