Real Jobless Claims Rise Is Coming

By "The Greek"

Weekly Initial Jobless Claims were reported today for the period ending September 8, 2012. Claims surprisingly jumped by 15,000, reaching back upward to 382K. It was a leap from a revised prior week count of 367K, which was hiked up by 2,000 from its initial reporting. It was distressing news on the surface, but perhaps to your surprise, this time I’m quelling concerns. The week’s data was impacted by a nonrecurring event and seasonal influence.

The first factor was even noted in the report itself, as Tropical Storm Isaac apparently drove at least 9,000 individuals to the unemployment line. When a bad storm floods or otherwise damages a building, it oftentimes also disrupts a business operation. Given that unemployment insurance is available, businesses can reduce their expenses as they repair and rebuild. Employees who are laid off are neither left in the breach, but insured.

The second factor was not mentioned in the report but likely plays a role in filings around this time of year. The long Labor Day holiday weekend could have disrupted the flow of new filings in one way or another. Thus, we cannot read too much into data around holidays generally, despite their being adjusted for by the reporting agencies.

The four-week moving average of new claimants increased by 3,250 this week to 375K. The insured unemployment rate measured 2.6% in the period ending September 1, unchanged from the week before. The number of insured unemployed Americans declined by 49,000 during the same week, to 3.28 million. The number of Americans receiving benefits of some sort for their unemployment, including through the extensions program, fell by 78,465, to 5.39 million in the period ending August 25. At this point, I reiterate that it is clear now that a great portion of the people falling off of this count are simply running out of coverage, and then falling off the radar.

Employment services firms are most closely tied to this report and the shares of Robert Half International (NYSE: RHI), Monster Worldwide (NYSE: MWW), Manpower (NYSE: MAN) and Kelly Services (Nasdaq: KELYA) are mostly higher today, but there’s too much noise in the news flow to really say this is why.

Company & Ticker	Today’s Change So Far
Robert Half (NYSE: RHI)	Unchanged
Monster Worldwide (NYSE: MWW)	+1.1%
Manpower (NYSE: MAN)	+1.7%
Kelly Services (Nasdaq: KELYA)	+0.5%

The jobless claims report was quickly overcome by the highly anticipated action of the Federal Reserve’s Federal Open Market Committee (FOMC), and so stocks moved decidedly higher from 12:30 PM EDT. The impact of this negative news would have been questionable anyway, given the nonrecurring drivers. However, over the coming months, I continue to expect this data point to reach above 400K again and to drive stock selling on some Godforsaken Thursday morning.

For this reason, and because of ongoing domestic and global economic deterioration and rising geopolitical impact, once the steam is used up from the central bank driver moving stocks again today, I would gradually move out of equities. The SPDR S&P 500 ETF (NYSE: SPY) is up 1.2% at this hour and 14.6% since June 1st and yet the American and global economies are slowing, and corporate earnings are being reconsidered. This can only last so long. I would gradually reduce holdings in stocks and the SPY, but continue to favor gold.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Jobs Report Favors Romney

Last evening, after President Obama gave his speech to the Democratic Party delegates in Charlotte, pundits speculated about how long a post party high might last, and what could kill it as quickly as today. The main suspect likely to assault the electorate mood was the monthly Employment Situation Report, which was just reported this morning at 8:30 AM EDT. In my view, the jobs report reflects a deteriorating economy and thereby favors Mitt Romney.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Jobs Report

Some will key on the two-tenths of a point improvement in the unemployment rate to 8.1%, from 8.3% last month, but such reports should be quickly overcome by the realization that labor participation, not job creation, played the key role there. Stock futures turned lower at the breaking of the news, but it may take some time for the real message of the report to be understood; the SPDR S&P 500 ETF (NYSE: SPY) is fractionally higher at the hour of publishing here, while the Dow Jones Industrial Average ETF (NYSE: DIA) is less enthused due to the details of the data discussed below. The NASDAQ also has the earnings warning of Intel (Nasdaq: INTC) to digest this morning, and so the PowerShares QQQ (Nasdaq: QQQ) is sinking. But what is holding up stocks generally today is the increased likelihood of Federal Reserve action later this month. What is gaining ground today is gold against the dollar, as the SPDR Gold Shares (NYSE: GLD) gains 1.6% into early trade.

