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Nouriel Roubini's Global EconoMonitor

RGE Monitor – Weekly Roundup

Check out all the great contributions that were published during the past week on RGE’s Nouriel Roubini’s Global EconoMonitor, RGE Analyst’s EconoMonitor, Finance & Markets Monitor, Peterson Institute for International Economics Monitor, Global Macro EconoMonitor, U.S. EconoMonitor, Emerging Markets Monitor, Asia EconoMonitor, Latin America EconoMonitor and Europe EconoMonitor.

On Nouriel Roubini’s Global EconoMonitor, the RGE Analysts focus on expected growth and inflation dynamics to determine the course of monetary policy actions in advanced and emerging market economies.  Please read Global Monetary Policy Outlook.

 

On the RGE Analyst’s EconoMonitor, Katharina Jungen takes the twentieth anniversary of the fall of the Berlin Wall as an opportunity to review the progress of economic convergence between the former German Democratic Republic (GDR) and West Germany.  Katharina notes that due to its economy’s lack of dynamism, not only has the East been lagging behind its western counterpart, but it is also set to be overtaken by other post-communist economies.  In order to revive the catching-up process, which has practically been on hold for the past decade, Katharina argues that a redirection of financial aid from social security transfers towards supporting innovation in small firms is key.  Please read Germany, 20 Years On: Goals Reached?

In Another Bleak U.S. Labor Market Report, Arpitha Bykere and Christian Menegatti argue that U.S. job losses remain high despite easing in the recent months. Amid continued job losses, record low work hours and subdued labor compensation, consumer spending will remain weak, especially as the impact of policy stimulus fades. Sluggish hiring will keep the unemployment rate high for some time and contribute to the slack in the economy.

In The Zombies are Coming… Again, Christian Menegatti and Elisa Parisi-Capone revisit the number and names of zombie banks in the U.S. as of Q2 2009.

In Revisiting 2009 Predictions for Equity Markets Monika Brown reviews and analyzes analyst predictions made in January 2009. A divergence in opinion between the large institutional managers and independent managers is noted.

 

On the Finance & Markets Monitor, Joseph Mason asserts that the discussion draft for financial reform released by the Senate Banking Committee doesn’t contain much that is worthwhile, and Mason argues that reform requires serious inquiry and understanding into the causes of the crisis; otherwise it is just a political exercise in the run-up to mid-term elections. Read In Crisis Inevitably Breeds Leviathan.

In Senate Bill Would Break-Up TBTF Banks, Barry Ritholtz takes a look at a bill that is gaining ground in Congress that would “break-up” big banks, addressing the too big or too interconnected to fail problem.

 

On the Peterson Institute for International Economics Monitor, Anders Aslund discusses the complaints that the CIS countries are having with Russia including Russia’s lack of respect for its neighbors’ territorial integrity, gas policy, trade conflicts, and financial issues.  Russia’s reputation as an unreliable and unpredictable partner is contributing to its increasing isolation on the world stage.  See The Leader of the CIS Is Lonely and Weak.

In India: New Letter and Spirit, Arvind Subramanian looks at the radical views of Jairam Ramesh, minister of state for the environment, as India struggles with its identity as an international player with the emergence of the G-20.

 

On the Global Macro EconoMonitor, James Kwak points out that productivity growth, which is often quoted in the media and is almost always referring to labor productivity, can be all over the map in the short term and especially during recessions; productivity often falls during a recession as output falls faster than companies lay off workers and spikes afterward because output is growing right while companies are laying off workers.  However, in the long term, productivity growth depends on thing like improvements in technology and business processes.  Read Productivity and Layoffs.

In If the Fed is Looking to Inflate Away Problems, What Should Asia Do? Edward Harrison presents a piece by Andy Xie who suggests that China and Japan should form a new free trade agreement.

In Parallels Between US and Japanese Economies Edward Harrison presents a clip of Marshall Auerback elaborating on the similarities between the U.S. and Japanese economies pointing to the misallocation of fiscal resources, crony capitalism, zombie banks, and low interest rates.

 

On the U.S. EconoMonitor, Fabius Maximus shows how ridiculous it is that most Americans vote their pocketbooks in elections to Congress and the Presidency.  See A Note about the US Economy and the Recent Elections (Yes, We’re Nuts)

In The Fed is Already Transparent, Mark Thoma presents a piece by Anil Kashyap and Frederic Mishkin who are worried that the Ron Paul proposal to audit the Fed will “cripple policy making.”  Thoma adds that the people are frustrated that they don’t feel the Fed is acting on their behalf, and Thoma offers some solutions to make the people feel that they have more influence.

