The Economy is Going Nowhere With 8.2% Unemployed in May – It Must Be Bush’s Fault

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A global rush into safer assets dragged yields on U.S., German and U.K. government bonds to uncharted lows.

While foreclosure starts were down 2.6%, FHA loan foreclosures (government-backed) were up an alarming 73% for April alone.

Loans from 2008 and 2009 are blamed. The FHA took on a large number of loans in 2008 and 2009 without much oversight of underwriting and lending practices. The FHA is seeking assistance from the large banks and FHA lenders to cover their losses with large cash settlements. Otherwise, there will be big problems.

Pending home sales dropped 5.5% and home prices fell 2.6% for the quarter this year.

Investors are generally very smart people and they aren’t fooled by manipulated stats. When they are worried, we all should be worried. The stock market is down 6% this month because of the bad news out of Europe and fears that the U.S. economy is not working. The three major indexes are up for the year however.

Total private wealth fell by 0.9%, to $38 trillion.

The ultra-rich were the largest losers. Households with investible assets of more than $100 million saw their wealth decline 2.4%. Their population declined slightly to 2,928 from 2,989. The main reason for all this wealth loss are stocks.

How ever are we going to tax them to death if they don’t exist or are so small in number that they only keep the government going for 5 hours as compared to the 11 hours which the Buffet Rule proposes to do?

Standard & Poor’s has threatened the U.S. with another downgrade. We are currently at AA+ and could be heading for A. They have also threatened to downgrade insurers, securities clearinghouses, mortgage agencies and a number of other firms unless there is a deal soon to lift the debt ceiling and cut the deficit. That’s not happening so expect a downgrade.

The NY Times reported on the Commerce Department numbers-

…The report also showed that after-tax corporate profits dropped for the first time in three years.

A modest downward revision to consumer spending, which accounts for about 70 percent of economic activity, and stronger import growth also accounted for the weaker first-quarter output. Economists polled by Reuters had expected growth would be revised down to a 1.9 percent pace.

Business inventories increased $57.7 billion, instead of $69.5 billion, adding only 0.21 percentage point to G.D.P. growth, compared with 0.59 percentage point in the previous estimate….

The U.S. economy grew at an annual rate of 1.9% in the first three months of the year. The original estimates were 2.2%. As usual, the government over-estimates and then changes it after the fact. What the general public remembers is the original inflated estimate. To bring this economy back, we need 5-6% growth. A minimum of 2.2% is needed to maintain the status quo.

We added only 69,000 jobs in May. The economy might be derailing. Something is not working.

The unemployment numbers are the best example of the government practice of “inflation to obfuscate.” For 59 of the last 60 reports, the government numbers were inflated. Unemployment claims have risen in 7 of the last 8 weeks. Last week was a five-week high.

Gallup’s unemployment rate in mid-May is down to 8.2% on unadjusted basis and to 8.5% after adjustment. Underemployment is down to 18% from 18.2%. Much of this decline may be due to a decline in the workforce participation rate — Americans 18 years or older who have a job or are actively looking for work — which fell to 67.5% in mid-May from 67.8% in March. As people get discouraged and drop out of the workforce, the unemployment rate tends to decline.

The just released tables from the BLS show an uptick in unemployment to 8.2% but take a look at U-5 and U-6 which are the real numbers –

Table A-15. Alternative measures of labor underutilization

[Percent]

HOUSEHOLD DATA
Table A-15. Alternative measures of labor underutilization
Measure Not seasonally adjusted Seasonally adjusted
May
2011
Apr.
2012
May
2012
May
2011
Jan.
2012
Feb.
2012
Mar.
2012
Apr.
2012
May
2012
U-1 Persons unemployed 15 weeks or longer, as a percent of the civilian labor force 5.5 4.8 4.7 5.3 4.9 4.8 4.6 4.5 4.6
U-2 Job losers and persons who completed temporary jobs, as a percent of the civilian labor force 5.1 4.3 4.3 5.4 4.7 4.7 4.5 4.4 4.5
U-3 Total unemployed, as a percent of the civilian labor force (official unemployment rate) 8.7 7.7 7.9 9.0 8.3 8.3 8.2 8.1 8.2
U-4 Total unemployed plus discouraged workers, as a percent of the civilian labor force plus discouraged workers 9.2 8.3 8.4 9.5 8.9 8.9 8.7 8.7 8.7
U-5 Total unemployed, plus discouraged workers, plus all other persons marginally attached to the labor force, as a percent of the civilian labor force plus all persons marginally attached to the labor force 10.0 9.1 9.3 10.3 9.9 9.8 9.6 9.5 9.6
U-6 Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force 15.4 14.1 14.3 15.8 15.1 14.9 14.5 14.5 14.8
NOTE: Persons marginally attached to the labor force are those who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the past 12 months. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not currently looking for work. Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule. Updated population controls are introduced annually with the release of January data.

The work force participation rate is back to March’s rate, which is not good at 63.8%.

Sources –

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