Job creation, depicted by a 96,000 net increase in nonfarm payrolls, came in under July’s revised rate of 141K (from 163K) and the economists’ consensus for 125K. Within the overall figure, private nonfarm payrolls only rose by 103K, versus July’s revised figure of 162K (from 172K). Take note of the direction of the revisions as well as the disappointment produced by the figures for August.

Debunking the unemployment rate was not hard to do this morning, despite the details of the report showing the number of unemployed Americans was down by 250K in August, to 12.54 million. Rather, the Household Survey shows the civilian labor force dropped sharply by 368K in August, even as the population was estimated higher by 212K. The same survey showed the number of employed Americans was down by 119K. Clearly, a big chunk of that improvement in the unemployed (if not all of it) was due to the continued drop-off of the long-term unemployed out of the labor force, not because people got jobs. Otherwise, the number of employed Americans should have risen.

As we look deeper into the data, we see that the number of long-term unemployed Americans (27 weeks of joblessness or more) decreased by 152K in August. There is a huge segment of the American population that is simply being lost into limbo. Who knows where they go, perhaps to homelessness, to prison, hospitals of one sort or another, to other parts of the world, or into their parents’ basements to drift into deep depression. Maybe a few are starting small businesses, self-publishing books, or earning income off the books in one way or another, but it’s clear that the majority are not faring well enough.

Some are working part-time instead of full-time, as the number of part-timers for economic reasons (meaning they want more hours) decreased by 215K in August, to 8.03 million. The number of those who have chosen part-time work (some of these likely didn’t understand the survey question) rose by 130K. I say that because school just started, and I believe less young people are likely to seek part-time work when attending school, though some returning from long vacations may be seeking work. Perhaps in today’s economy, a greater number of young people are finding resources from home harder to come by, and must therefore work while earning their degree.

The number of Americans marginally attached to the labor force, meaning they did not aggressively seek work over the last four weeks, increased by 32K. Within this segment, the number of discouraged workers, or those people who believe there are no more jobs available for them any longer, decreased slightly by 8,000.

Under-Employment Rate
The calculation of the under-employment rate, which takes into account the number of Americans working part-time for economic reasons and the detached workforce, follows here. If we add back the excluded 2.561 million displaced workers to the labor market, and include the 8.031 million underemployed part-timers in the unemployed count, adjusted unemployment reaches ((12.544M + 2.561M + 8.031M) / (154.645M + 2.561M)) * 100 = 14.7%. Last month, the rate was ((12.794M + 2.529M + 8.246M) / (155.013M + 2.529M)) * 100 = 15.0%. Don’t be fooled by what looks like an improved rate of underemployment to go along with the gain in the unemployment rate, because this figure, like the other, leaves out the unexplained decrease in the civilian workforce. Where have those unaccounted for Americans gone? Please tell me if you know, because they are not in this tally.

The details of the Establishment Survey show total private (not including public sector) jobs increased by a net 103K in August. That was significantly under ADP’s estimate for 201K, which helped support the stock market Thursday. It was likewise inconsistent with the decline in Challenger’s Monthly Job-Cuts data. What it did reflect, was something I’ve been warning about, a decrease in manufacturing employment. That segment of the economy dropped 15K jobs in August, and while jobs are not being shed by Boeing (NYSE: BA) as yet, layoffs are increasingly being considered at cyclicals like General Electric (NYSE: GE), Caterpillar (NYSE: CAT) and Cummins (NYSE: CMI). The entire goods-producing segment of the economy shed 16K jobs, with most of those coming in durable goods. There was even a 7,500 drop at motor vehicle and parts makers like Ford (NYSE: F), General Motors (NYSE: GM) and Magna International (NYSE: MGA).