In Inflation Expectations Continue to Inch Higher, James Picerno points out that it appears that the financial system has stabilized and the battle against deflation seems to have been won, but that doesn’t make it any easier to predict precisely how the Fed will act going forward.

Also on the U.S. EconoMonitor:

Unemployment Rate Illusion by Edward Harrison

Understatement of the Year: “Recovery Hampered by Unemployment” by Barry Ritholtz

 

On the Emerging Markets Monitor, Antonio Carlos Lemgruber recognizes the seriousness of the dollar party and recommends keeping an eye, as usual, on what is happening in the U.S.  Lemgruber sees these “negative” signs occurring as soon as the very beginning of 2010.  Read The Dollar Party.

 

On the Asia EconoMonitor, Anoop Singh wrestles with the mystery of Asian firms that save but don’t invest and households that hold wealth and don’t consume, which is contributing to global imbalances and constraining its long-term growth potential.  Singh offers corporate governance and financial sector development as vital clues, which present interesting policy implications.  See Asia’s Corporate Saving Mystery.

In The IMF on Asia’s Recovery and its Sustainability, Claus Vistesen argues that Asian countries “hold little promise in terms of providing a decisive engine for rebalancing through sustainable growth in domestic demand which exceed investment rate, and therefore is cautious on the overall sustainability of the recovery in Asia.

 

On the Europe EconoMonitor, David Smith reports that in the UK, the Bank’s new forecasts are more upbeat and predict higher inflation, while unemployment figures continued the very encouraging pattern.  See Bank Moderately Upbeat – Good Unemployment News by David Smith

In The Dollar As A Funding Currency, Edward Hugh discusses carry trades and exit strategies.

63 Responses to “RGE Monitor – Weekly Roundup”

GuestNovember 13th, 2009 at 1:47 pm

Just doing a little survey here- how many of you bloggers are planning on cutting back on holiday gift giving??? I know I am, just wondering who else might be doing the same?Hide reply Reply to this comment By Novice on 2009-11-13 12:53:36My family will probably try to limit Christmas gifts to a few “very good gifts”. Our spending won’t be as high as in the good old bumper years, but we will be willing to purchase a few good items.PeteCAHide reply Reply to this comment By PeteCA on 2009-11-13 13:02:09I will be… Dont need anymore foreign made crap – anythign i buy will be 100% US!Reply to this comment By MM CA on 2009-11-13 13:46:54

SoftwarengineerNovember 13th, 2009 at 4:31 pm

Gold May Be $1100/OzBut let’s be real, where’s the hoards of Americans lining up to buy gold? How would most of them pay for it, even if they wanted it as a hedge against teh falling dollar?I have noticed jewelry at discount rates lately though, like 70% off sales for gold items….especially buying on places like eBay auctions from bankrupt jewelers’ inventory.Example: I weighed a 14K gold [that’s 50% gold and 50% silver] chain for $78 at Walmart a week or two ago and believe me, if gold’s $1100/oz Walmart didn’t pay for the gold chain jewelry labor….LOLAnd this was Walmart’s regular price….not on sale. BTW, no one was shopping for jewelry the 30 min I stood there….the two sales girls were begging me to buy.Will cash for gold give you $78 for the Walmart gold chain….Hades no, I bet you’d be lucky to get $20….Oil goes up 250% in about a year due to dollar deflation, yet gas maybe went up like 25-35% [excess supplies are going through the roof too].Its been documented recently that grocery stores are lowering prices to attract a dwindling customer base, as I’ve noticed even Discount Wharehouse prices can be beat by more expensive stores in my neighborhood (i.e., Albertson/Safeway/FredMeyer/QFC) sales prices….beaten badly too. I guess we’re eating less and/or more cheaply with this recession/depression with no end.So where is this alleged inflation monster? In our heads?China Has a Smoke and Stimulus Mirror Economy Right Now TooIts documented in Fortune magazine (11/29/2009) and basically states China can’t continue their stimulus debt economy either, its following America over the debt cliff too.You shut their stimulus debt off in that nation and their horrifying unemployment problem today would double or triple….imagine the angry mobs in that nation that already can’t feed its people.Fortune magazine (11/29/09) has an article called “Investing” and it states:“…56% of unemployed will never get rehired…”And you think they’ll pay ‘em more in devalued dollars as American unemployment SNOWBALLS at that rate? Remember too, the 10.2% excludes the ones who’s unemployment benefits ran out, college kids looking for work and the minions that have settled for minimum wage type jobs so they could eat [I estimate about 50,000,000 in America, adding them all together to date].Fortune magazine stated its a good time for employers to shop for high quality employees now, with the chronic snowballing of unemployed [all professions, degreed or not] in America….but do you really believe they’re gonna pay ‘em more, after the lucky few get hired…LOLIts All Change AMS in 2009The college degreed unemployment spiked 85% earlier this year:More degreed unemployment news in part:“…The total number of unemployed increased by more than 50 percent from January 2008 through last month, but the number of jobless Americans 55 or older jumped 70 percent, according to new Labor Department numbers released Friday.And for people with college degrees, the number rose even more sharply, by nearly 85 percent.The numbers confirmed a trend that job cuts are moving up the age and educational ladders, said Andrew Stettner, deputy director of the National Employment Law Project….”the rest of the URL:http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2009/02/06/national/a152330S41.DTLMainstream media and the colleges would never admit it, doesn’t matter that much anymore if you have a degree or not…..actually, I hear nursing jobs with lower paid LPNs are safer than higher paid RN positions….LOL

