Sunday, December 5, 2010

Nov. 2010 Employment Report Analysis

Employment Situation Summary
Release Date: Usually the first Friday of each month
Release Site:
Market Relevance: VERY HIGH
Management Value: VERY HIGH

To learn about the official release please follow:

"Brain surgery is not rocket science to a brain surgeon".

Friday, December 3, 2010

Blue World Employment Situation Analysis
Occasionally I feel the need to give our economic report analysis posts a nickname. A recent example was "Reality vs. Rhetoric". The only one I can think of for this one is:


All I've been reading all week are articles talking about how employment may have strengthened in November. Really? Based on what? A few more shoppers than last year? That is ridiculous. I really don't know where the experts think these jobs are coming from but there is not a single indicator to suggest a material improvement in the employment situation has or will occur anytime soon. GDP growth includes too much inventory, has been revised sharply lower for the next year and prospects based on foreign trade have dimmed. Housing, bad. Construction, bad. Manufacturing, bad. (See "Is the Table Set for the Double Dip"? Friday the TV, radio and internet were peppered with adjectives like "surprised", "shocked", "appalled", "stunned", "dazed", "shaken", "dismayed"," horrified", "aghast", etc. These adjectives were being used to describe the reactions of the "experts" to the employment numbers. Well, let's all take a moment to THANK GOD WE, AT BLUE WORLD, ARE NOT EXPERTS!

So, perhaps a little less expert-bashing and a little more uninformed, uneducated, novice analysis would be of greater value.

The Household Survey (Table A) reports an unemployed rate of 9.8 percent, up two tenths of a percent from October '10. More importantly the total private sector only added 50,000 jobs and of those only 39,000 were non-farm positions according the Establishment Data on Table B. Section U-6 of Table A-15, Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force, remains at a staggering 17 percent. If you have read us at all you will know that the most disconcerting number in this report is the 5.1 percent unemployed rate for those at least 25 years old with a bachelor's degree, or higher. That is a jump from October '10 of .4%. That is a BIG scary number. Manufacturing and construction lost jobs while the number of unemployed for over 27 weeks continues to climb.

We see not a single surprise in any of these numbers. Jobs, simply, are not created based on nothing. The only reason payrolls grow is in response to an increasing demand for products and services in the private sector. Jobs and demand do not operate in parallel. They operate in circuit. Right now that circuit is in "vicious cycle" mode. Unemployment is high, so many Americans have no disposable income. No disposable income translates to decreasing demand for even the most basic necessities. Decreasing demand leads to decreasing need for labor. It should therefore be no surprise that healthcare is among the few industries adding jobs consistently throughout this recession. The baby boomers are aging and requiring more and more care. Increased demand equals increased employment. It is no mystery.

Employers need a reason to believe that demand will increase. They need to feel the political and regulatory environment is stable and supportive of business activity. Until that happens anyone who predicts an improvement in the employment situation and, therefore, the economy must expert.

We remain in a very defensive posture with our investment strategies and will for the foreseeable future.

Thank you for reading and...stay tuned!

Release Site:

Every effort is made to ensure accuracy of data transcription but accuracy cannot be guaranteed. The official release site should be cross referenced for accuracy and footnoting. The analysis represents the opinion of Blue World Asset Managers, Ltd. who are not giving advice and does not warrant or guarantee predictions based on its analysis.