Best Financial Markets Analysis Article A couple of items from the "real economy" - we have not had much time to focus on that this week as we lather ourselves in Kool Aid of federal government/central bank fiat money and all the good it does for us chosen folk in the speculator class.

First, yesterday we spoke about the nonsense that is government reporting; it appears the "You can't handle the truth" mantra has taken over the past 20 years in data presentations. Long time readers will know of countless stories we wrote through 2007, 2008 and occasionally in 2009. At some point it becomes self defeating so we just sort of smirk most of the time now, instead of wasting any breath explaining why this or that data point had been fudged. [Oct 2, 2009: True September Unemployment in America Reaches 14%] But as we celebrate the sub 14% 10% unemployment rate that is "not as bad" as the late 70s/early 80s, I thought this story was an excellent example of how our new paradigm of economic reporting does a great job of sweeping reality under the rug. The headline was promising ... well at least the first half of the sentence: Metro Jobless Rates Fall ... as More Workers Drop Out"

Gosh darnit, I had a barrel of green shoots to toss in the air, until I read the entire headline. For newer readers this headline might be confusing but anyone who has been around FMMF for a while knows how diabolically broken our employment calculations are in the country... yet the mainstream media dutifully reports them from rote. Of course the mainstream media is owned by major corporations, whose lobbyists dollars are well in place to make sure the "status quo" remains... don't want to rile up those peasants with reality based information. So one of the many flaws we point out repeatedly about US labor reports is the small fact that if a person is not actively looking for work for 4 weeks, a magical thing happens. They no longer are unemployed. Apologists will mention they went back to school (despite a lack of evidence of surging rolls in our universities) or perhaps were birthing a child (difficult for men to do, at last check - and once again not verified by a surge in baby births).

The reality is there is a massive underclass of (at best) undercounted or (at worst) tossed to the side. When the frustration of countless closed doors cause people to drop out of an active search... boo yah, our unemployment rate falls! Or of course, some of these people get hidden away in other nooks and crannies. Our welfare rolls are surging [Jun 22, 2009: WSJ - Numbers on Welfare See Sharp Increase] and I've read at least 3 pieces the past month (never had time to post on blog) about how disability insurance claims are shooting through the roof. What this means is otherwise (relatively) able bodied people who cannot find work, simply have given up the ghost and filed for long term disability insurance. Of course that costs the taxpayers but on the plus side... our unemployment figures improve from that trend as well. Green shoots!

Let's take a closer look at the AP story I cited above - just remember this data when you hear the headlines blaring about "unemployment rates falling" - devil is in the details. We predicted another jobless recovery due to structural issues in the US and so far so good... this is nothing but a paper (printing) "recovery".

The September unemployment rate fell in 223 of 380 metro areas, or about 59 percent. The jobless rate rose in 123 metro areas, and was unchanged in 34. (sounds great!)
The unemployment rate fell in September in most metro areas for the second straight month, although that's largely because more people gave up on job searches than found new work. (must you ruin this story with details when I'm trying to celebrate?) Once jobless workers stop looking for work, they are no longer counted in the unemployment rate.
"The job market is not recovering at all yet," said Jim Diffley, regional economist for IHS Global Insight. "We're looking at another jobless recovery."
Nationwide in September, 600,000 people looking for work threw in the towel, the Labor Department said earlier this month.

So you can extrapolate that data in September for months earlier this year, and in the future. Please feel free to add them back into the "under 10%" unemployment rate for a dash of reality.

One example at the state level

Several metro areas in Wisconsin illustrate the trend: the state's unemployment rate dropped to 7.7 percent from 8.4 percent in August. (green shoots for those of us who only read headlines!) Three of its cities saw significant improvement in their unemployment rates: Wausau, Eau Claire and Fond du Lac. But the work force shrunk in all three cities, while the state lost about 21,000 jobs. (however, brown shoots for readers of FMMF - I'm sorry for you leading you outside of the Matrix)

Two more example with large metro areas:

In Denver, the unemployment rate fell to 7.1 percent from 7.4 percent in August. Yet the metro area of Denver-Aurora-Broomfield lost more than 6,000 jobs, the Labor Department report said. A drop in its work force of 14,600 people, or about 1 percent, reduced the unemployment rate.
Portland, Ore., also reported what appeared to be a large improvement in its unemployment rate, which fell to 10.9 percent from 11.6 percent in August. While the metro area of Portland-Vancouver-Beaverton did gain a small number of jobs, its work force also shrank by about 1 percent.

So you get the point. Now everything above is reality - that is to discuss with your friends. On Wall Street we will choose to only look at the headline and scream "green shoots" as the CNBC pom pom girls cheer us on. K.I.S.S.: "Unemployment rate dropping = economy improving = buy stocks!"

**************************

Let's turn to another subject... when I began this blog in summer 2007 I was already speaking of the food stamp issue not much thereafter. As we were celebrating a "thriving" economy (based on daytrading homes), we noted 1 in 11 Americans were on food stamps. Quite shabby for the "richest country on Earth"... but not to worry, we've addressed that issue and.... uhh... oh nevermind. We've since shot up in 2.5 years to 1 in 9 Americans. [Jun 8, 2009: 1 in 9 Americans on Food Stamps] Shhhh... keep it a secret, we don't want the "socialists" in Europe to know about these things - keep showing them Hollywood movies so they think we all live like Bradgelina. ("Oh those Americans have a lovely life... what a lifestyle!")