MM CANovember 14th, 2009 at 7:44 am

Goos Stuff SE…. i hear nurses in California are hearing that if new health insurance reform goes through- they are expecting cutsin salries, especially private and for profit hospitals….No Jobs is everywhere at every age and education level….

GuestNovember 14th, 2009 at 8:31 pm

So where is this alleged inflation monster? In our heads?Surprisingly, this article pretty much answers this very question.Inflation is being exported abroad, from the US. It’s brewing in China (and to Brazil and India too?). When it pops there, unlike in the past, it’ll have dire consequences. Chickens come home to roost…

MorbidNovember 14th, 2009 at 10:23 am

Perhaps my behavior is misguided but our family stopped giving gifts at Christmas many years ago. Why? Because we all began to feel the commercialization of this religious holiday offensive – sending the wrong message at every psychic level one can imagine. So we don’t celebrate that “pagan” commercialized way anymore. We gather together as family for mutual support and love – with good conversation, meals and whatever else may want to enter.Wouldn’t it be interesting if our entire country did this as a sign of our discontent with the way things are being handled in Washington and as a sign of our solidarity with all those who are unemployed and who cannot afford to perpetuate this “money” driven idea of what the meaning of the Christ event is for mankind.

GuestNovember 14th, 2009 at 8:59 pm

Christ wasn’t born in December (if at all). This was a hijacking of the pagans’ holiday: common usurpation of anothers’ cultural traditions (meant to squeeze them out).But yes, commercialization got to an absurd level. Repulsive even to those like me who aren’t followers of myths…

PeterJBNovember 15th, 2009 at 12:28 am

In the early Roman days, the vent was known as Saturnalia and as our modern Xmas, the events were much the same; stressful but back in those days the slave(s) got the day off and were allowed to express themselves verbally and freely: now that would really be a bi%$h, Oui? And you think that you are badly off? Hah!Happy Saturnalia,Ho hum

PeteCANovember 15th, 2009 at 10:07 am

The Bible records that Christ was born “while shepherds tended their flocks in the fields”. Therefore, this was most likely the Spring time in Palestine at that time – when sheep were giving birth to lambs. So your comment is quite right … it was not December. The early historians who tried to work out the time of Jesus’ birth missed by several months. Subsequently, Christians adopted a practice over the years (many years later) of giving a simple, humble gift during the season of cheer. And YES – this exploded into rampant commercialization which is quite inconsistent with the original intent of the holiday.PeteCA

PeterJBNovember 13th, 2009 at 6:32 pm

Pondering “leadership” imposed anarchy, er fascism:Former chief IMF economist Simon Johnson points out that the U.S. is intentionally weakening the dollar in order to bail out the too big to fails:To bail out our banks, we need cheap money, and this implies some inflation. To finance our current account deficit, investors need to think they are buying inexpensive assets from us. Everything points to a cheaper dollar…Short-term rates (controlled by the Fed) will stay low, while long-term rates (market-determined and affected by trust in our Treasury and Fed to keep the value of dollar strong) will rise as people fear their dollar investments will be debased. There is no doubt that both the Fed and the Bank of England know what is happening. The spread between short- and long-term rates (known as the “yield curve”) will rise, and banks will benefit; would-be home buyers and people with overdrafts or outstanding credit card balances pay more, while savers get little.This is how the public pays for the past losses of our financial system.We don’t have to do this again and again. We could start by changing our financial system from the roots. We need to credibly remove the promise to bail out our large banks each time they fail. This means forcing them to hold more capital, dividing them up so they are smaller, and then letting them fail when they make poor gambles.The Treasury’s past and current close connections to Goldman Sachs, Citigroup and other major investment banks illustrate how our own doom machine functions. We need to break up these “banks” so they are small enough to fail, and also ensure that no bank, regardless of its connections, is able to demand that the Fed and the Treasury support its solvency in the future to prevent financial collapse.Break ’em up.”http://www.zerohedge.com/article/weak-dollar-and-too-big-failsComment: this time around ‘it ain’t gonna work’!Keywords: trust | our | theirHo hum