Private sector service providers added a net of 119K jobs in August, according to the survey. The majority of those came in Leisure & Hospitality (+34K), Professional & Business Services (+28K) and in Healthcare & Social Assistance (+21.7K). Services declines were only found in Temporary Help (-4.9K), which marked a reversal of recent months and was bad news for Kelly Services (Nasdaq: KELYA) today.

The Retail Trade industry added 6.1K jobs in August, I expect due to increases at discounters like Wal-Mart (NYSE: WMT), Target (NYSE: TGT) and Costco (Nasdaq: COST), at the cost of underperformers like J.C. Penney (NYSE: JCP) and Sears (Nasdaq: SHLD). Information only added 3,000 jobs in August; so much for the impact of the Internet newcomers like Facebook (NYSE: FB) and Yelp (Nasdaq: YELP). The public sector shed 7,000 jobs in August, down from 21K in July and 18K in June.

On net, I think there’s no doubting that this report favors Mitt Romney, because when the workforce change is understood, it reflects a deteriorating economy. I expect these reports are going to get worse in the next two months ahead of the election. The Democrats will focus on the unemployment rate today, but I expect the Republicans will not have to explain that anomaly as the months progress and the economy deteriorates further.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Weekly Initial Jobless Claims Report

Initial Weekly Jobless Claims were reported this morning for the period ending August 25, 2012. The latest data showed claims stuck at 374,000 through the period, ahead of economists’ expectations for 370K, though matching the prior week’s flow of claims. However, the four-week moving average shows jobless claims continued to creep higher, with the average up 1,500, to 370,250. The close of August is a slow period for all business activity, especially just ahead of the Labor Day weekend. Over recent weeks, I’ve been warning that the claims count should creep back up over 400K, leading to one fateful Thursday morning stock selloff. Thus, I half jokingly stated, “Sell Stocks on Wednesday Afternoons” as a trading strategy. September and October are shaping up as a more likely time for a shift toward that end.

The Claims Report showed insured unemployment unchanged at 2.6% for the lagged period ending August 18. The number of people insured and unemployed decreased by 5,000 and numbered about 3.3 million people. The four-week moving average for insured unemployment increased by 9,000, and was a bit higher than the weekly data indicated. The number of Americans covered by some sort of benefit, including through the extensions program, decreased by 62,253 in the period ending August 11, to 5.5 million. Of course, this figure decreases for more than one reason, as Americans fall out of qualification for benefits and as a few of them actually get jobs.

The shares of employment services firms pay close mind to the weekly data, and are curiously lower today despite the lack of change.

Company & Ticker	Thursday’s Start (10 AM)
Robert Half (NYSE: RHI)	-1.1%
Korn Ferry (NYSE: KFY)	-0.7%
Monster Worldwide (NYSE: MWW)	-1.3%
Manpower (NYSE: MAN)	-1.1%
Kelly Services (Nasdaq: KELYA)	-0.7%

If I’m right, America’s largest employers will likely be doing most of the firing, but only because they employ the most people per company. In actuality, America’s small businesses are the most important of our employers. The largest employers are by no coincidence also companies that provide value services or necessities, including Wal-Mart (NYSE: WMT), McDonald’s (NYSE: MCD), Target (NYSE: TGT) and Kroger (NYSE: KR).

This week’s leading layoff newsmakers, either firing, planning cuts or rumored to be about to declare layoffs included Lexmark International (NYSE: LXK), Schnitzer Steel Industries (Nasdaq: SCHN), Boston Scientific (NYSE: BSX), Lockheed Martin (NYSE: LMT), RealNetworks (Nasdaq: RNWK), Rockwell Collins (NYSE: COL) and Sony (NYSE: SNE).

For your information, I often like to include the individual state and territorial information from the report:

The highest insured unemployment rates in the week ending August 11 were in Puerto Rico (4.4), the Virgin Islands (4.1), Pennsylvania (3.9), New Jersey (3.8), Connecticut (3.6), Alaska (3.6), California (3.4), Rhode Island (3.1), New York (3.0), and Nevada (3.0).

