Financial, Real Estate, Stock Markets Trends and Current Affairs

CNBC has as a headline “US Shares Seen Higher on Jobs Data Boost”, a very interesting (and rather bullish) take on the state of affairs given what I see as the actual situation. If you recall, I had a much less sanguine perspective last May, as illustrated in US Employment Hopium Smoking Idealists? An interesting contrast to the MSM title above comes from a much smaller publication (Hawaii News Daily) which ran this story a few days ago:

 Did you know that a smaller percentage of Americans are working today than when the last recession supposedly ended?  But you won't hear about this on the mainstream news.  Instead, the mainstream media obsesses over the highly politicized and highly manipulated "unemployment rate".  The media is buzzing about how "163,000 new jobs" were added in July but the unemployment rate went up to "8.254%".  Sadly, those numbers are quite misleading.  According to the Bureau of Labor Statistics, in June 142,415,000 people had jobs in the United States. In July, that number declined to 142,220,000. That means that 195,000 fewer Americans were working in July than in June. But somehow that works out to "163,000 new jobs" in July. “

And another interesting snippet...

... the "employment rate" gives a much clearer picture of what is actually going on in the economy.  The employment to population ratio is a measure of the percentage of working age Americans that actually have jobs.  When it goes up that is good.  When it goes down, that is bad.  In July, the employment to population ratio dropped from 58.6 percent to 58.4 percent.  Overall, the percentage of working age Americans that have jobs has now been under 59 percent for 35 months in a row.

The following is a chart of the employment to population ratio in the United States over the past 10 years....

The gray shaded bar in the chart represents the last recession as defined by the Federal Reserve.  As you can see, the percentage of working age Americans with a job dropped sharply from nearly 63 percent at the start of 2008 to a little above 59 percent when the recession ended.

But the "employment rate" kept on dropping even further.

It finally bottomed out at 58.2 percent in December of 2009.

Since that time, it has stayed very steady.  It has not fallen below 58 percent and it has not risen back above 59 percent.

This is very odd, because after ever other recession since World War II this number has always bounced back strongly.

But this has not happened this time.

In essence, it is starting to look like 4 percent of the working age population of the United States has been removed from the workforce permanently.

The good news in all of this is that things have at least not been getting any worse over the last couple of years.  Even though things have been bad, at least we have had a period of relative stability.

The bright guys over at RGE Monitor see it this way:

In July, the U.S. Bureau of Labor Statistics (BLS) employment report showed payrolls grew by 163,000 after rising by a downward revised figure of 64,000 in June;

This is a stunt designed to create a hopium-induced false sense of euphoria. Let's throw some common sense on this. The Bullshit Labor Statistics report show payrolls grew by 99,000 (yes, that's right! Last months report was revised downward, as it usually is on average). 

May job creation was revised slightly higher. Private payroll rose 172,000 after gaining 73,000 in June, while government payrolls fell 9,000; a piskup in services sector jobs led gains. The household survey showed the unemployment rate at 8.3% as both employment and the labor force dropped, and the broader U-6 unemployment measure increased to 15%...  In late July, initial unemployment claims increased 8,000, while the four-week moving average slightly edged down- in line with the improvement in job creation numbers in the July employment report. However, in July, the Conference Board survey of online job demand showed demand falling by 153,600, after showing modest growth in the second quarter.

So, what's the deal with the general state of the economy? 

U.S. Q2 2012 GDP Growth Falls 25% Amidst the Most Aggressive Fiscal and Monetary Stimulation This Country Has Ever Seen As Durable Goods Expenditure Declines

As per RGE Monitor: According to the advance estimate of Q2 2012 GDP by the U.S. Bureau of Economic Analysis (BEA), q/q growth was at a seasonally adjusted annualized rate (SAAR) of 1.5%, after growing at 2% in Q1 2012. The data show a slowdown in the growth rate of real final sales, to 1.2% q/q after rising 2.4% q/q in Q1 2012. The underlying data show a continued weakening in government spending and substantial deceleration in both business fixed structures and fixed residential investment. The data leave U.S. annual growth in 2011 at 1.8%. Clearly, the painfully slow recovery has been insufficient to heal the labor market.

U.S. Consumers: Confidence Continues to Decline in July; Personal Finances and Job Market View Pessimistic

The Reuters/University of Michigan survey of consumer sentiment index in July declined for the second consecutive month, with the index falling to 72.3 from 73.2 in June, but up from 72.0 in the early-July preliminary survey (its lowest level since December 2011, from 73.2 in June 2012). While sentiment around current conditions improved in the July survey, expectations dipped and consumers’ assessment of the labor market and personal finances were negative. The Conference Board Consumer Confidence Index in June fell further to 62.0 from 64.4 from May, registering a decline in the expectations index and painting a mixed picture about the labor market.

U.S. Consumption: Retail Sales Decline for Third Consecutive Month in June

Nominal retail sales in June showed a stronger 0.5% m/m decline, held lower by motor vehicles and parts, building supplies and gasoline spending, while core retail sales—excluding gasoline, autos and building supplies—dipped 0.1% m/m. 

 And on the topic of retail...

Although most see and are starting to admit that we have never really left the 2008 recession, share prices have been called "Cheap" by many "so-called" financial experts despite the S&P flirting with an all time high and Europe preparing to plunge the world back into a concerted global recession (again). Think about the gigantic swath of the S&P that exhibited negative revenue growth but whose shares still rose on higher earnings. They are being rewarded for bringing LESS money into the door. Combining the increasing weakness of the US consumer with the increasing revenue weakness of the US corporation and the upcoming (nearly guaranteed) defalationary shock out of Europa and near all time highs in the stock markets, and you have a recipe for a put parade, no???!!!

I had the BoomBustBlog team carry out a scan of consumer discretionary companies in 'Retail' industries. We started with 102 stocks and whittled them down to 17 based on revenue, operating profit and net profit trend. We also looked at their P/E mutliple, business model and a couple of other more subjective aspects such as analyst expecatation and YTD performance. The same was performed for consumer discretionary companies in the 'Consumer Durable' category. We have one very strong candidate for the consumer/retail short of the year crown, and subscribers (click here to subscribe) can download the preliminary here  Preliminary Analysis
(Consumer Discretionary).

In the meantime and in between time, here are examples of companies that made it to the shortlist but failed to get the crown!

Abercrombie & Fitch and Aeropostale. Two mall stocks and you know how I feel about those malls as Europe pops...

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By the way, these are two popular mall stores, and you know how I feel about those malls as Europe pops...

PEI 2nd Quarter Earnings Review - Why Aren't Analysts Asking The Hard, Or Even The Obvious Questions???

Much Of The Developed World Prints Today, But Where's The Wealth? Real Value Of Risk Assets Continue To Plunge!

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