MorbidNovember 14th, 2009 at 5:59 am

Yes, and a class of folks “paying” for this are the retired in America. The fellow who services our heating system told me yesterday that his customers who have been retired about 15 years are having a hard time. Because it seems they are savers who rely on interest from their nest eggs to sustain them. Well, that “interest” now goes to the assholes who caused the problem.Obi and company are going to experience blowback because of their criminal elite policies. Vote them all out.

GuestNovember 14th, 2009 at 9:02 pm

They took the bait, hook line and sinker, didn’t they?Do what the ruling elite say you should do, pledge allegiance to the State, fight (and die) and you’re be rewarded… Never mind that in the process you’ll be destroying the only thing that really matters, that which really does give you life- the earth.

GuestNovember 14th, 2009 at 12:33 pm

“would-be home buyers and people with overdrafts or outstanding credit card balances pay more”Actually, peopley buy based on approximatly 33% of monthly income going to housing. If long term rates go up, houses prices must come down. The real estate community that sais “now is a good time to buy because interest rate are low” don’t understand or mention that house prices rise due to those low rates!hlowe

FEDupNovember 15th, 2009 at 6:25 am

exactly what is happening: our leaders tell us they want a strong dollar but as Simon Johnson points out, it is exactly the opposite. We are living in a society where the people are always given the wrong information and reasons for govt actions. Only free thinkers and those “not on the take” can sort through the constant stream of “goobleygook” but by then the voice of reason and truth is too little or too late.

PeterJBNovember 14th, 2009 at 4:50 am

Speaking about eating:I believe that the USA has an agricultural system that is totally dependant upon an elaborate food distribution system and ‘Big Farma’ (I just made that term up:).All this for example, unlike China, where 95% of all rice is consumed within 15 km of where it is grown (please note this fact if you Americans’ suddenly get the urge to invade China). Of the issue, you ask?USDA declares half of Midwest as agricultural disaster area…http://www.marketskeptics.com/Gotta keep your eye on the bouncing ball y’allHo hum

MorbidNovember 14th, 2009 at 6:15 am

Isn’t there a threat of the DUST BOWL looming?Haven’t seen much on that aspect lately – that “100” year phenomena.

bNovember 14th, 2009 at 9:00 am

pjb,it’s odd but i saw this sign on someone’s lawnthe other day..” Have Army, will mobilize urge to invade for food and fuel, leave contact info. and directions at mail box.”.i went back yesterday and the sign is still there but it looks as if the graffiti artists have had their fun with it.? you can’t make this stuff up!

MM CANovember 14th, 2009 at 8:24 am

anyone notice Starbucks upped thier prcing anywhere from 10-16% accross the board a few motnsh ago? Well now they have shrunk their “3” different cup sizes by about 7%. So a quick 17-23% increase overall.. point is thier profits may be up, but only because of redcuced costs and a big price increase. 15 cents on a 2.00 cup of joe may nto seem much, but at thier volumes its substantial makeup revenue for declining overall sales.Screw the people who can still buy it is the motto these days, same with health insurance reform…on another note I decided to take the plunge and upgrade some TV’s from the old tube types to flat panel, so i shopped around and decided Costco had the best price and value for Flat panels. so i picked up 3 Vizio 32 inch lcd’s with all the bells and whistles. got them all for 339.00 each. the kicker was California now has a new Electronic Waste collection fees of 16.00 for anyhting under 35 inches and 25.00 for anyhting over 35 inches. this applies to computer laptops, monitors, anyhting with a display. so on top of the increased sales tax of 10% out here in my area they now have this fee. so for $1,037.00 of electroincs i paid 103.70 in tax and another 48.00 in fees for a total of 151.70 in tax/fees. an effective rate of 14%.Bottom line is California is totally killing any recovery chance with all these taxes and fees they now have for everything. add that to state income tax rate of about 8%, federal rate of 15-35%, Medicare and SS rates of 5-8% and there is’nt a lot of purchasing power left. Gas taxes, energy taxes, phone taxes and fees, its all out of control.The thing with Costco is they have a great return and warranty policy on most items and these TV’s came with 2 years Costco warranty and another year when bought with an AMEX card, so if they break within three years, which most likely will happen ill just get them replaced for free. One could actually just break them and get the newest and latest every 2-3years at no cost.i read they expect 242 Billion in “holiday” sales for november and December. slighlty above last year. Bottom line is that is approx $790.00 for every single person (307M) people. there is no way a family of four is going to spend $3200.00 this holiday season.Point being these holiday sales numbers will be one big fabricated lie to show there is a recovery going on. I say it will be BS! i think a more realistic number will be 76 Billion (1000.00 for family of four) to 125 billion ($1600.00 for family of four)http://www.businessinsider.com/chart-of-the-day-traditional-holiday-spending-2009-11Holiday sales will be the great test of our recovery. Wall Street analysts and industry insiders are predicting a mild uptick in sales over last year’s historic loss. The forecast from the International Council of Shopping Centers is for 1% growth and $242 billion, which seems rather conservative.But what if ICSC is too optimistic? The forecasted number is lower than the peaks of 2006 and 2007 but slightly higher than the $239 billion spent during the holidays in 2005. We’re skeptical about the proposition that Americans will spend slightly more this year than they did in 2005. That year unemployment was half of what it is now and median home prices had gone up 13.4%. Are we really ready to spend like we did back then?

