The BLS Employment Situation Summary for November 2013

Posted by PITHOCRATES - December 9th, 2013

Economics 101

There was Much Spending in November where People Gathered to Celebrate the Thanksgiving Holiday

The Bureau of Labor Statistics November’s Employment Situation Summary is out.  The government is trumpeting the 203,000 jobs created and the fall in the unemployment rate from 7.3% in October to 7.0%.  Proof they say that the economy is turning around.  And that their economic policies are working.  So everything is coming up roses.  If you stop reading the Employment Situation Summary there, that is.  For if you read further the economy is still horrible.

A big part of this improvement was the furloughed federal workers returning to work after the government shutdown.  And the Thanksgiving Holiday.  With retail hiring seasonal employees and stocking their shelves for the kick off of the Christmas shopping season.  This year starting on Thanksgiving Day for many retailers.  So you would expect a gain in employment connected to the Christmas shopping season.  Which there has been.  Retail trade employment added 22,000 jobs.  And leisure and hospitality, employment in food services and drinking places added 18,000 jobs.  And air transportation added 3,000 jobs.  Thanks to the biggest travel day of the year falling in November.

So there was much spending where people gathered with friends and family to celebrate the Thanksgiving holiday.  And the mad rush to the stores to begin their Christmas shopping.  There was much traveling, shopping and dining in November.  As there always is.  Though some years are better than others.  There was also new hiring in the automobile and construction industries.  Probably more due to the near-zero interest rates thanks to the Federal Reserve’s quantitative easing.  Basically printing money to drive down interest rates.  To encourage people to buy big ticket items like cars and houses.  Even though they had no plans to do so.

It is only the Decline in the Number of People in the Labor Force that gives us an Improving Unemployment Rate

So new jobs in these areas don’t reflect on the overall economic climate.  Because once Christmas is over business will lay off those they hired for those seasonal jobs.  And once the Federal Reserve stops ‘printing money’ those interest rates will rise.  Perhaps compounded by runaway inflation from so much printing.  So these aren’t good indicators of the economy.  We can gain a better understanding by looking at the higher stages of production.  Where there are large capital outlays required to hire and expand business.  Industries that look at the long-term.  So if they’re not hiring they’re not optimistic about the long-term economic picture.

A lot of economic activity has to happen before a retail store can sell anything.  Raw material industries have to pull resources out of the environment.  Industrial processors have to transform these raw materials so manufacturers can use them.  And once manufacturers build things wholesalers buy them and resell them to retailers.  That’s a lot of costs these industries have to incur to produce things that may sell 6-9 months later.  Or longer.  And if the economy is looking anemic to them they are not going to incur these costs.  Which is what happened in November with some of these higher stages of production.  Mining, logging and wholesale trade showed little to no change.

The civilian labor force declined by 720,000 in October.  With the government shutdown blamed for a lot of these lost jobs.  So when the government opened for business again in November we should have seen a large increase in the civilian labor force.  But we didn’t.  The civilian labor force only increased by 455,000 in November.  Which means that if you factor out the government shutdown there was still a decline in the number of jobs.  And it is only this decline in the number of people in the labor force that gives us an improving unemployment rate.  For once people give up and quit looking for a job because the economy is so bad the Bureau of Labor Statistics (BLS) stops counting them.  Skewing the real unemployment rate.

The Current Economic Recovery is a False One created with the Smoke and Mirrors of Low Interest Rates

This gets to the crux of the Obama economic recovery.  Or, rather, the absence of any recovery.  The government trumpets the creation of 195,000 new jobs per month this year.  But they don’t tell us how many jobs we lost per month this year.  Which we can calculate.  In January of this year there were 89,009,000 people not in the labor force.  In November that number rose to 91,273,000.  A total loss of 2,265,000 jobs this year.  Or a loss of 205,909 each month.  So while they cheerfully report the creation of 195,000 new jobs per month we actually lost 205,909 jobs each month.  If you count those people who left the labor force the BLS doesn’t count when calculating the unemployment rate.  In fact, if you look at the trends this year you can see the trends are going in the wrong direction.

Those in Labor Force vs Unemployment Rate thru November 2013 R1

The most shocking thing about this chart is that there are over 91 million people not in the labor force.  The labor force is the sum of the employed and unemployed persons.  So these are people who could be in the labor force but aren’t.  Because they don’t have a job.  For whatever reason.  On welfare, collecting disability, early retirement, just can’t get a job because the economy is so bad, etc.  So there will always be people out of the labor force.  And a large number is bad.  Because these people aren’t helping to create economic activity.  Which is why the Obama recovery is so anemic.