The largest increases in initial claims for the week ending August 18 were in Michigan (+2,383), Florida (+1,558), Colorado (+781), South Carolina (+774), and Texas (+517), while the largest decreases were in California (-5,549), Ohio (-1,379), Oregon (-1,098), Wisconsin (-539), and Virginia (-480).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Layoffs Are Coming, I Assure You They Are

The latest Weekly Initial Jobless Claims Report was not the big one I’ve been warning is coming, the one that will shake up stocks some God forsaken Thursday morning. Rather, the latest report offered an image of improvement for the lovely labor market and helped to lift the iShares S&P 1500 Index (NYSE: ISI) this morning. It did so by a fraction, as suspicious followers of mine continue to wait for the big data disaster that will strike some catastrophic future Thursday morning.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Layoffs I Said!

The government data minders who produce this report previously indicated this week’s data would be clear of the misaligned adjustment for the factory shutdowns at Ford (NYSE: F), General Motors (NYSE: GM) and others in July. Those mischievous manufacturers messed with tradition this year, and left the feds looking like fools still singing after the music stopped. Still, I do not think the noise is out of the figure yet. Whether it is or not probably will not matter before long, as manufacturing data from across the nation has indicated managers are killing hiring plans and reconsidering their worker counts. Considering the latest trend in consumer spending, the same should be happening at service providers. Employment is still a lagging economic indicator you know.

Anyway, this week’s report covering the period ending August 4, a period in which hardly anyone is around the office anyway (human resources included), produced a 6,000 person decrease in new unemployment filings. The count fell to 361K, down from the prior week’s revised count of 367K. By the way, the revision was higher, from 365K at initial report.

The consensus of economists’ views pegged the weekly count at 367K, but this figure is not so important due to the frequency of the data point. Economists have bigger fish to fry than to risk their reputation on a number that is not likely to vary much week-to-week. That’s why you find the estimates usually sit quite close to the prior week’s result.

What’s important, as everyone will tell you, is the moving average. It best depicts the real trend. That’s true, but it’s still old news for a lagging economic indicator, so it’s basically useless anyway. Still, it would be amiss of me to leave it out of this report. Therefore, I note that the four-week moving average increased by 2,250, to 368,250, in the reported period. It’s not much of a change, but it excludes one of the erroneous data points of July. You would expect the misfortune to average out to even over time, and it should, so we will be unable to blame it for much longer. There’s always the weather though. In this case, unfortunately, there is also the determined path of the global economy.

Insured unemployment was unchanged in the lagged week ending July 28, sitting at 2.6%. Still, the number of people that this represented included an increase of 53K, taking the count to 3.332 million insured under the unemployment benefits program. The number people receiving benefits under all programs, including the extension benefits program, fell by 214,367, to 5.75 million in the period ending July 21. Before you start questioning my wisdom, remember that there are two ways off benefits, getting a job or passing 99 weeks of joblessness. Considering the unemployment rate increased in July to 8.3% (or 8.2500000000001% as the administration painted it), the latter seems more likely to me.

In any event, the shares of employment services firms tend to react to labor data, as you might expect. On this day then, the shares of most are higher, save Kelly Services (Nasdaq: KELYA), which seems to be the group’s counter-play for those who must have an interest to keep their portfolios best matched to the index they’re benchmarking. It’s because of Kelly’s focus on temporary workers, which may benefit from an uncertain environment.

Company & Ticker	Thursday Morning Performance
Robert Half (NYSE: RHI)	+0.2%
Korn Ferry (NYSE: KFY)	-2.0%
Manpower (NYSE: MAN)	+1.1%
Monster Worldwide (NYSE: MWW)	+0.8%
Kelly Services (Nasdaq: KELYA)	-0.1%

The nation’s largest employers also matter in this regard, as they’ll be the guys firing the most Americans in terms of pure numbers when the souvlaki hits the fan. That means Wal-Mart (NYSE: WMT), IBM (NYSE: IBM), McDonald’s (NYSE: MCD), Target (NYSE: TG) and Kroger (NYSE: KR). Well, maybe not then, considering most of these company’s sell discounted goods or necessities, so it’ll be more mom and pop shops shuttering up for a new job behind the counter at one of these fine American establishments.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Weekly Jobless Claims Reverting to Meaner Mean

