World News!

Egypt

• In "is it still February" news, thousands of Egyptians gathered in Cairo's Tahrir Square to demand that the nation's military dictatorship implement promised political changes more rapidly than has been done so far.

Libya

• The US House of Representatives has voted to deny funding for any direct help to the Libyan rebels - including weapons, training, and advice.  A related proposal to stop US participation in the NATO airstrikes was defeated.

Sweden

• Surgeons in Sweden have performed the world's first synthetic organ trnsplant, implanting a laboratory-grown windpipe into a 36-year-old cancer patient.

Syria

• The Syrian government has expressed outrage over Ambassador Robert Ford's trip to Hama, claiming that it "is obvious proof of the implication of the United States in the ongoing events".  Now, while it may be a stretch to say that the "armed terror gangs"[1] are being sponsored by the US, the official position of the US State Department is that the purpose of his trip is "to make absolutely clear with his physical presence that we stand with those Syrians who are expressing their right to speak for change."  So they may have the vague makings of a point.

United Kingdom

• When hell is full the dead will walk the earth, and the city of Bristol will be prepared with a top secret contingency plan.  The contingency plan also states that city employees "fully qualified in zombie handling may qualify for partial exemption and accreditation in the training for handling pirate outbreaks and for spotting the difference between genuine hot air balloons and evil, giant, floaty space aliens."

United States

• With Rupert Murdoch and News Corp all over the news right now, Reuters has prepared a helpful graphic showing exactly what businesses that company owns.
• Unsurprisingly, yesterday's meeting between President Obama and House and Senate leaders about the debt ceiling produced no results.  The Republican leadership proposed a six to eight month extension, while the President held out for a deal that would last at least through the November 2012 elections.
• Fitch Ratings has downgraded Minnesota's credit rating from AAA to AA+, citing the state's use of nonrecurring revenue sources to cover budget shortfalls, and the fact that the state has been shut down since July 1.

[1]  Have they actually committed acts of terror?  Well, some of them might have blood-borne diseases.  Lots of blood flies around when you're getting savagely beaten by the police, so the Syrian government would probably make the case that they're engaging in bioterrorism.

Commissioner's Statement on the Employment Situation News Release

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The latest Commissioner's Statement on the Employment Situation (http://www.bls.gov/news.release/pdf/jec.pdf) was issued today by the Bureau of Labor Statistics. The text is below.
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Advance copies of this statement are made available to the press under lock-up conditions with the explicit understanding that the data are embargoed until 8:30 a.m. Eastern Daylight Time.

Statement of

Keith Hall
Commissioner
Bureau of Labor Statistics

Friday, July 8, 2011

Nonfarm payroll employment was essentially unchanged in June (+18,000), and the unemployment rate, at 9.2 percent, also changed little. Over the past 2 months, job growth has slowed markedly. Employment rose by an average of 215,000 per month from February through April of this year, compared with an average of 22,000 for May and June.

Mining employment continued to expand in June, with a job gain in support activities for mining (+7,000). Employment in professional and technical services also continued to increase (+24,000). The industry has added 245,000 jobs since reaching a recent low in March 2010. Leisure and hospitality employment edged up over the month (+34,000).

Employment in manufacturing was flat in May and June, following 6 months of gains that totaled 164,000. Employment in temporary help services changed little in June and has shown little net growth so far this year. Most other private-sector industries showed little or no change over the month.

Employment in government continued to trend down (-39,000) in June. Federal employment declined by 14,000. The number of jobs in both state government and local government continued to trend down over the month and has been falling since the second half of 2008.

Average hourly earnings of all employees on private nonfarm payrolls were down by 1 cent in June to $22.99. Over the past 12 months, average hourly earnings have risen by 1.9 percent. From May 2010 to May 2011, the Consumer Price Index for All Urban Consumers (CPI-U) increased by 3.4 percent.

Turning now to measures from the household survey, the unemployment rate was 9.2 percent in June, and 14.1 million
people were unemployed. Since March, the unemployment rate has risen by 0.4 percentage point, and the number of unemployed persons has increased by 545,000.

The employment-population ratio declined to 58.2 percent in June. Among the employed, the number of individuals working part time who preferred full-time work was essentially unchanged at 8.6 million.