GuestNovember 14th, 2009 at 4:34 pm

wuaHAHAHAAA,CNN was talking about Obama and Pelosi White House Spending Orgy. Wow CNN talking about spending orgy.

PeterJBNovember 14th, 2009 at 5:28 pm

Speaking of applied stupidity where stupid is unconstrained by national boundaries, career choice, age, gender, race, colour or creed, et cetera; it’s a type of ubiquitous phenomenon:Nice roundup: Coxe On The Power Of Zero“It isn’t the End of the World.” Just around the corner, riding furiously toward them, are the Four Horsemen of the Apocalypse.)http://www.zerohedge.com/article/coxe-power-zeroAnd moving onto common sense:”Also bolstering gold prices will be the Beast of the East, according to Faber. “China’s demand for commodities [including gold] will go up and up and up,” Faber said, Bloomberg reported.”http://www.dailyfinance.com/2009/11/13/gold-will-stay-above-1-000-an-ounce-forever-says-swiss-dr-doo/Remarkable really, no matter what you do, stupid always remains stupid; a mite like being castrated to become a eunuch er, of the “leadership” cult cum clique.Keywords: stupid | stupid | stupidHo hum

PeterJBNovember 15th, 2009 at 12:06 am

Speaking of the blindman and his finger pointing to http://www.garynull.com/:Some data highlights:Bank of America has spent $14.9 billion to settle 15 cases alleging various charges such as securities violations and mismanagement;Citigroup has spent over $13.9 billion to settle 12 cases alleging various charges including abusive lending practices and involvement in fraudulent activities;Merrill Lynch has spent $12.2 billion to settle cases involving various allegations including negligence and mismanagement of funds;Morgan Stanley has spent over $5 billion to settle 11 cases involving various allegation including failure to disclose material information to customers;Wachovia has spent over $9.5 billion to resolve allegations including misleading investors and conflicts of interest;UBS has spent $19.5 billion to settle 6 cases with various charges including misleading investors.”Isn’t that interesting? Individuals go to jail but corporations that get caught acting under Laws preserved for humans get another chance; another chance; another chance…Well, in Australia the Corporate Chant isIt is more profitable to say sorry,than to ask permission!(Mind you it is the Indian (read: help desk in India that doesn’t say sorry as management in Australia are just not here; they actually say ” this is not an admission of any form of responsibility whatsoever and can only be construed as a “goodwill” gesture on “our” part (after they have gouged their customers of hundred of dollars, they offer ~1% “credit” of the “credit drop” (read: overcharge, scalp, deduction, disappearance, et cetera), to shut you up – and expect you to be grateful!Where are management, you ask?: Who knows? – there probably aren’t any)Ho hum

FEDupNovember 15th, 2009 at 6:41 am

your comment “isn’t that interesting? individuals go to jail but corporations that get caught acting under Laws preserved for humans get another chance; another chance..”Yes, this is the main purpose of the “corporate shield”. It elevates their rights and protections above those of individuals. They discovered a long time ago that it was worth it to make profit with illegal activities knowing if they got caught, their penalty would be to pay back 10% of thier illegal gains-a sweet racket exploited to it’s fullest potential by the financial industry!

