Tomorrow’s report on the employment situation in November is widely expected to show a steepish increase in joblessness. The number of first-time claims filed for unemployment insurance benefits last month was about 2.2 million, or about 50 percent higher than in the same month last year and about 23 percent higher than in October, based on seasonally unadjusted numbers.
If overall unemployment rose by the same percentage from October to November, then the unemployment rate ought to have been about 7.4 percent last month, the highest level in about 15 years. Of course, the feds can tinker with labor force numbers and seasonal adjustments (November normally is a month that sees strong hiring in anticipation of the holiday retail season) and the actual reported unemployment rate may not be that bad; the Wall Street consensus is for a figure of just 6.7 percent, up from 6.5 percent in October.
Not contributing significantly to whatever increase does get reported will be the top executives of America’s largest publicly traded corporations, because layoffs never extend to the boardroom no matter how bad a job the managers have been doing. On the other side of the coin, the trillion-dollar-plus economic rescue plan to date hasn’t come anywhere near helping the average worker.
So who has it helped? Well, we might suppose that the shareholders of the nation’s biggest financial companies have benefited; those companies, which have been the biggest recipients of our money, might well have seen their shares fall even lower than they are now if Messrs. Paulson and Bernanke hadn’t generously shoveled our money into their vaults.
And just who are those shareholders? Regular folks like you and me, who’ve saved a penny here and there and patriotically invested in the companies that make America great, right? Um, no, not so much.
Bank of America, for example, the country’s biggest banking firm, is 55.5 percent owned by “institutions,” meaning other banking firms, big Wall Street brokerage houses and, yes, some pension funds and mutual fund companies. Citigroup is 63.3 percent institionally owned, and struggling insurer American International Group is 55.9 percent owned by institutions.
Just which institutions are they? In fact, it’s a pretty cozy little group: Of the top 25 holders of each of these three companies as of Sept. 30, 15 are the same ones in all three cases. Here’s the list:
AXA
Bank of New York Mellon
Barclays Global Investments
Barrow Hanley Mewhinney & Strauss
Brandes Investment
Capital Research Global
Capital World Investment
Deutsche Bank
FMR LLC
Geode Capital Management
Goldman Sachs Group
Northern Trust Corp.
T. Rowe Price
State Street Corp.
Vanguard Group Inc.
Note in particular that Goldman Sachs is the big brokerage house that used to be headed by Daddy Warbucks, I mean Henry Paulson.
This sort of thing helps explain why executives of these kinds of companies continue to receive unconscionable “compensation” packages no matter how the companies perform: because the biggest shareholders and the “independent” directors are all members of the same club or subculture. If anyone started holding one of them to reasonable standards, they’d all be in trouble.
Showing posts with label unemployment. Show all posts
Showing posts with label unemployment. Show all posts
Thursday, December 4, 2008
Friday, November 28, 2008
More Trouble Ahead?
The stock market mounted a fairly impressive rally this week, amounting to a rebound of about 17 percent off the Nov. 20 low. It also moved off the deeply “oversold” levels that were showing on some indicators I look at, some of which were at levels comparable to the market crashes of 1929 and 1987.
However, as of Friday, my short-term indicators were showing that the Dow has in fact moved into “overbought” territory. That’s not very worrisome in itself; these indicators almost always hit steeply overbought levels on any rebound from a sharp decline, and they can remain in overbought territory for some time while the index continues to post new highs for the move. But it’s at least a sign that the strongest gains for this move may already have been made and there may be some degree of pullback due.
Possibly more troubling is a divergence between the Dow industrials and the Dow transportation average. Back in the spring, in my former blog for The Post and Courier (which I gather has now been taken offline), I identified a Dow Theory sell signal after the transports hit a new all-time high while the industrials remained well below their own record high. The current situation isn’t nearly as significant, but it may be another signal that a downdraft lies ahead: The industrials as of today are back above all their October lows, while the transports remain below the short-term lows set on Oct. 9 and 15. In other words, the transports haven’t recouped as much of their losses as the industrials have.
Last spring, I was wondering how it was possible for the transportation average to rise to an all-time high at the same time fuel prices were doing the same thing; now I’m wondering why the transports are looking weaker than the industrials at a time when fuel prices have been falling pretty hard. It strikes me as an imbalance with at least modestly bearish implications.
There are plenty of possible news hooks due next week that could spark a decline, but the one that analysts and economists are the most worried about is Friday’s report on the national employment situation for November. Given the increases in weekly initial claims for unemployment insurance this month, it’s likely the unemployment rate will have risen substantially.
Of course, that’s already bad news for people who’ve lost their jobs, but from the perspective of economists and brokerage house analysts, the report will be bad news because it will suggest that “consumers” (who of course are mostly workers) will be spending less in the weeks and months ahead, further hampering corporate profits. I’ve never figured out why the bean-counters and MBAs always want to respond to slower sales by cutting jobs and then can’t seem to understand why their sales drop even more, but I expect we’ll be seeing more of that kind of head-scratching next week.