The labor force participation rate was little changed, at 64.1 percent, in June. Among those outside the labor force-- persons neither working nor looking for work--the number of discouraged workers in June was 982,000, down from 1.2 million a year earlier. These individuals were not looking for work because they believed no jobs were available for them.

In summary, nonfarm payroll employment in June was essentially unchanged for the second consecutive month. The
unemployment rate, at 9.2 percent, was 0.4 percentage point higher than in March.

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Employment Situation

Brace yourself.  No matter how this comes out, this will be big today.

 

This, of course, is the Employment Situation report.  It's that time of the month again, the time when the Bureau of Labor Statistics releases the official figures on how many jobs were created in the previous month, what the official unemployment rate is, and so on and so forth.  This is a huge and closely followed report, because employment and new jobs are a strong indicator of economic health, which is measured in GDP.

 

If you recall, the figures for May were not just sad, they were brutally depressing.  The analysts were looking for 170,000 new nonfarm jobs, and we added only 54,000.  The unemployment rate increased to 9.1%, representing 13.9 million people unemployed and looking for work - and 44.6% of those people had been out of work for more than 27 weeks.  The number of people employed part time for economic reasons declined slightly to 8.5 million and the number of individuals marginally attached to the labor force fell to 2.2 million[1], putting the effective unemployment rate at 16.1%.

 

The good news was that the average workweek increased to 34.4 hours, and average hourly earnings increased 0.3%.

 

Looking towards the June figures, the Econoday-surveyed analysts are mildly optimistic.  They're looking for 105,000 new jobs, for unemployment to drop to 9.0%, for the rate of increase in hourly earnings to drop to a 0.2% increase, for the average workweek to remain unchanged, and for private payrolls to increase 125,000.[2]  To find out how right they are, let's turn to The Employment Situation -- June 2011, where we see...

 

Wow.

 

If you haven't clicked that link yet, sit down first.  Listen to some mood music.

 

The Bureau of Labor Statistics is reporting that only 18,000 new nonfarm jobs were added in June - missing expectations by 87,000.  They describe unemployment as "little changed", rising "only" 10 bps to 9.2% (yes, also missing expectations).  That represents 14.1 million people unemployed and looking for work[3], with 44.7% of them having been out of work for 27 weeks or more.  An additional 8.6 million people were employed part time for economic reasons, and 2.7 million people were marginally attached to the labor force[4].  All of that puts the effective unemployment rate at 16.53%.

 

In the wake of all that, people probably aren't too worried about the other predictions.  But let's check them anyway.  Average hourly earnings decreased - not "slowed to a lower rate of increase" but actually decreased - by 1%, and the average workweek decreased 0.1 hours to 34.3 hours.

 

Finally, and here's the icing on the doom cake, last month's total new nonfarm jobs was revised from the original 54,000 down to only 25,000.

 

"It takes a worried man to sing a worried song

"It takes a worried man to sing a worried song

"It takes a worried man to sing a worried song

"I'm worried now, but I won't be worried long."

 

[1]  To recap:  "employed part time for economic reasons" means "working a part time job because they can't find anything better", and "marginally attached to the labor force" means "would like a job, but isn't looking any more because they've given up hope of finding one".

[2]  In other words:  they're expecting the private sector to add 125,000 new jobs and the public/nonprofit sector to lose 20,000 jobs.  Which seems fairly consistent with the Challenger report data.

[3]  Yes, in the world of the BLS, 200,000 more people out of work is "little changed".

[4]  Meaning, if you're playing the "bad news bingo" home game, the number of people employed part time for economic reasons increased by 100,000 last month, and the number of people marginally attached to the labor force increased by 500,000.

World News!

China

• Thanks to worries about corruption, China is giving serious consideration to a significant reduction in spending on their "seven new strategic industries plan".

European Union

• The European Union raised interest rates for the second time this year, bringing their benchmark interest rate to 1.5%, in an effort to slow above-target inflation.  The tightening was not seen as a surprise.

Israel

• The state of Israel is - unofficially but actually - boycotting a senior UN official who wrote a report critical of the level of force used against pro-Palestinian demonstrators.
• Hamas has arrested Adrian Barakat, a hairdresser, for violating a year old law making it a criminal offense for men to cut women's hair.