MM CANovember 15th, 2009 at 8:24 am

Must Read on NO JOBS! Just like i have been saying and do not think we could hit 13-15% within 2 years.http://globaleconomicanalysis.blogspot.com/2009/11/mish-unemployment-projections-through.htmlMish Unemployment Projections Through 2020 – It Looks GrimInquiring minds are interested in figuring out how long it might take to get back to “full employment” defined as 5%.John Mauldin touched upon this theme in Welcome to the New Normal.John’s analysis stopped short of making actual projections as to when full employment would return, or the detailed path it would take to get there year by year. However, I thank John for providing a nice starting point for discussion.In Scarred Job Market Expected to Weigh on Economy The Wall Street Journal offers this look at how long it would take to return to employment levels before the start of the recession. Please consider the long road back.The Long Road BackClick On Any Chart In This Post For Sharper ImageThe Journal states …”On average, the economists don’t expect unemployment to fall below 6% until 2013″The Journal goes on …”On average the economists — not all of whom answered every question — expect the unemployment rate to peak at 10.2% in February. But even once the employment situation stops getting worse, economists expect recovery to come slowly. “It could take until 2014-15 before we see a 5% handle on unemployment again,” said Diane Swonk at Mesirow Financial.”6% by 2013?!5% by 2015?!Really?Mapping UnemploymentTo map unemployment projections year-by-year from now through 2020 there are a huge number of variables to take into consideration.Factors Affecting Unemployment ProjectionsCurrent Hiring TrendsDemographicsWorking Age Population Growth ProjectionsBoomer RetirementsParticipation RatePart-Time EmploymentDrivers For JobsHousingCommercial Real EstateGlobal Wage ArbitrageOutsourcingDouble Dip RecessionProductivityManufacturingLet’s start our analysis with a look at monthly job growth trends from 1999 through 2009. John Mauldin posted the following chart, I filled in averages and outlined in blue previous recession periods.Monthly Job Growth 1999-2009Chart courtesy of BLS. Annotations by me, numbers are in thousands.The areas in deep blue mark recessions. The last recession ended in November, 2001. The economy shed jobs for the next 21 months. Is there any reason for it to be different this time?At the height of the internet bubble with a nonsensical Y2K scare on top of that, the economy managed to gain 264,000 jobs a month.At the height of the housing bubble in 2005, the economy added 212,000 jobs a month.At the height of the commercial real estate bubble with massive store expansion, the economy added somewhere between 96,000 and 178,000 jobs per month depending on where you mark the peak.Neither the housing boom, nor the commercial real estate boom is coming back. Nor is there going to be another internet revolution. If anything, outsourcing of internet jobs to Asia is likely to remain intense.Finally, consider all the financial engineering jobs, banking jobs etc, that are not coming back.No Genuine Driver For Jobs.The retail sector has massive overcapacity. We do not need more Home Depots, WalMarts, Lowes, Sears, Pizza Huts, Targets, Safeways, etc etc.Commercial real estate is flooded with vacant offices and plagued by falling rents.Housing inventory is enormous.Boomers will be looking to downsize their lifestyles.There is not going to be another internet boom.What about manufacturing? As an imperfect proxy for manufacturing, let’s take a look at light vehicle sales and employment.Motor Vehicle SalesCalculated Risk has this interesting chart of Light Vehicle Sales.Notice the huge recent spike caused by cash-for-clunkers that has since been given back. Are auto sales going back to where they were? I don’t think so? In terms of jobs, will it matter even if they do?The Department of Energy has an interesting chart on Declining Automotive Manufacturing Employment.Those automotive and auto parts jobs are gone for good regardless of whether or not sales increase.Peak Growth In Jobs Is InThe peak growth in jobs, based on an analysis of jobs that are never coming back is clearly in.The internet boom peaked at 264,000 jobs per month in 1999.The housing bubble boom peaked at 212,000 jobs per month in 2005.The commercial real estate boom peaked at 178,000 jobs per month.The next peak will be lower yet.Let’s be generous and suggest 150,000 jobs per month for an entire year at the peak of the next cycle. That is actually exceptionally generous given we have not yet taken into consideration boomer demographics, part-time jobs, the participation rate, and other such factors.Current PicturePlease consider the October 2009 Employment Report including household data, the civilian labor force, the unemployment rate, part-time employment, and trends in the participation rate.Table A Household Data October 2009The civilian labor force is 153,975,000.82,575,000 are not in the labor force.Those base numbers will be used in charts a bit later.Table A-12Table A-12 is where one can find a better approximation of what the unemployment rate really is. Let’s take a lookclick on chart for sharper imageGrim StatisticsThe official unemployment rate is 10.2% and rising. However, if you start counting all the people that want a job but gave up, all the people with part-time jobs that want a full-time job, all the people who dropped off the unemployment rolls because their unemployment benefits ran out, etc., you get a closer picture of what the unemployment rate is. That number is in the last row labeled U-6.It reflects how unemployment feels to the average Joe on the street. U-6 is 17.5%. Both U-6 and U-3 (the so called “official” unemployment number) are poised to rise further although most likely at a slower pace than earlier this year.For the purpose of this post, I will be charting and predicting U-3 the official unemployment number.Table A-5 Part Time Statusclick on chart for sharper imageThe chart shows there are 9.28 million people are working part time but want a full time job. A year ago the number was 6.8 million.Note the trend in part-time work. It is inching up. In a recovery it should be headed down quickly. The reason is employers increase the hours of part-time workers before they start hiring full-time workers.The key take-away from this series are the millions of workers whose hours will rise before companies start hiring more workers.Table B-2. Average weekly hours of production and nonsupervisory workers on private nonfarm payrollsTable B-2 is another measure of part-time employment. Companies will expand workweeks to 40 hours and even add a bit of overtime before hiring new employees.The current workweek is down to 33 hours. That represents a lot of people who will not be hired as the economy picks up steam.Population EstimatesAccording to the Census Bureau Population Estimates we are going to add about 2.5 million working age (16 years old and up) citizens a year from now until 2020.The numbers varies slightly year to year. I used an estimate of the average summing up the buckets from 16 to 100+ for the years in question and rounding the result.Civilian Participation RateThe participation rate is a measure of how many of those aged 16 and older are working vs. the entire pool of those 16 and older.The participation rate soared from 1960 to 1990 as women started working and two wage earner families became the norm as the following table shows.Year Men Women1960 83.3 37.71970 79.7 43.31980 76.3 51.51985 76.3 54.51990 76.1 57.5As boomers head into retirement the participation rate should be expected to decline.The participation rate is also affected by those wanting work but not actively seeking work. The difference between U-5 and U-3 in Table A-12 above shows the effect of a falling participation rate.In theory, economists claim the participation should rise as the economy recovers on grounds that people who want jobs but stopped looking will again start looking.Theory is one thing and practice is another as the following charts show.Participation Rate 1950-PresentCivilian Participation Rate DetailSo much for theory about participation rates rising as a recovery starts.If history repeats, expect the participation rate to keep declining after this recession ends. Then because of demographic trends of boomer retirement, I expect the participation rate to continue declining through 2020.Table A-1 Employment StatusTable A1 shows the civilian noninstitutional population (those over 16 not in prisons), the participation rate, unemployment rate, employed, those not in the labor force, and those who want a job. Those numbers form starting numbers for the charts below.Unemployment ClassificationsPeople are classified as employed if they did any work at all as paid employees during the reference week; worked in their own business, profession, or on their own farm; or worked without pay at least 15 hours in a family business or farm. People are also counted as employed if they were temporarily absent from their jobs because of illness, bad weather, vacation, labor-management disputes, or personal reasons.People are classified as unemployed if they meet all of the following criteria: They had no employment during the reference week; they were available for work at that time; and they made specific efforts to find employment sometime during the 4-week period ending with the reference week.

