* * *
The September establishment survey showed a 248K job
gain, but that was the seasonally maladjusted, preliminarily guesstimated
version which will be revised in October and November, and then re-benchmarked
several more times in the coming years. So let’s take a pass on the enthusiasm
with respect to this fleeting monthly delta and consider a couple of trend
points evident in this morning’s release — data points which aren’t going to
get revised away and which actually provide some fundamental insight about the
actual “employment situation” and the true condition of the U.S. economy.
* I KNOW, FOLKS... I'M BEATING A DEAD HORSE. EVEN
WORSE... I'M ASKING YOU TO CONCENTRATE... TO THINK... TO CONNECT THE DOTS. (I'M
A VERY BAD MAN...)
* WHAT CAN I TELL YA? YOU SHOULD KNOW THIS STUFF. YOU
SHOULD UNDERSTAND THIS STUFF. I'M HOPING AND PRAYING THAT VIA REPETITION...
SOME OF THIS STUFF WILL STICK!
My favorite number is right at the top of the BLS table
and it’s 155.9 million. That is the civilian labor force number for September
and it compares to 154.9 million reported for October 2008 - way back when the
financial crisis was just erupting.
The reason that rather tepid gain of 1 million labor
force participants over the course of six years is important is that during the
same period...
* DURING THE SAME PERIOD...
...the working age civilian population (over 16 years)
rose from 234.6 million to 248.4 million - or by 14 million in round terms.
That’s right... the labor force grew by only 7% of the
gain in adult population.
That explains, of course, why the labor force
participation rate of 66.0% back at the time of the crisis has plunged to a
36-year low of 62.7% in September. (Or to put it another way, the
employment-to-population ratio of 59% last month compared to just under 62%
six years ago and 64.2% in the year 2000.)
* I KNOW... NUMBERS... TRYING TO MAKE SENSE OF THEM MAKES
YOUR HEAD HURT! WELL, MAN UP! TAKE TWO ASPIRINS AND CONTINUE READING!
Needless to say, that huge 500 basis point decline in the
true jobs ratio is dramatically more important than the monthly jobs delta — even
if the later did trigger a run-the-stops burst by the robo traders within
seconds of the release.
* THE MARKET REACTION I GET. WHAT I DON'T GET IS THE
DOLLAR STRENGTHENING OVER THE LAST SIX MONTHS. (JUST AN ASIDE, FOLKS; JUST THINKING
OUT LOUD.)
The fact is, the plummeting rate of employment among the
adult population means that the effective rate of taxation on labor hours
worked has risen sharply, and will continue to do so as the baby boom ages.
* CONCENTRATE, FOLKS... CONCENTRATE... AND KEEP READING!
So you don’t have to be a raving supply-sider to realize
that a rising tax rate on labor - expressed as either current taxes or future
debt service as far as the eye can see - is not a formula for the kind of
perpetual earnings growth that is being capitalized by today’s bubblicious
stock markets...
(*PURSED LIPS*)
...and that’s especially true in a world crawling with
cheap workers and massive excess production capacity stimulated by 14 years of
financial repression and ultra-cheap capital by the world’s central banks.
* IT'S REALLY NOT ALL THAT HARD TO FOLLOW, FOLKS. THE
REASON THEY DON’T GENERALLY TEACH THIS STUFF IN SCHOOL ISN'T BECAUSE IT'S TOO
"HARD" TO UNDERSTAND; NO, IT'S BECAUSE THEY (THE OLIGARCHY) WANT THE
POPULATION TO BE AS BLIND, DEAF, AND DUMB AS POSSIBLE! (SIT DOWN! SHUT UP! DO
AS YOU'RE TOLD!)
* THEIR TACTICS WORK PRETTY WELL, TOO.
The single most important number in today’s report is 102
million, which is the rounded sum of adults either not in the labor force or
unemployed, and it amounts to 41% of the adult population. Stated differently,
that’s the number of adults who do not contribute to current production and
must be supported either by family breadwinners or the state - and nowadays
especially the latter.
Indeed, when these trends for prime age workers (25-54
years) are viewed, the case is even more compelling. The employment ratio for
that group is at 1982 levels - a ratio that prevailed when the female labor
force participation rate was still climbing strongly. On a gender-adjusted
basis, the prime age employment ratio has never been as low as it has remained
since the end of the Great Recession.
* THIS IS THE "NEW NORMAL," FOLKS. THIS IS WHAT
OBAMA PLANS TO HAND OFF TO OUR CHILDREN AND THEIR CHILDREN.