Weekly Initial Jobless Claims have been a hot mess in July, due to adjustments to the data for plant closings that proved hard to predict. You would expect layoffs to be light in the heat of summer, but with several manufacturing data points showing employer discomfort with their labor counts, and what that implies about the rest of the job market, things could be about to change. Yesterday’s ADP report offered some hope, with ADP’s estimate indicating a pickup in hiring, but ADP data has cried wolf too often to be trusted.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Jobless Claims

After last week’s reported sharp drop-off of jobless claims, we were expecting a reversion to the mean this week, and that mean is getting meaner. For the week ending July 28, weekly initial jobless claims increased 8,000 to 365K. Last week’s dramatic drop (-35K) was subject to revision, with the initially reported 353K count, hiked a bit to 357K.

The four-week moving average here has been infected by the mistimed adjustment for plant closings at Ford (NYSE: F), General Motors (NYSE: GM) and others. It would normally be a useful go-to figure in such an instance, but I’m confident it is also understated and will remain so until the bad weeks age out. The four-week moving average fell by 2,750 in the reported period, to 365,500.

Insured unemployment stuck at 2.6% in the lagged period ending July 21. The actual number of insured unemployed workers declined by 19K, to 3.272 million, for the same period. The total number of Americans receiving a benefit of some sort, including through the extensions program, fell by 69,672, to 5.964 million Americans in the period ending July 14. However, I am urged by the silent and overlooked Americans whose extension benefits have run out, to remind you about them.

The stocks most closely affected by this data are of the staffing and outsourcing companies. There are plenty of other reasons for the shares to be lower today though, with the SPDR S&P 500 (NYSE: SPY) down a half point on the inaction of the European Central Bank (ECB). Still, the employment servicers are showing oversized losses today for good reason.

Company & Ticker	Wednesday Morning % Change
Robert Half Int’l (NYSE: RHI)	-0.3%
Korn Ferry Int’l (NYSE: KFY)	-0.9%
Monster Worldwide (NYSE: MWW)	-13.5%
Kelly Services (Nasdaq: KELYA)	+0.2%
Manpower (NYSE: MAN)	-2.2%
Paychex (Nasdaq: PAYX)	-0.3%
On Assignment (Nasdaq: ASGN)	-1.6%
51job Inc. (Nasdaq: JOBS)	+0.2%%
Kforce (Nasdaq: KFRC)	-1.5%
Heidrick & Struggles Int’l (Nasdaq: HSII)	-1.3%

Kelly Services (KELYA) proves stalwart here because of its specialty in temporary worker provision. The underperformance of the rest of these companies makes sense due to their cyclical nature and ties to the labor market. With the economy deteriorating and with central bankers fumbling around things, there’s little reason to place bets here now.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

ADP Report - The Boy Who Cried Wolf

The ADP Private Employment Report reached the wire this morning, and somebody somewhere just rolled their eyes. It’s because the data point, which is actually just an estimate that gets the attention of an important government report (or at least it once did), has tended to misfire and misguide from time to time (to be kind).

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

ADP Report

The report for July showed ADP’s estimate for a private nonfarm payroll increase of 163K, which was higher than the economists’ consensus forecast for 120K. The problem is that none of the townspeople know if the wolf is really out there or not because of past performances. The SPDR S&P 500 (NYSE: SPY) is up a half point on this news, and against the weight of a poor manufacturing data point at ISM. With two days to the big government report, it’s worth your capital to wait anyway. The shares of employment services firms are indicating more worry than ADP gives reason for, with Robert Half (NYSE: RHI), Korn Ferry (NYSE: KFY), Manpower (NYSE: MAN) and Monster Worldwide (NYSE: MWW) all lower. Kelly Services (Nasdaq: KELYA), which specializes in temporary workers, is appropriately higher since temps are getting the nod in an uncertain environment.