Japan

• The Japanese plan to have nuclear safety tests has drawn criticism from citizens and local governments, who fear that the lack of a schedule and the fact that no unchecked plant may be restarted will cause rolling blackouts the continue through the year.

Mexico

• The United States and Mexico have finally settled disputes over the access of Mexican trucks to US highways.  Under the terms of the settlement, the US will institute a pilot program allowing the trucks access to do cross-border deliveries (but not deliveries inside the United States), and there will be electronic monitoring of the trucks to see how long they are in service.  In return, Mexico will lift multiple tariffs on US products.

United States

• In "this is how freedom dies" news, the TSA has issued a warning that terrorists are considering surgically implanting explosives into people to avoid current screening methods.  There is no indication of any immediate plots, but this will most likely lead to new - more invasive - scanning procedures.
• Treasury Secretary Geithner is reported to be meeting with a small team of Treasury officials to look for options to avoid default if the debt ceiling is not raised by August 2.  Options said to have been discussed are whether the US Constitution would allow the President to ignore Congress and continue to issue debt, and whether the government has the legal authority to prioritize payments.
• President Obama is set to meet with Republican congressional leaders today to resume budget talks.  The President is likely to offer to accept cuts in Social Security and Medicare in exchange for increased taxes.
• That meeting may not go so well, given that House Majority Leader Eric Cantor stated "I can tell you one thing, that we are united as Republicans to say now is not the time to raise taxes" while being interviewed on MSNBC this morning.

First Time Jobless Claims

My goodness.  Is it Thursday already?  Amazing how time flies on a short week.

 

Anyway, if it's Thursday, it's time for First Time Jobless Claims.  If you recall from last week we missed expectations by 8000, with initial claims for the week ending 6/25 coming in at 428,000.  Actual initial claims came in at 403,284 (up 8,998), and the total number of people claiming benefits in all programs for the week ending 6/11 came in at 7,511,613.

 

The Econoday-surveyed analysts, refusing to be daunted, are once again calling for "only" 420,000 initial claims for the week ending 7/2.  This is the same figure they've predicted for 6/25, 6/11, and 5/28, so its starting to look less like a consensus estimate and more like "even a stopped clock is right twice a day".  Nevertheless, let's see if this is one of those two times.

 

Looking at the report, it appears that I was somewhat unfair to those Econoday analysts.  We do start off by noting that the initial claims for 6/25 have been adjusted upwards from 428,000 to 432,000.  Next, we see that the advance figure for seasonally adjusted initial claims for the week ending 7/2 is 418,000, beating expectations by 2000.  The actual initial claims for the same week, however, are up 13,514 to a level of 416,798.  And the total number of people claiming benefits in all programs for the week ending 6/18 fell 52,052 to a level of 7,459,561.  We'll have to wait until tomorrow, when the Employment Situation report comes out, to get a sense of how many of those people that stopped claiming benefits did so because they got back to work.

FAO Food Price Index

The FAO is the Food and Agriculture Organization of the United Nations.  Quoting from their web site, they act "as a neutral forum where all nations meet as equals to negotiate agreements and debate policy.  FAO is also a source of knowledge and information.  We help developing countries and countries in transition modernize and improve agriculture, forestry and fisheries practices and ensure good nutrition for all.  Since our founding in 1945, we have focused special attention on developing rural areas, home to 70 percent of the world's poor and hungry people."

 

So that's who they are.  One thing they do is track, through the FAO Food Price Index, the "monthly change in international prices of a basket of food commodities".  This FFPI is further subdivided into five sub-indices, which are:

• The Meat Price Index, which tracks the average of of two different poultry products, three bovine meat products, three pig meat products, and one ovine meat product.
• The Dairy Price Index, which tracks butter prices, cheese prices, casein prices, SMP and WMP prices.
• The Cereals Price Index, which tracks 9 different types of wheat, 1 type of maize[1], and 16 types of rice.
• The Oils and Fat Price Index, which tracks 11 different oils.
• The Sugar Price Index, which tracks - wait for it - the price of sugar.

May's results were mixed.  the FFPI in total fell 1% (to a level of 232), which is still 37% higher than it was in May 2010.  The Meat Price Index rose 1.1%, the Dairy Price Index barely changed, the Cereals Price Index fell 1%, the Oils and Fat Price Index barely changed, and the Sugar Price Index fell 10%.