What’s also shocking about this chart are the trends.  The official unemployment rate has been falling.  Good news, yes?  Well, as it turns out, no.  Because the number of people not in the labor force has been rising during the decline in the unemployment rate.  Making the unemployment numbers questionable at best.  For you can’t have less unemployment if people continue to leave the workforce because they can’t get a job.  And the employment picture isn’t getting better.  It’s getting worse.  And it’s going to keep getting worse until those higher stages of production start hiring.  Which they won’t do until they see a real economic recovery.  And not a false one created with the smoke and mirrors of low interest rates.

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The Pilgrims and Thanksgiving

Posted by PITHOCRATES - December 3rd, 2013

History 101

Queen Elizabeth hated the Puritans more than the Catholics

The Pilgrims landing at Plymouth Rock were God-fearing people.  Who had left England to escape religious persecution.  The Pilgrims were members of the new Protestant faith.  Less than a century old at that time.  With Henry VIII, King of England, turning Catholic England Protestant in the 1530s.  Which didn’t go over well with England’s Catholics.  Becoming a thorn in Henry’s daughter’s side.  Queen Elizabeth.  (The first Queen Elizabeth.  Not the current one.)  Who she persecuted.  But they weren’t the only people she persecuted.

The Church of England swung between Catholicism and Protestantism through the years.  Trying to please both Catholic and Protestant.  In time becoming neither Catholic nor Protestant but something in between.  Pleasing neither Catholic nor Protestant.  Queen Elizabeth, the head of the Church of England, settled the matter.  By persecuting those dissatisfied with the Church of England.  The Catholics who said it was too Protestant.  And the Protestant ‘extremists’ who said the Protest Church of England was too Catholic.

It was these Protestant ‘extremists’ that really irked Elizabeth.  No, the Church of England wasn’t good enough for them.  Because it didn’t strip every last vestige of Catholicism from it.  It was impure.  Corrupted with Catholicism.  Vestments.  Icons.  Altars.  It was just downright obscene.  That’s why she turned on these ‘Puritans’ with a vengeance.  And persecuted them like Catholics.  Even worse at times.

The Pilgrims suffered Three Years of Poor Harvests and Famines because of Socialism

Things didn’t get any better under James I.  Who followed Elizabeth’s lead.  With the political climate turning against the ‘Puritans’ they skedaddled.  Leaving England.  And resettled in Leiden, Holland.  Where they had the freedom to worship as they pleased.  But the different language and culture became a problem for the congregation.  Their children were becoming less like their parents and more like the Dutch.  Who enjoyed the pleasures in life a little more freely than they thought proper for a ‘Puritan’.  If their children became Dutch it would ultimately mean the end of the congregation.  So they boarded a ship.  No, not that one.  They took the Speedwell to England.  Then boarded THAT ship.  The Mayflower.  Crossed the Atlantic Ocean.  And landed at Plymouth Rock.

Now the Pilgrims landing at Plymouth Rock were God-fearing people.  But they had a little in common with the hippies of the Sixties.  Not the sex and drugs.  But how they lived.  For the Pilgrims lived like the hippies wanted to live.  As communists.  The Pilgrims worked but didn’t own anything.  Everything they produced belonged to everyone.  Produced by those according to ability.  And taken by those according to need.  The perfect communist society.  And truly authentic to the yet unknown communist philosophy.  Right down to the recurring famines.

The harvest of 1620 was poor.  Making the first winter hard.  And there was famine.  It was so bad that half of them died.  The Indians then taught them how to grow corn.  Things were looking up.  They celebrated the first Thanksgiving.  But the harvest of 1621 was just as bad as the harvest of 1620.  And they suffered another famine.  Another poor harvest followed in 1622.  And another famine.  Why?  Because people were lazy.  The most able-bodied of them did not want to work according to their ability.  Just so the lazy could enjoy the fruit of their labors.  And draw from the common stores according to their need.  Without contributing anything to the common stores.  Because they had better things to do than work.  Besides, it was easier just to steal what others grew than working hard in the fields.

