Exit Stage Theft

Grant's Interest Rate Observer
Volume 27, number 16
August 7, 2009

GRANT: The philosophical question to complement the technical one is whether human beings are fit to manage a system of uncollateralized paper currency?

YELLEN: I will be the first to say that it is always difficult to get monetary policy just right. but the Fed's analytical prowess is top-notch and our forecasting record is second to none.

DUDLEY: The Federal Reserve needs to set an IOER rate(that's the interest rate on excess reserves) consistent with the amount of required reserves, money supply and credit outstanding consistent with its dual mandate of full employment and price stability. If demand for credit exceeds what is appropriate, the Federal Reserve raises the IOER to reduce demand. If the demand for credit is insufficient to push the economy to full employment, then the Federal Reserve reduces the IOER rate, recognizing that the IOER rate cannot fall below zero.

GRANT: Our hunch is that it[the Fed] will overstay its radical easing and mishandle its brand-new "interest on excess reserves" policy device.

Vuja de non

Via Some Assembly Required

Seeking Alpha:

US consumers saw their personal income and disposable personal income (DPI) drop in June 2009, but still increased their spending, according to the most recent “Personal Income and Outlays Report” from the Bureau of Economic Analysis (BEA), Retailer Daily reports.

According to BEA estimates, American consumers’ personal income decreased $159.8 billion, or 1.3%, in June. DPI, which is personal income less current personal taxes, decreased $143.8 billion, also a 1.3% drop. Meanwhile, consumers’ personal consumption expenditures (PCE), which essentially reflect consumer spending, increased $41.4 billion, or 0.4%.

(And consumer deleveraging at a snails' pace, all things considered.-AM)

I say "Dad, now what?" He says, "Get a job."

Rosie Via Zero Hedge.

72 Skidoo

Todd Harrison at Minyanville : You say Goldman(GS), I say " It feels like the insider sales window opened."

(At 72% gain on a 6 month who would blame them? After all they were listening to the boss in Japan.-AM)

Wasn't me I promise

(Bill King of the majestic The King Report gets plagiarized.-AM)

The King Report
August 6, 2009 – Issue 3565

Thanks to Barry Ritholtz for alerting us that Asian Times’ reporter Chan Akya lifted our explanation of GDP math in our August 3 missive and printed it virtually verbatim in his Aug. 5 column without attribution. If anyone is passing our letter to this cad, please stop.

4Chan (The Asian Joe Biden) Akya: …if Q4 08 gross domestic product (GDP) was 100 units, and Q1 09 was reported at minus 5.5% and Q2 09 GDP was expected to be minus 1.5%, the expectation was for GDP of 100 units minus 5.5%, or 94.5 units, minus 1.5%, or 93.08 units. But, with the revision of Q1 09 GDP to minus 6.4%, the Q1 GDP units become 100 minus 6.4%, or 93.6 units. So Q2 is minus 1%, or 92.664 units. In other words, the figures were worse, not better, than expected.

http://www.atimes.com/atimes/Global_Economy/KH05Dj02.html

Rosie suggests green chutes

David Rosenberg via Mish

Today’s employment report is being treated as a ‘green shoot’ of major proportions. While it was by far the best jobs performance of the year, much of the better-than-expected tally in nonfarm payrolls reflected the bounce in auto production as well as the distortion from the federal census workers. Combined, these two influences effectively “added” 100,000 to the headline number, so net-net, the consensus view of -325,000 was not as far off the mark as the market believed at first glance.

The auto sector added 28,200 to the industry payroll in July, which was the highest tally in 11 years. To show you just how big that really is, it is a 69% annualized surge. Normally, the industry, which is in secular decline, posts job losses of between 20,000 and 30,000 consistently, so this alone represented roughly a 50,000 swing. We estimate that there was about a 30,000 swing in the rest of the manufacturing sector due to the spillover from the current inventory adjustment in the motor vehicle industry. The 0.3% MoM increase in the workweek was also skewed by the 4.1% MoM jump in the auto sector.

As we mentioned, there have been large fluctuations in the federal government payroll too. After hiring a slew of Census workers in the spring, there were 57,000 layoffs in May-June and then we saw in today’s report that 12,000 federal workers were “hired” in July. Again, mathematically, this contributed about 20,000 to today’s headline number. In other words, and we have no intent on raining on anyone’s parade, there was about 100,000 non-recurring payrolls in that top-line figure. It may be dangerous to extrapolate today’s report into a view that we are about to fully turn the corner on the job market front.

Yes, the income number was also firm; average weekly earnings popped 0.5%, but again, this reflected the bounce in the auto sector as well as the 10.7% increase in the minimum wage to $7.25 an hour. Again, this is a non-recurring item and does not at all reflect an improvement in underlying income fundamentals in the personal sector. We had a similar bounce in the summer of 2008 when the minimum wage was last boosted.


To be sure, the drop in the unemployment rate was a surprise, but it was all due to the slide in the labour force — the employment-to-population ratio gives a more accurate picture of the slack in the labour market and the hidden secret in today’s report was that this metric slid to a 25-year low of 59.4% from 59.5% in June and 61.0% at the turn of the year. Of those unemployed, 33.8% of them have been unemployed now for over 27 weeks — a record amount (was at 29.0% in June and was at 17.5% at the start of this recession)

I see unemployed people.

Marketwatch
Aug 7, 2009, 11:52 a.m. EST

The Labor Department report showed U.S. unemployment fell in July to 9.4% even as the economy lost another 247,000 jobs, the smallest decline in nearly a year.

Even a cursory glance at the numbers tells you that something's missing. That something, of course, being the number of people who gave up looking for work. Because that number exceeded the number of jobs lost by nearly 200,000 the unemployment rate actually fell.

(What they call the civilian participation rate dropped from 65.7 to 65.5 percent, which is around 440,000 people who according to the Federales, have just given up. Now they become imaginary people.By the way,the BLS@http://www.bls.gov/web/cesbd.htm seasonally adjusted 1,333,000 imaginary jobs into the total - on a preliminary basis. Last year on this month they did just about the same. Now don't be confused just close your eyes and remember that seasonality - as well as the miraculous birth death model that on average giveth new jobs but does not taketh away-pays no attention to 'cyclical influences'.-AM)