 

Moving on to the June report, the news is somewhat less encouraging.  The FFPI rose 1% (to a level of 234), putting it 39% higher than it was in June 2010 and only a few points away from its all-time high of 238 (reached in February 2011).  Drilling in to the sub-indices:

• The Meat Price Index hit a level of 180, barely changed from May (poultry was up 3% to set a new record, but pig meat declined). 
• The Dairy Price Index hit 232, also barely changed from May.  Skim milk powder and casein prices increased 5% but whole milk powder prices fell 3%.  Butter and cheese remained stable.
• The Cereal Price Index hit a level of 259, down 1% from May (but up 71% from June 2010).  Most of the improvement is credited to better European weather and Russia's plans to lift their wheat export ban.
• The Oils and Fats Price Index hit a level of 257, barely changed from May.
• The Sugar Price Index hit 359, up 14% from May.  Most of the price increase is driven by short-term demand vs. tight availability.

[1]  You probably know this, but "maize" is also known here in the US as "corn".  Once upon a time, "corn" was a generic term for any sort of grain

World News!

Canada

• Although the official end does not come until tomorrow, Canada's 2800 troops in Afghanistan have begun to return hone.

China

• China's central bank raised interest rates another 25 basis points today, bringing the target one-year lending rate to 6.56% and the benchmark one-year deposit rate to 3.5%.
• The World Trade Organization has ruled that Chinese export quotas on nine minerals are a violation of agreements China made when it joined the WTO in 2001.  The WTO now expects China to bring those exports into line with international requirements.

Germany

• The German parliament, despite having a standing policy of not selling arms to repressive states, is debating whether or not to sell 200 tanks to Saudi Arabia.

Japan

• The Japanese government has approved a second emergecy budget, this one for 2 trillion yen (about $24.7 billion)), which will be used to help fund new housing for the tens of thousands displaced by the earthquake/tsunami/nuclear meltdown, and to support businesses hurt by the disaster.  The budget will be presented to parliament for approval later this month.
• Japan is getting ready to conduct safety tests on all 54 of it's nuclear reactors (only 19 of which are currently still operating).

Portugal

• Moody's Investors Service has officially downgraded Portugal's sovereign debt rating to Ba2, a rating officially known as "non-investment grade" and unofficially known as 'junk".  The ratings agency cited concerns that Portugal will not be able to meet its deficit reduction targets.
• The response of the European Commision to the Portuguese downgrade was to question the rationale for the downgrade, and to call for an end to "the oligopoly of the ratings agencies" and for measures to limit their influence.

Challenger, Gray & Christmas Job Cuts Report

Challenger, Gray & Christmas - and stop me if you've heard this before - is an "outplacement consulting firm".  This means that, when a company is getting ready to "outplace" employees, they get hired to try to soften the blow and make the company look better by prepping them for their newly unemployed status, and by coaching them on how to look for work.  As a result they get a lot of insight into current layoff plans, and they use that insight to create a monthly report discussing these layoffs.

 

The report has one particularly interesting feature.  It reflects planned layoffs announced during a given month, but not actual job losses for the month.

 

May saw employers announce plans to cut a total of 37,135 jobs, a 1.8% increase from April.  Government and non-profit sector planned layoffs led the pack, representing 39.7% of the total (14,755 announced job cuts), followed by aerospace and defense at 15.6% (or 5778 planned layoffs).  The top three reasons for planned layoffs were cost-cutting measures (43% of the total), business closing (33.8% of the total) and restructuring (9.4% of the total).

 

The analysts don't bother to make predictions for this particular release, so let's go straight to the report.  June saw US-based employers announce a total of 41,432 job cuts, an 11.6% increase from May.  The government and non-profit sector continues to lead the pack with 10,176 announced layoffs (24.6% of the total).  Second place was claimed by the health care and products sector, with 3,729 announced layoffs (9% of the total) - the food sector almost tied for second, announcing 3,500 layoffs (8.4% of the total).  Restructuring took the lead slot in "job cur reasons" at 36.6% of the total, followed by cost-cutting (24.1%) and closing (18%).