All of the Things that made America Great were born in Plymouth Colony

Jamestown was suffering the same fate.  The socialist utopia of living in a commune just didn’t work.  The most able-bodied men refused to work according to their ability to support other men’s wives and children.  For they had their own wives and children to support.  So those with ability did the minimum.  Because doing any more didn’t help them in any way.  Or their families.  It was like asking people to work an extra two hours at work for free.  So others with large families to support could work two hours less and go home early.  So one group of workers work 10 hours for 8 hours of wages.  While another group work for 6 hours for 8 hours of wages.  Which is socialism.  Redistribution.  From those according to ability to those according to need.  It was this economic philosophy many settlements used.  Giving them poor harvests.  And famines.

But that all changed in 1623 for the Pilgrims at Plymouth Colony.  William Bradford, governor of the colony, changed the economic system.  He abolished socialism.  And replaced it with free market capitalism.  He parceled out the common land.  Giving each household a parcel of land.  Saying it was their property.  It belonged to them.  As did anything they grew on it.  Which meant the more they grew the more they could eat.  Or trade for other things they needed.  Which unleashed the energies in the able-bodied.  And they worked their behinds off.  Growing as much as they possibly could.  Soon the harvests everywhere they implemented free market capitalism were bountiful.  Even in Jamestown.  And there was no famine in Plymouth Colony following the 1623 harvest.  Things were different.  And never would be the same again.

Finally the Pilgrims had a reason to be thankful.  Free markets.  The best medicine there is for famine.  Thanks to free market capitalism the colonies prospered.  And a new nation arose.  This economic liberty would go on to make the United States the greatest nation in the world.  Religious freedom.  Private property.  Limited government.  All of those things that made America great were born there in Plymouth Colony.  Thanks to William Bradford.  Who saw the futility of socialism.  And abolished it.  Things were difficult in the beginning.  But their decision to leave England ultimately provided the better life they were seeking.  And as it turned out they got out when the getting was good.  For the religious climate didn’t improve in England.  As the conflict between Catholics and Protestants would lead to civil war in 1642.  And it wasn’t pleasant.  Missing the horror of that gave the Pilgrims another thing to be thankful for.

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FT198: “Obamacare will fail because you can’t incentivize people to make their lives worse.” —Old Pithy

Posted by PITHOCRATES - November 29th, 2013

Fundamental Truth

Stores used the Incentives of Black Friday to get People to do what they Wanted

A belated happy Thanksgiving.  And a belated happy Black Friday.  We say belated because Black Friday was already here by the time Friday woke from its sleepy slumber.  No more waiting in line Friday morning for those stores to open.  No.  Today if you snooze (i.e., spend Thanksgiving with the family at home) you lose.  Because it’s first come first served.  Which means if you wanted to get some of those deep discounts before they run out you didn’t let anything silly like celebrating Thanksgiving with the family get in your way.

Now everyone loves a bargain.  It’s why we scan the Sunday sales papers.  And search online for the best price.  But in the Obama ‘recovery’ there isn’t a whole lot of spending going on.  As there isn’t a whole lot of employment going on.  Since President Obama assumed office his policies have destroyed some 10 million jobs.  And one thing about unemployed people.  They definitely want a bargain.  Especially if they want a good Christmas for their family during the dark times of the Obama presidency.

But there is a greater lesson Black Friday can tell us other than President Obama is a bad president.  Especially in things economic.  Why are stores opening on Thanksgiving?  Because they’re cruel and evil forcing their workers to slave away during a holiday?  No.  It’s not that.  In fact, some employees love working on a holiday.  For they get paid more working on a holiday than they normally would.  Allowing them to earn extra money to give their families a good Christmas during the dark times of the Obama presidency.  As it turns out shoppers and workers alike like Black Friday.  For it allows each to have more for less.  And that is the great lesson of Black Friday.  Getting people to do what you want by offering them something they want.  Or, in other words, offering them an incentive.

The Kansas–Nebraska Act of 1854 pitted Northern Republicans against Slave-Owning Southern Democrats

Slaves working in the planter South had no desire to be slaves.  Yet they were slaves.  Why?  There weren’t slaves in the North.  Only in the South.  The blacks in the north chose not to be slaves.  While those in the South had no choice.  The planter elite in the South, the ‘Old World’ planter aristocracy, used force.  And having a larger force in Washington than they normally would have (thanks to the Three-Fifths Compromise that counted slaves as three-fifths of a person for representation in Congress) they were able to use the force of government to continue to force blacks into slavery.  The Southern Democrats (i.e., the ‘Old World’ planter aristocracy) were able to keep the black man enslaved until the mid 19th century.  Even using the power of the federal government to override states’ rights in the North.  Using the Fugitive Slave Act to force northern states to return fugitive slaves to their Southern Democrat owners.  The ‘Old World’ planter aristocracy.