However, as of Friday, my short-term indicators were showing that the Dow has in fact moved into “overbought” territory. That’s not very worrisome in itself; these indicators almost always hit steeply overbought levels on any rebound from a sharp decline, and they can remain in overbought territory for some time while the index continues to post new highs for the move. But it’s at least a sign that the strongest gains for this move may already have been made and there may be some degree of pullback due.
Possibly more troubling is a divergence between the Dow industrials and the Dow transportation average. Back in the spring, in my former blog for The Post and Courier (which I gather has now been taken offline), I identified a Dow Theory sell signal after the transports hit a new all-time high while the industrials remained well below their own record high. The current situation isn’t nearly as significant, but it may be another signal that a downdraft lies ahead: The industrials as of today are back above all their October lows, while the transports remain below the short-term lows set on Oct. 9 and 15. In other words, the transports haven’t recouped as much of their losses as the industrials have.
Last spring, I was wondering how it was possible for the transportation average to rise to an all-time high at the same time fuel prices were doing the same thing; now I’m wondering why the transports are looking weaker than the industrials at a time when fuel prices have been falling pretty hard. It strikes me as an imbalance with at least modestly bearish implications.
There are plenty of possible news hooks due next week that could spark a decline, but the one that analysts and economists are the most worried about is Friday’s report on the national employment situation for November. Given the increases in weekly initial claims for unemployment insurance this month, it’s likely the unemployment rate will have risen substantially.
Of course, that’s already bad news for people who’ve lost their jobs, but from the perspective of economists and brokerage house analysts, the report will be bad news because it will suggest that “consumers” (who of course are mostly workers) will be spending less in the weeks and months ahead, further hampering corporate profits. I’ve never figured out why the bean-counters and MBAs always want to respond to slower sales by cutting jobs and then can’t seem to understand why their sales drop even more, but I expect we’ll be seeing more of that kind of head-scratching next week.
Thursday, November 20, 2008
'Tis the Season
This morning’s weekly report on claims for unemployment insurance benefits was greeted by the financial media with something like horror, though the stock market seems to have shrugged it off successfully by midday. Once again, however, the reported numbers are highly misleading.
The news tickers and financial correspondents are, as usual, reporting the Labor Department’s headline number: 542,000 initial filings for benefits, up from 516,000 the previous week and the highest level since 1992. Pretty shocking stuff, if it were real. Here’s a chart (click to enlarge, right-click to open in its own window) showing the true situation:
The headline number is of course the “seasonally adjusted” figure for initial claims. What the chart shows, in contrast, is the actual number of filings this year to date compared with last year and the average going back to 1967. And the actual number of filings, 511,941, was down in the latest week, not up.
That’s not to say that the employment situation is rosy. The latest number is in fact the second-highest for the corresponding week since record-keeping began; the highest was in 1982. And the total is 58 percent above the corresponding week last year, which, as the chart shows, was actually a little below the long-term average. But there’s no surprise here; the unadjusted figures this year have been running sharply higher than last year since February (with one week in July marking an exception).
Adding in continued claims, which are reported a week later than initial claims, the situation looks pretty bad:
The latest number for this series is 53 percent above the same week last year and, like the initial claims number, is the second-highest on record for the corresponding week, with 1982 marking the peak. And again, filings this year have steeply outpaced last year for pretty much the whole year, so I’m having a little trouble understanding why this is all such a shock to the talking heads on TV.
In both charts, this year’s filings have been following the long-term seasonal pattern quite closely but at an exceptionally high level. If the numbers continue that pattern, it’s not good news for workers, because the seasonal tendency is for layoffs to increase sharply until mid-January. Given the effect the economic slowdown is already having on retailers, car dealers and just about everyone else, it’s not good news for anyone.
The news tickers and financial correspondents are, as usual, reporting the Labor Department’s headline number: 542,000 initial filings for benefits, up from 516,000 the previous week and the highest level since 1992. Pretty shocking stuff, if it were real. Here’s a chart (click to enlarge, right-click to open in its own window) showing the true situation:
The headline number is of course the “seasonally adjusted” figure for initial claims. What the chart shows, in contrast, is the actual number of filings this year to date compared with last year and the average going back to 1967. And the actual number of filings, 511,941, was down in the latest week, not up.
That’s not to say that the employment situation is rosy. The latest number is in fact the second-highest for the corresponding week since record-keeping began; the highest was in 1982. And the total is 58 percent above the corresponding week last year, which, as the chart shows, was actually a little below the long-term average. But there’s no surprise here; the unadjusted figures this year have been running sharply higher than last year since February (with one week in July marking an exception).