Among other things, these dismal employment ratio numbers
tell you why the Wall Street patter about PE multiples being at or below
historical norms is so wrong-headed. The capitalization rate for the American
economy should be falling because the dependency burden faced by workers and
entrepreneurs is soaring at rates never before witnessed.
* EXACTLY...!!!
Going back to September 2000, for example, there were
only 76 million adults not in the labor force or unemployed, and that
represented just 35.8% of the adult population of 213 million. This means there
has been a 26 million gain in the number of adults not working - not working even
part-time - during that 14 year period.
About 10 million of that gain is accounted for by retired
workers on social security - a figure which has risen from 28.5 million to 38.5
million during the interim. But where are the other 16 million?
* BUT WHERE ARE THE OTHER 16 MILLION...?!?!
The answer is: on disability (+ 4.5 million), food stamps
(+ 25 million), survivors and dependents benefits, other forms of public aid,
living in parents’ basements... or [perhaps barely surviving] on the streets.
* OBAMA'S AMERICA, FOLKS! READ AND WEEP... THAT IS... IF
YOU GIVE A DAMN.
There should be no mistake about the implications of
these baleful trends as once again reinforced in today’s “jobs Friday” report.
They do not represent merely a social problem or the fact that Washington’s
fiscal calamity is going to get steadily worse in the years ahead. They also
embody an endemic economic problem and staggering challenge to the Keynesian
money printing regime now incumbent in Washington.
* STILL WITH US...? STILL READING...? GOOD! YOU'RE
LEARNING THINGS! AND IF BY CHANCE YOU ALREADY KNEW EVERYTHING STOCKMAN IS
REPORTING... WELL... GOOD FOR YOU AND CONSIDER THIS SIMPLY RETENTION STUDY!
(*GUFFAW*)
In the first place, the massive monetary experiment since
2000 - which has seen the Fed’s balance sheet grow from $500 billion to $4.5
trillion... or by 9X - has not caused macro-economic performance to improve. The
employment ratio has plunged; full-time breadwinner jobs have actually shrunk;
total labor hours employed have been stagnant; real GDP has grown at only 1.8%
annually for 14 years (compared to 4% annually between 1956 and 1970), and real
net capital investment is 20% below its turn of the century level.
* AND HE HASN'T EVEN MENTIONED THE SUPPOSED NON-EXISTENT
BUT IN REALITY RAGING INFLATION THAT IS DIRECTLY EFFECTING THE LIFESTYLES OF MOST
OF US!
* FOLKS... EVEN THOSE OF YOU WHO COULDN'T CARE LESS
WHETHER MILK (OR GAS) IS $2-GAL. OR $4-GAL. OR WHETHER HOT DOGS AND GROUND
CHUCK ARE $2 LB. OR $4 LB. MUST RECOGNIZE THAT THE EXTRA COSTS BEING BORNE ARE
COMING OUT OF SOME OTHER BUDGET COMPARTMENT!
* TAXES... TOLLS... FEES... SURCHARGES... COLLEGE
COSTS... INSURANCE COSTS... EVERYTHING IS GOING UP... EXCEPT SALARIES FOR THE
AVERAGE AMERICAN. THE RICH ARE GETTING RICHER. THE POOR ARE GETTING... WELFARE.
AND THE MIDDLE CLASS? WE'RE GETTING HOSED!
What is really embodied in today’s report is more
evidence that America’s dependency ratio is still rising and that the already
crushing burden of the welfare state will weigh ever more heavily on an economy
that is visibly failing as measured by any of the fundamental trends of
performance. Indeed, it is well to recall that even today - after what the
clueless occupant of the White House claims as 10 million new jobs when 90% of
that number, in fact, represents “born again” jobs relative to the 2007 peak - there
are 110 million Americans living in households receiving means-tested benefits
and 158 million in households that receive transfer payments of all types.
(*JUST SHAKING MY HEAD*)
* HOW DO WE DIG OUR WAY OUT OF THIS ONE, FOLKS? I'M OPEN
TO SUGGESTIONS.
Yet as the burden of taxation and public debt resulting
from these trends weigh ever more heavily, it leaves the mad money printers
resident in the Eccles Building stranded in an impossible corner. Unless they
wish to destroy the monetary system and keep money market rates at zero
forever, they will have to normalize interest rates. And rising interest rates -
eventually 300-400 basis points at minimum - on top of rising taxes do not
amount to a formula for booming growth.
(Or even any meaningful economic growth at all.)
In that context, capitalizing S&P earnings at 20X
reported profits on the eve of the coming storm is a fool’s errand. And you can
look it up.
What really counts for growth and stock market value
beyond the day trader’s horizon is all right there in the September jobs report
- even if they didn’t mention it on bubblevision.
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