Last month’s report showed ADP’s estimate for private employment growth was off a bit. The company estimated private employment increased by 172K (revised from 176K) in June, but the Employment Situation Report showed private employment actually rose by 84,000. ADP uses real payroll data, so maybe the government has it wrong, since it uses government employees to process the information. I would bet on both being wrong, and just take your key from the latest consumer spending stall, since unemployed people don’t buy stuff.

Let’s humor the boy and see what he’s yelling about up there on the hill; maybe the wolf is behind him and he doesn’t even know it. ADP’s latest data shows the service sector likely added 148K jobs while the goods producing sector added 15K. Manufacturing added just 6,000 jobs. Goods producing job additions represent 9.2% of the total additions here, which is a little less than the sector’s footprint on the economy. Therefore, it likely confirms the latest signs of recession we’ve seen in the manufacturing sector; remember jobs will lag. Then, today, ISM’s Manufacturing Index showed contraction for the second month in a row, with the index marking 49.8 for July. That said, ADP still has the sector adding jobs.

Small Businesses added the majority of jobs, with the addition of 73K on net in July. Medium sized businesses added 67K jobs, while large businesses hired 23K new people on net. The size categories are defined by number of employees, with “large” including companies of 500 employees or more. Small businesses are those with up to 49 employees. Small businesses do employ the majority of Americans and are properly represented here.

Anecdotally, you might find it interesting that construction added jobs for the second straight month, adding 5,000 in July. That offers support to companies like Jacobs Engineering (NYSE: JEC), KBR, Inc. (NYSE: KBR) and PulteGroup (NYSE: PHM). It all depends on what type of construction is going on, and I suspect a lot of it is around the development of natural gas reserves and distribution (or once Keystone moves forward). Some of it may be related to public infrastructure development in markets that can support that now, like say in Texas and North Dakota. And some of it might be from large publicly traded builders, now benefiting from the demise of smaller competition, and in some cases, development of multi-family unit facilities for our Renter Nation.

Surprise, surprise, financial services firms added 9,000 jobs in July; actually it was the 12th straight month of net job additions for the sector. I suppose the Facebook (NYSE: FB) IPO single-handedly played an important role in new hires at Morgan Stanley (NYSE: MS) and J.P. Morgan Chase (NYSE: JPM). As we all know, the large banks have been shedding jobs en masse, with Bank of America (NYSE: BAC), Citigroup (NYSE: C) and others seriously contracting their operations. I hear the banks are having to hire a bunch of people to manage all the claims against their mortgage writing operations though. Also, regionals like TD Bank (NYSE: TD) and PNC Financial (NYSE: PNC) are benefiting from the handcuffed operations at larger banks, so some hiring might be developing on the regional level. Sheriffs do not count as financial jobs, so all the hands-on foreclosure work is not accounted for there.

Commentary on the report offered wisely tempered enthusiasm from ADP’s President and CEO Carlos Rodriguez, who noted that a better and more consistent rate of job increases would be more meaningful. It was the 30th consecutive month of job gains, but the last three months of total nonfarm job growth dropped off significantly from Q1, so there’s a sense (obvious to some) that something might be changing for the worse.

Another commentary offered on the report suggested tentative hiring due to worry about European crisis and domestic fiscal policy. While that is certainly the case, the American economy is without a doubt feeling real and tangible impact from European recession and slowing China growth. Also, in the U.S., our economic recovery has been hobbled by the scars of the financial crisis, including jobs that will never come back and a burdened and damaged financial system. So, it’s pretty tangible, and should not be brushed off. In other words, the wolf really is out there.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Jobless Claims Gains Askew

Before you get too excited about the latest Weekly Jobless Claims Report, read this. Jobless claims fell by 26,000, to 350K, perhaps raising an eyebrow or two since it was the best such data since March of 2008, and at the strangest time for it. Before long, though, pundits and the press were attributing the improvement to another factor, which was at least partly to blame.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Jobless Claims

Jobless claims improved because plant operators like Ford (NYSE: F) and General Motors (NYSE: GM) pushed forward their regular summer shutdowns. Since the Jobless Claims data is seasonally adjusted, it accounted for the seasonal shutdowns without some of them occurring and perhaps erroneously deflated the jobless count in the process. When combined with the impact of a strangely placed Independence Day holiday in the center of the week, it sent the data askew. For that reason, wait a while before celebrating the latest jobless claims dive.

