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Abysmal June Employment Figures Warn of Great Depression Ahead

Economics / Great Depression II Jul 10, 2011 - 06:00 AM GMT

By: Robert_McHugh_PhD


Best Financial Markets Analysis ArticleThe June Jobs numbers were horrendous, just like May's were, telling us the QE2 strategy of the Fed has failed, and the Central Planners' policy to keep taxes high, and not significantly cut them or rebate them has failed. There is so much focus on making sure the rich get properly taxed that true economic stimulus is paralyzed. QE was false economic stimulus. Trillions of new dollars were printed, however there was no effective delivery system in place to move that money to households, where the real economy begins. Wall Street got the cash, bid up the price of commodities with that cash, and inflation rose. That was about it.

The Bureau of Labor Statistics within the Labor Department reported Friday, July 8th that in the month of June, only 18,000 net new jobs were created in America. That is a disgrace. It means our Central Planners' policies have failed miserably. They drove the budget deficit up, drove the debt ceiling up, yet created no net jobs over the past several months. You see, the 18,000 figure is a lie. It is false. The true number was much worse. The CESBD Birth/Death adjustment in June was 131,000. In other words, the Labor Department took a wild assed guess that 131,000 jobs probably were created by new businesses they think started up in June. This is a pure guess. Plus, anyone who has ever started a new business knows folks take no pay or deep pay cuts at the start. The truth is, if you back out the 131,000 phony guesstimate CESBD figure, we find that the economy actually lost 113,000 Jobs in June. May's figure was revised lower to 25,000 new non-farm payroll jobs being created from what was originally reported as 54,000. But again, if you back out the 206,000 CESBD make pretend jobs, May saw a decline of 181,000 Jobs. So, for the two months May and June, the economy lost 294,000 Jobs. Then, if you consider we need to create 150,000 new jobs each month just to keep pace with population growth, this means the economy fell short of breakeven by 594,000 jobs just in May and June. This is alarming. Not only are we not creating new jobs to get those who are unemployed back to work, but the situation is worsening.

The BLS reported Friday that the number of unemployed persons increased 545,000 since March 2011 as part of their Unemployment number report, which is in the ballpark of the above non-farm payroll analysis. The unemployment rate rose to 9.2 percent in June, and is up 0.4 percent since March 2011.

There were 14.07 million folks out of work that meet the BLS definition of being out of work. There were an additional 2.7 million good folks who looked for work in the past 12 months, but did not look in the past four weeks, so were excluded from the BLS unemployment figure, many of whom were too discouraged to keep looking. Then, on top of this there were 8.6 million folks who were stuck in a part-term jobs (ie. very likely, low paying hourly work) involuntarily due to their hours being cut back, or they cannot find full time work. That totals 25.4 million underemployed folks in June, or 16.5 percent.

Wealth redistribution is not the answer, a communistic welfare state where the government provides all, is not the answer, which is part of the reason Greece is in such a mess. Government jobs, government handouts, and taxing the rich is not the answer. Giving trillions of dollars to Wall Street is not the answer.

The answer is to get cash, lots of cash, into the hands of households, to kick start this economy. Real stimulus for a prospering economy begins at the household level, trickles up to small businesses, trickles up to large corporations, trickles up to Wall Street, all the while the local, state and federal governments benefiting from increased tax revenues every time a dollar is passed up the economic food chain. If you kill off all small creatures on earth, there will be no food for large carnivorous creatures, and the large creatures will also die. The household must be fruitful and multiply so the rest of the economy can live and prosper.

We need a massive tax rebate to every household, with significant tax cuts across the board, to get this economy on the right track. The deficit created from the tax rebate will be more than made up with increased tax revenues from a growing and prosperous economy that will inevitably result after the tax rebates to households occurs. If we were to rebate $50,000 to every household, for example, or two years of income taxes, and require them to use half the money to pay off debt, a lot of great things would immediately occur. First of all, households would start spending with the extra money. This would create increased revenues for small businesses selling goods and services to households. This would incent small businesses to hire workers, creating millions of new jobs. Small businesses would have to boost their supplies of goods available to household consumers, so would approach large corporations and buy goods and services from them. Large corporations, seeing demand for their products and services grow, would approach Wall Street Investment Banking firms for capital to expand. On every sale at every level, the local, state and federal governments would receive increased tax revenues at low tax rates, which would balance deficits, and provide funds for infrastructure improvements which would again, create more jobs and boost the economy. Households (consumers) account for 70 percent of GDP in a healthy economy. Small businesses account for 70 percent of new job creation in a healthy economy. The system works when allowed to. But the key is, the Central Planners have to have the guts to enact a huge income tax rebate to every household to get things kick started, and on the road to recovery.

The byproduct is that by requiring half the income tax rebate to be used to pay down debt, every credit institution in America sees their risk-based capital levels improve dramatically, strengthening the entire financial system. Non-performing loans would be reduced as bad debts are repaid. Household balance sheets would strengthen as debts are reduced, meaning more households would qualify for loans. Further, credit institutions would become flush with cash, increasing their appetite to lend. They get a redo. They get more good loans and get to erase bad loans.

A massive income tax rebate is the solution, the answer, to avoiding the Great Depression which is coming if this policy is not adopted, and soon.

The next chart is warning a Great Depression is coming. We see a massive stock market topping pattern which should complete over the next 9 to 12 months. Time is running out. A significant tax rebate could change this dour outlook.

We cover a host of indicators and patterns, and present charts for most major markets in our International and U.S. Market reports, available to subscribers at 

If you would like to follow us as we analyze precious metals, mining stocks, and major stock market indices around the globe, you can get a Free 30 day trial subscription by going to and clicking on the Free Trial button at the upper right of the home page. We prepare daily and expanded weekend reports, and also offer mid-day market updates 3 to 4 times a week for our subscribers.

by Robert McHugh, Ph.D.

Robert McHugh Ph.D. is President and CEO of Main Line Investors, Inc., a registered investment advisor in the Commonwealth of Pennsylvania, and can be reached at

The statements, opinions, buy and sell signals, and analyses presented in this newsletter are provided as a general information and education service only. Opinions, estimates, buy and sell signals, and probabilities expressed herein constitute the judgment of the author as of the date indicated and are subject to change without notice. Nothing contained in this newsletter is intended to be, nor shall it be construed as, investment advice, nor is it to be relied upon in making any investment or other decision. Prior to making any investment decision, you are advised to consult with your broker, investment advisor or other appropriate tax or financial professional to determine the suitability of any investment. Neither Main Line Investors, Inc. nor Robert D. McHugh, Jr., Ph.D. Editor shall be responsible or have any liability for investment decisions based upon, or the results obtained from, the information provided. Copyright 2008, Main Line Investors, Inc. All Rights Reserved.

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24 Oct 11, 07:55
What happened to your DOW 1,000 call?

What happened to you "Dow 1,000" call you made back in the spring of 2009? With all the bears on board now, this market is heading higher.

Please note, the "broadening top" has a 50-50 proposition AT BEST of playing out if you look back at historical patterns.

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