GuestNovember 15th, 2009 at 9:49 am

and you wonder why? because of rising healthcare cost, wage cost, federal/local tax to push those small business out of business. the new healthcare bill and higher tax will push more business out of business.

GuestNovember 15th, 2009 at 6:50 pm

I’d like to see what exactly these small businesses do. I’d wager that a high percentage of them are engaged in pretty meaningless activities, activities that are NOT part of the future, activities that would be dying anyway.How man espresso stands, auto detailing, pet sitting and other businesses do you think were out there that people can no longer afford?Taxes are the least of the issues. It’s a basic restructuring of things such that no governments, no corporation(s)or other are going to stop the drift back down the technological ladder. But it’s how some cover their butts, by distracting from the real fundamentals, pointing at/blaming others…

bNovember 15th, 2009 at 9:46 am

http://globaleconomicanalysis.blogspot.com/2009/11/obama-wants-spending-cuts-he-should.html….U.S. defense bill would pay Taliban to switch sidesIn one of the most insane proposals ever, U.S. defense bill would pay Taliban to switch sides.The defence bill President Barack Obama will sign into law on Wednesday contains a new provision that would pay Taliban fighters who renounce the insurgency, Senate Armed Services Committee Chairman Carl Levin said on Tuesday.Under the legislation, Afghan fighters who renounce the insurgency would be paid for “mainly protection of their towns and villages,” Levin said.Does anyone think paying people to switch sides can possibly work? What happens as soon as we stop paying them?Hell bells, is there any accounting of where the money goes in the first place? This proposal is beyond idiotic…”We just marched in we can just march home”Please consider Ron Paul on Forbes: Be Prepared For The Worst; On Larry King Discussing Michael Moore”We just marched in we can just march home. Besides, I will win this argument. We are bankrupt and cannot afford it.””Let’s quit this militarism around the world. We are in 130 countries and 700 bases around the world and we cannot sustain these. It’s pumped out by the left and the right. There is conservative Keynesianism and liberal Keynesianism which always fails and gives us the financial crisis we are in.”Ron Paul has it correct.Mike “Mish” Shedlock

GuestNovember 15th, 2009 at 9:52 am

this Obama seriously has some thinking problem. this retard is running country into ground and still got nobel prize?