The best sign that something was wrong could be found in the movement of the employment services group. The shares of Robert Half International (NYSE: RHI), Korn Ferry International (NYSE: KFY), Kelly Services (Nasdaq: KELYA), Monster Worldwide (NYSE: MWW) and Manpower (NYSE: MAN) were lower from 0.6% to 4.5% on the day Thursday.

The rest of the report showed the weekly decrease impacted the four-week moving average as well, as it fell 9,750, to 376,500, for the week ending July 7. For the week ending June 30, the insured unemployment rate held at 2.6%. For the week ending June 23, the total number of people receiving benefits of some sort, including through the extensions program, rose by 17,011, to 5.874 million.

As far as the weekly flow of jobless claims go, you can expect more noise to enter the picture when the plant operators actually do shut down and it goes unaccounted for. So, in other words, this data point could get messy again this summer.

For your information:
The highest insured unemployment rates in the week ending June 23 were in Puerto Rico (4.1), Alaska (3.9), Pennsylvania (3.8), Connecticut (3.5), California (3.4), New Jersey (3.4), Rhode Island (3.3), Illinois (3.1), Oregon (3.1), Nevada (3.0), and the Virgin Islands (3.0).

The largest increases in initial claims for the week ending June 30 were in New York (+4,473), Kentucky (+2,252), Michigan (+1,742), California (+1,045), and Oklahoma (+843), while the largest decreases were in Florida (-3,724), Texas (-2,196), Pennsylvania (-2,113), Massachusetts (-1,325), and Maryland (-806).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Employment Report Shows Deterioration by My Analysis

The Department of Labor (DOL) hardly reported any change in the job market today when it issued its Employment Situation Report for the month of June. Still, the data fell short of economists’ expectations and was a letdown after ADP’s Private Employment Report offered some hope Thursday. As a result, the broader stock indexes were lower through midday trade Friday, with the SPDR S&P 500 (NYSE: SPY) down 1.3% and the PowerShares QQQ (Nasdaq: QQQ) off 1.7%. My analysis shows that the market’s discounting reflects an accurate assessment of an employment environment that is in fact already deteriorating. So, while some are concerned about a possible storm forming, I feel the wind already picking up.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Employment Report

The Labor Department’s Employment Report showed the unemployment rate held at approximately 8.2% for the third straight month, meeting economists’ expectations for the same malaise. The worst thing about this data point is that a trend of improvement existed but has now come to a halt. The civilian labor force grew by 0.1%, but as the number of employed rose 0.09%, the number of unemployed Americans increased by 0.2%. It wasn’t enough of a change to reflect deterioration in the unemployment rate, but it is moving in the wrong direction now. The employment-population ratio stuck at 58.6%, so it was hard to see the minute change for the worse. Further along this report, I offer more evidence of a deteriorating trend.

What bothers me most is that the lagging unemployment rate may today reflect corporate managers’ concern about developments in Europe, China and here at home. Europe is in recession; the data that would have confirmed that was only fractionally short of showing two quarters of euro zone economic contraction. Data since the last quarter GDP report for the euro zone has only deteriorated amongst the PIIGS while infecting the previously healthy cornerstones of the EU, France and Germany. Chinese data after data point supports the case for a serious slowdown in the economic growth of the important global player. China has offered a sort of nitrogen boost to the global economy, keeping the crisis in the U.S. from driving a global recession and depression for some. My feeling now is that the globally interconnected economy, with China still too dependent on its western business partners, is headed for a simultaneous hit.