Adding in continued claims, which are reported a week later than initial claims, the situation looks pretty bad:
The latest number for this series is 53 percent above the same week last year and, like the initial claims number, is the second-highest on record for the corresponding week, with 1982 marking the peak. And again, filings this year have steeply outpaced last year for pretty much the whole year, so I’m having a little trouble understanding why this is all such a shock to the talking heads on TV.
In both charts, this year’s filings have been following the long-term seasonal pattern quite closely but at an exceptionally high level. If the numbers continue that pattern, it’s not good news for workers, because the seasonal tendency is for layoffs to increase sharply until mid-January. Given the effect the economic slowdown is already having on retailers, car dealers and just about everyone else, it’s not good news for anyone.
Thursday, November 6, 2008
Pink-Slipped
Aficionados of my previous finance blog (http://www.charleston.net/blogs/real_money) will be well aware that I’m not a fan of some of the massaging the government does with its economic statistics, especially seasonal adjustments. I would much rather have real numbers than imaginary ones, and let me take the seasonal factors into account for myself, thank you very much.
Today’s 443-point drop in the Dow Jones Industrial Average is being attributed mainly to very weak October retail sales and gloomy earnings reports and forecasts. All of which is logical. But the decline is being said to have occurred “despite a decline in jobless claims.”
Well, no.
It’s true that the Bureau of Labor Statistics reported today that initial claims for unemployment insurance benefits fell 4,000 in the week ended Nov. 1 from the previous week – on a seasonally adjusted basis. But on a real basis – that is, based on the actual number of filings with state employment agencies – initial filings rose 3 percent.
Here’s the real picture, and it isn’t pretty:
(Click to enlarge)
What the chart shows is total claims for unemployment insurance benefits (that is, initial claims plus continued claims) this year to date vs. last year and vs. the average for the same week for the previous four decades. As is pretty obvious, this year is looking awful. In the latest week, ended Oct. 25 (continued claims are reported a week behind initial claims for some reason), total claims amounted to 3.77 million, the highest number for that week since 1982 and 1.2 million, or 47 percent, higher than the same week last year.
Another way of looking at it: Through the week ended Nov. 1 this year, 16.1 million Americans had filed initial claims for unemployment insurance benefits, 3 million more than in the same period last year, a 23 percent increase. In other words, layoffs this year are running about a fourth higher than last year, which already wasn’t exactly a great year.
So it shouldn’t come as a total surprise that retail sales are down, or that corporate earnings in general are down. The bean-counters at those corporations have prettied up their income statements by cutting costs – i.e., jobs – and the result is that sales have also fallen because those job cuts have led to less buying power on the part of consumers. This is pretty typical of the downside of every economic cycle, but that doesn’t make it any less illogical and self-defeating, nor does it lessen the pain of those people who’ve been tossed out.
Have any of the billions upon billions of our dollars that have been shoveled out to Wall Street and Detroit done any good for the average American? Not yet, obviously.
Today’s 443-point drop in the Dow Jones Industrial Average is being attributed mainly to very weak October retail sales and gloomy earnings reports and forecasts. All of which is logical. But the decline is being said to have occurred “despite a decline in jobless claims.”
Well, no.
It’s true that the Bureau of Labor Statistics reported today that initial claims for unemployment insurance benefits fell 4,000 in the week ended Nov. 1 from the previous week – on a seasonally adjusted basis. But on a real basis – that is, based on the actual number of filings with state employment agencies – initial filings rose 3 percent.
Here’s the real picture, and it isn’t pretty:
(Click to enlarge)
What the chart shows is total claims for unemployment insurance benefits (that is, initial claims plus continued claims) this year to date vs. last year and vs. the average for the same week for the previous four decades. As is pretty obvious, this year is looking awful. In the latest week, ended Oct. 25 (continued claims are reported a week behind initial claims for some reason), total claims amounted to 3.77 million, the highest number for that week since 1982 and 1.2 million, or 47 percent, higher than the same week last year.
Another way of looking at it: Through the week ended Nov. 1 this year, 16.1 million Americans had filed initial claims for unemployment insurance benefits, 3 million more than in the same period last year, a 23 percent increase. In other words, layoffs this year are running about a fourth higher than last year, which already wasn’t exactly a great year.
So it shouldn’t come as a total surprise that retail sales are down, or that corporate earnings in general are down. The bean-counters at those corporations have prettied up their income statements by cutting costs – i.e., jobs – and the result is that sales have also fallen because those job cuts have led to less buying power on the part of consumers. This is pretty typical of the downside of every economic cycle, but that doesn’t make it any less illogical and self-defeating, nor does it lessen the pain of those people who’ve been tossed out.
Have any of the billions upon billions of our dollars that have been shoveled out to Wall Street and Detroit done any good for the average American? Not yet, obviously.
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