Pecos BankerNovember 15th, 2009 at 10:24 am

Do you think it might be starting to dawn on people to factor in the military into their economic calculations? But how can this be? Has Roubini ever discussed it? I thought that topic is off limits.

bNovember 15th, 2009 at 3:23 pm

pb,only a fool responds to rhetorical questions, solet me continue. yes, it is time. how do we, didwe, go on without accounting for the financial, human and spiritual losses associated with theactivities termed military. my position is thatwe shrink from these considerations in directproportion to the loss of value in our lives.we are obviously wasting the value of this lifeneedlessly.?.speaking of following the bouncing balls, christand proper accounting of war expenditures…and gift giving.every year my wife asks me what i want for christmas.i tell her i want to realize and manifest the mysteriouslinkages of the trinity in spirit and express thisrealization as the monad ( metaphoric harmonic? ) of christ consciousness.is that too much to ask? she doesn’t laugh, she justgets pissed off and says “really?”. “but what doyou want?” … seriously..the 25 th, dec. marks three days in the tomb,(womb?) deathafter the 21 st, the winter solstice. rebirth of the son/sun, in relation to the mother/earth, begins. they just mixed up the resurrection andthe birth, which is fine as it projects, in the confusion, the every person, every moment nature ofemerging consciousness. a stray thought..so now we have all the maleficent, malfunctioningmaladaptive’s in receipt of bailouts or payoffs with no assurances or commitments to do anything other than what they have been doing to destroy everything productive, creative or life enhancing..this can’t last long. the future won’t wait..we need to incorporate reality into our world view, all of it, or we have no hope of comprehension, no consciousness. this is thestate of mind of the elite, preferred ignoranceat the level of humanity so they don’t have toasses any responsibility to themselves.ignorance may not be bliss but it is preferableto debilitating guilt and self loathing. the relief of comfortable illusions is temporary..i should shut up.

GuestNovember 15th, 2009 at 6:55 pm

Perhaps it’s been the plan all along, to completely destroy this country. Afghanistan, after all, is the boneyard of governments, the final nail in their coffins.I’m just not thinking that we’re being run by fools. They want all restrictions out of the way so that they can plunder without oversight. It’s pretty simple when you view man’s ugly tendencies, what he does with power. But as many right-wingers want, government to be shrunk such that it can be washed down the bathtub’s drain, they will not have, as once flushed down the drain government won’t be there to bolster their robbery.

bNovember 15th, 2009 at 10:09 am

http://globaleconomicanalysis.blogspot.com/2009/11/bair-bank-bailout-not-good-thing.htmlSaturday, November 14, 2009Bair: “Bank Bailout NOT a good thing”; Pension Benefit Guaranty Corp (PBGC) Bailout ComingPBGC $22 Billion In The HoleInquiring minds are reading the PBGC Annual Management Report for Fiscal Year 2009The Pension Benefit Guaranty Corporation (PBGC) ended fiscal year 2009 with an overall deficit of $22 billion, according to the agency’s Annual Management Report submitted to Congress today. The result compares with the $11.2 billion deficit recorded at the previous fiscal year-end on September 30, 2008.In an interim report to Congress in May, the agency showed a record deficit of $33.5 billion, based on unaudited numbers at the fiscal year mid-point on March 31.The main factors for the year-over-year decline in the single-employer program’s net position included a $10.6 billion charge due to an unfavorable change in interest factors, $4.2 billion in losses from completed and probable terminations, a $3.9 billion charge due to passage of time, and $383 million of administrative and other expenses.The Passage Of TimePlease note that $3.9 billion of the deficit is due to “passage of time”. You can’t make this stuff up, it’s too bizarre.Also note that the deficit was $35 billion in March. Hmmm. Guess what happens if the stock market goes down again…..comment: repeat..bair-bank-bailout-not-good-thing.bair-bank-bailout-not-good-thingbair-bank-bailout-not-good-thingbair-bank-bailout-not-good-thing..they gave the money to the wrong people, perhaps?

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