Friday, January 8, 2010

Morning Update/ Market Thread 1/8

Good Morning,

Equity futures are down on the unemployment report which came in much worse than expected. Below is a snapshot of the overnight action in the DOW and S&P:

The dollar fell hard on the release, bonds rose (hmmm, could that be by design?), gold rose and oil fell.

I have to laugh because I watched this supposed expert on CNBS yesterday at lunch time convinced that there would be 100,000+ jobs created! Well the headline number is -85,000 jobs and 10% unemployment rate. This headline number is much worse than expected, well below the bottom of the range and the zero number that was the consensus. However, the consensus of the household survey was that the rate would rise to 10.1%, instead it held steady.

From a technical standpoint, I would have probably preferred a rosy report and a spike to really draw in the last remaining bears. Sorry to be a cynic, but there are definitely games galore being played in the markets, very little of what we see can be taken at face value in my opinion. So, this report is cold enough to not cause a spike and warm enough not to cause collapse. Ahhh, just right if your goal is to keep confusion and the deception running…

Not seasonally adjusted U-6 jumped from 16.4% to 17.1%. Seasonally adjusted U-6 rose from 17.2% to 17.3%. Note the December ’08 not seasonally adjusted U-6 of 13.5%. It has risen 27% in the past year, that’s quite a year over year increase, a number I’m sure you won’t be reading or hearing on CNN.

Here’s the entire report:

December Employment Report

Interestingly, they revised November’s numbers all the way to positive 4,000 from the prior report of -11,000. Oh boy, we were saved and didn’t even realize it, lol! The fervor put into these numbers is ridiculous. They definitely cause people to take their eyes off the real ball that is driving it all right now, and that’s debt.

At any rate, here’s Econoday’s first cut at it:
Payroll jobs finally turned positive with today's employment report but the problem is that it was in revised November data. Markets quickly looked past the gain in November as December fell back significantly. Nonfarm payroll employment in December fell 85,000, following a revised gain of 4,000 in November and a revised fall of 127,000 in October. For the latest month, the consensus had forecast a rise of 10,000 in payroll jobs. November and October revisions were down 1,000 net for the two months.

From the household survey, the unemployment rate was unchanged at 10.0 in December. Today's report includes household survey data reflecting annual revisions to seasonal factors. November had originally been estimated at 10.0 percent and was unrevised. For December, the market had anticipated an uptick to 10.1 percent.

Wage inflation in December was unchanged as average hourly earnings rose 0.2 percent and also matched the market forecast. The average workweek was steady at 33.2 hours in December.

The economy is in recovery but it is still a jobless recovery. Productivity will be up in the fourth quarter and that will be good for near-term profits. But without a healthy consumer sector, the profits picture is not so rosy. On the release this morning, Treasury yields eased, equity futures declined, and the dollar slipped.

LoL, there’s that old “jobless” recovery line of bull again. Those unwilling to consider debt saturation will never figure out why each time the paper economy cycles upwards the real economy is left to suffer. Each cycle producing a larger disconnect between false paper statistics and the real world production of goods and services.

Frequent reader, Joe, dug a little deeper in to the household survey and found that it is a “disaster.” Here are the numbers he found, they are astonishing:
Here are some year over year stats first:

In December 2008, there were 235.035 million working-age adults. In December 2009 there were 236.924 million, an increase of 1.889 million in a year. During the same period of time, the size of the labor force (those actually looking for/holding a job) decreased from 154.3 million to 152.6 million, a drop of about 1.7 million. This creates a gap of about 3.6 million people who are working-age but who either can't or won't find a job. About 3 million new jobs would need to be created just to be at the same employment/population percentage we were at a year ago. That would be break even. [about 250,000 per month]

Actually employed working-age adults dropped from 143.3 million in Dec of 2008 to 137.95 million in Dec 2009. A drop of 5.35 million working people in one year.

In month over month terms, things look pretty bad. The number of employed people dropped by 1.1 MILLION from November to December. The number of people who dropped out of the labor force (not looking for work any more) increased by 1 million.

Combine this with the stories yesterday about the colossal increase in number of people on emergency unemployment in the last month, and you have an employment mess on your hands.

Wow, Joe. More than 1 million dropped out of the work force in one month and amazingly they are able to hold the unemployment rate steady at 10%. Amazing what seasonal adjustments and changes to their procedures can accomplish at covering up.

Here's John William's chart, it will automatically update with the latest figures. Note that his rate is now just under 22%, but may have gone over once this updates:

Chart of U.S. Unemployment

While I'm on Shadowstat's site, let's take a look at the money aggregates. Wow! What was M3 is plunging and is now NEGATIVE year over year. The smaller aggregates are plunging as well, but still up on a year over year basis:

Chart of U.S. Money Supply Growth

Wholesale trade is released at 10 Eastern.

Yesterday’s action produced potential topping hammers on most of the indices. It was yet another small move on the McClelland Oscillator, the third in a row. Expect a large directional move. With this report, severely overbought short term stochastics, overbought and divergent daily and weekly stochastics, a weekly MACD that is rolling over despite rising prices, a historic divergence of price and volume, the highest stock valuations in the history of mankind, new highs seen only at major tops, bullish percent indications only seen at major tops, why heck, the direction ought to be up.

And with funny money and mark to fantasy still supreme in the banking sector, there is no doubt they can make that happen if they so desire. Just borrow money from the Fed (create it) and buy up one another’s stock. See, it’s simple to have a roaring economy, you unemployed simpleton, you.

LOL, seriously, I would expect today’s move to run further than most think because of the small changes on the McClelland. Next week is options expiration already, so don’t get too excited until you see support fall. The small rising wedge I’ve been tracking will break at about 1,125, and that occurring will signal that a correction of some magnitude has begun. The current pivot is 1,133, next support is 1,107.

The following was from last month, but the headline rate and game have not changed…

The Unemployment Game Show