This is coercion.  This is how you get people to do what they don’t want to do.  Using the power of the federal government the Southern Democrats kept their slaves in bondage.  Also, using the power of the federal government they forced those in the North who wanted to help ‘fugitive’ slaves to stay free return their slaves or else.  That ‘or else’ being the full weight of the federal government coming down on them with extreme prejudice.  But when the North became more populated control of the House of Representatives favored the larger populated North.  Despite the Three-Fifths Compromise.  Which left the Senate.  And as each state got two senators how the new states entered the union mattered.  For the planter elite to hold their power over the United States.

The Missouri Compromise of 1820 was an early attempt to put slavery onto the path of oblivion.  Those in the North did not want it.  The planter elite in the South did.  So they compromised.  Slavery could remain in the South to appease the planter elite but the compromise prohibited slavery in the new Louisiana Territory that Thomas Jefferson purchased above the 36°30′ parallel (about the southern border of Missouri).  Except in the state of Missouri.  Then came the Kansas–Nebraska Act of 1854 and the idea of popular sovereignty.  Throwing the Missouri Compromise of 1820 out the window.  These two states were both above the 36°30′ parallel.  The Kansas–Nebraska Act of 1854 said the first people into the fledging states could choose for themselves if they would be a slave-state or a free-state.  Which led to a mad rush to Kansas.  And a bloody civil war there.  That eventually led to the American Civil War.  To settle once and for all the issue of slavery in America.  Would the Southern Democrats prevail and keep the black man in bondage?  Or would the Republicans free the slaves?

Obamacare is less like Black Friday and more like Slavery

Even if you flunked your history class you should know the answer to this.  Abraham Lincoln and his Republicans defeated the Southern Democrats and won the American Civil War.  Freeing the slaves.  Of course, the Southern Democrats were not good losers.  They gave us the KKK.  Then the Jim Crowe Laws.  The separate but equal nonsense that didn’t exist in the Republican North.  The old southern aristocracy were not huge fans of the Declaration of Independence or the Constitution.  All they wanted was privilege.  They wanted the Old World in the New World.  And the planter elite fought bitterly to keep that.  Well, not them as much as their fellow southerners they lied to about states’ rights.  Getting them (most of who were too poor to own a single slave) to fight and sacrifice their lives to maintain the institution of slavery.  To maintain the privilege of the southern aristocracy.

So there you have examples of incentive and coercion.  Black Friday incentivized people to hire in for seasonal jobs during the holiday season.  And brought people into stores with deep discounting.  Everyone got something they wanted.  And so they did what the store owners wanted.  People worked for them on Thanksgiving.  And people came into the stores on Thanksgiving.  Both of their own free will.  Now contrast that to slavery.  Where there was no free will.  Only the coercion of the federal government.  Where fear and intimidation compelled slaves to remain slaves.  And their only incentive was to obey their masters to avoid physical harm.

With the Supreme Court ruling the penalty of Obamacare became a tax.  Allowing the federal government to compel people to buy health insurance or suffer the consequences.  A ‘tax’ that will grow in time.  Buy insurance or else.  With that ‘or else’ being the full force and fury of the IRS.  Something most people would find more unpleasant than a colonoscopy.  Without any anesthetic.  No, a letter from the IRS is something no one wants to see in their mail.  For few things will fill you with fear and dread more.  This is the enforcement mechanism of Obamacare.  Which they need because people otherwise wouldn’t spend more for less.  Higher insurance premiums to cover things they will never need (a gay man will never need prenatal care).  And sky-high deductibles that will be like having no insurance.  As everything will be out of pocket until you reach that sky-high deductible.  Which few people will reach unless they have a catastrophic illness or accident.  This is why people are NOT signing up for Obamacare.  Because Obamacare ain’t no Black Friday.  Obamacare is offering nothing the people want.  At prices higher than they ever had to pay for health insurance before.  Leaving them with less to spend on their family.  Forcing them to cut out things they once enjoyed.  Which is why Obamacare will fail.  Because you can’t incentivize people to make their lives worse.  No, to do that you need the fearful power of the state.  Just like the Southern Democrats used to maintain the institution of slavery.

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