While all the talk was how this economy was a barn buster and creating great wealth, we quietly noted that if you googled "food bank" the story was not quite so pristine. As we wrote nearly 2 years ago (again, as the Wall Street punditry and politicians were in denial) [Jan 18: One Lonely Voice Agrees with Me on Food Inflation]

my friend, try to look at the big picture... its scary. Call your local food bank if you don't believe me, we are already seeing anecdotal stories of large drops in food donations - after all canned beans hold their value more than our disastrous dollar.

Food Bank Shortage in TX

Food Bank Shortage in MI

F ood Bank Shortage in NYC

Food Bank Shortage in Washington DC

Food Bank Shortage in Pittsburgh

Food Bank Shortage in New Hampshire

Food Bank Shortage in Minnestota

Folks, I could do every state if I wanted... you get the picture - go run a check via Google. And it's going to only get worst as the economy worsens.

We also have noted over the past year, Walmart saying they see a huge rush of grocery purchases around "pay periods" (whether that comes from actual work, unemployment checks, food stamp card debited, etc). In English this means people are literally living paycheck to paycheck, and cannot by minor items... such as food, in part of that space between pay periods. [Dec 26 2007: Target Shoppers Turning into Walmart Shoppers]

Food retailing consultant Bill Bishop, of Willard Bishop Consulting, said Costco's decision shows how pervasive the pressure on consumers has become. He said more and more grocers are seeing their sales peak and fall based on when assistance benefits are distributed.

But as we know in American system has been hijacked to serve the people who run the banks, not those who stand in the lines at the banks; food or otherwise. [Feb 20, 2009: NYT - Newly Poor Swell Lines @ Food Banks Nationwide] [Nov 14, 2008: Wall Street Journal - A Run on (Food) Banks] And if you dare raise your voice you (a) are a socialist and (b) do not understand American corporate socialism free market capitalism.

Anyhow, as our "recovery" rolls on, the situation on Main Street continues to .... evolve. I am always looking for canaries in coal mines for nuggets of truth. We like truth, although others call truth "pessimism". This story on Costco (COST) - they who cater to the "upper middle class" or above - now rolling out food stamps nationwide certainly looked like a little birdie to us. Certainly we must expect "Cash for Whole Foods Market" stimulus coming out of Congress by early 2010, no? Even Costco executives were shocked by the response....

Costco Wholesale Corp. said Wednesday that it will start accepting food stamps at its warehouse clubs nationwide after testing them at stores in New York. It's a big about-face for a retailer that has catered to bargain-hunting but affluent shoppers, and it's a sign of the grim reality facing retailers and their customers.
The number of Americans relying on government food subsidies to eat recently hit a record 36 million.
Company officials said they had doubted many customers would use food stamps but it turned out new members said they were joining precisely because the company accepted the assistance program.
Because about half of Costco's customers are small businesses and the rest tend to be more affluent than shoppers at traditional grocery chains, Galanti said, executives had assumed there wouldn't be much response to it accepting food stamps but realized that assumption may have been wrong.
"Certainly this economy was a wake-up call," Galanti recently told investors. "It is not just very low-end economic strata that are using these (who) typically don't have purchasing power."
Most users no longer receive stamps, but instead carry the value on a card that can be swiped at checkout much like a bank debit card. That makes it easier and more discrete for shoppers and speeds the checkout and reimbursement processes for retailers.

Now isn't is wonderful that our leaders are trying to do everything in their power to "reflate" the US economy, causing even higher prices for us all, as wages stagnate? Clearly a sensible policy - rather than letting prices fall to a point where actual demand meets supply and "relatively affluent" shoppers at Costco are not forced into the food stamp program. I know - I have some hair brained ideas.

In summary, I apologize bringing you these news items, after all it's a recovery [Dec 15, 2008: The Economic "Recovery"] as deemed by the stock market (which knows all) and our newly minted positive GDP figure! So after you read this entry, I'd ask you take the red pill, quickly forget it ever happened, and collect $200 as you pass GO. Of course that $200 shall come from government... [Jun 5, 2009: 1 in 6 Dollars of Income Now Via Government; Highest Since 1929]

By Trader Mark

http://www.fundmymutualfund.com

Mark is a self taught private investor who operates the website Fund My Mutual Fund (http://www.fundmymutualfund.com); a daily mix of market, economic, and stock specific commentary.

See our story as told in Barron's Magazine [A New Kind of Fund Manager] (July 28, 2008)

© 2009 Copyright Fund My Mutual Fund - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Comments

Post Comment (Moderated)

Subject:

Name:

E-mail address (will not be published):

Comment:

(Note Commenting Issue: If after Submitting you are returned to the Main Index Page then due to site caching your comment has not been accepted. Solution - Click the Browser Back Button to the article page and Press PAGE REFRESH (you should see the message "You are not authorized to carry out this operation") Now re-enter your comment (ignoring the notice) - If all's well then you will remain on the article page after submitting, a moderator will check and authorise the comment. Alternatively EMAIL to comments @ marketoracle.co.uk , quoting the article number.

The Market Oracle is a FREE Financial Markets Forecasting & Analysis web-site.
(c) 2005-2009 MarketOracle.co.uk (Market Oracle Ltd) - Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted. Any and all information provided within the web-site, is for general information purposes only and Market Oracle Ltd do not warrant the accuracy, timeliness or suitability of any information provided on this site. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We do not give investment advice and our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to enter into a market position either stock, option, futures contract, bonds, commodity or any other financial instrument at any time. We recommend that independent professional advice is obtained before you make any investment or trading decisions. By using this site you agree to this sites Terms of Use. From time to time we promote or endorse certain products / services that we believe are worthy of your time and attention. In return for that endorsement and only in the cases where you purchase directly though us may we be compensated by the producers of those products.