Managers may not be laying off many more employees than they had been when the Weekly Jobless Claims flow was flirting with 350K, but they do appear to be laying off more folks. Hiring, likewise, is restrained, even as workers complain of being overburdened, though economists mostly consider slave-workloads as part of worker productivity. The truth is, we’ve been squeezing the last drops of juice out of our labor force for too long and people are probably burning out. The average workweek edged higher again in June, yet employment hardly changed.

The truth remains that our unemployment rate understates the true depth of decline in the labor market. In the latest reported period, the situation deteriorated if we include the underemployed and the so-called “marginal” into the count. In June, Americans working part-time for economic reasons, or those people who would rather be working full-time jobs then part-time hours at McDonald’s (NYSE: MCD) or Wal-Mart (NYSE: WMT), increased 1.4%, to 8.2 million. Those Americans who are considered only marginally attached to the labor market, because they have not sought work for more than 4 weeks, increased 2.5% to 2.48 million. In calculating “underemployment,” if we add back the excluded 2.483 million displaced workers to the labor market, and include the 8.21 million underemployed part-timers in the unemployed count, adjusted unemployment reaches ((12.749M + 2.483M + 8.21M) / (155.163M + 2.483M)) * 100 = 14.9%. Last month, the rate was ((12.720M + 2.423M + 8.098M) / (155.007M + 2.423M)) * 100 = 14.8%. This confirms that the situation is deteriorating, and not stagnant. Therefore, stocks were correct in their reconsideration of what was painted as mixed news by the popular press and talking heads with stakes in the game.

Establishment Data
Total nonfarm payrolls increased by 80,000 in June, up from the revised 77,000 increase seen in May. The DOL reports that the average monthly net job addition of the second quarter was 75,000; that’s not hot. As a matter of fact, it compares pretty poorly to the average monthly gain of 226K seen in the first quarter of 2012.

The public sector bleed of the last few months eased in June, as government jobs declined by only 4,000, versus 28,000 in May. The private sector should better reflect the economy and it disappointed. Private nonfarm payrolls increased by 84K, down from the 105K increase in May. Take note of that point, as it reflects what I believe is a young trend’s start. Private Services Industries, a critical driver of the economy, reported a 71K job increase in June, versus the larger 126K increase in May. A 47K increase in Professional and Business Services jobs outweighed declines in Retail Trade, Information and Transportation and Warehousing.

Here’s my problem with the gain in Professional and Business Services: it was greatly driven by a 25K position increase in Temporary Help Services. Some pointed to this data as a positive, but I see it differently. While I agree that temporary help additions are a positive sign when the economy is exiting recession, I believe that while we are in a more stable environment, a hiring surge in temporary help is a bad sign. I believe it shows employer unwillingness to hire full-timers. In other words, that conservatism only reflects the caution of employers, which could be the forerunner of a layoff surge. Ironically, temporary help provider Kelly Services’ (Nasdaq: KELYA) shares are down 2.1% at this hour. Other employment services firms like Robert Half International (NYSE: RHI), Korn Ferry International (NYSE: KFY) and Manpower (NYSE: MAN) are all lower 2% or more Friday.

The Manufacturing Sector added 11,000 positions in June, driven by the support of the automakers (+6.7K) Ford (NYSE: F), GM (NYSE: GM) , Toyota (NYSE: TM) and others producing in the U.S. Durable Goods makers added 14K jobs in June, so I suppose give thanks to Boeing (NYSE: BA), which had twice as many orders as expected recently, and maybe producers like Northrop Grumman (NYSE: NOC), Lockheed Martin (NYSE: LMT), General Electric (NYSE: GE) and Deere (NYSE: DE). Though, I have my doubts about industrial sector shares, given the latest ISM Manufacturing data and peripheral indications from regional Fed districts. I do not expect the same result for manufacturing in coming months, including basic materials producers of industrial commodities like Alcoa (NYSE: AA).

In conclusion, I believe the market is correct to discount stocks today. I believe I’ve shown that a new trend of deterioration seems to be developing, and it would more likely gain steam than subside given the decline of our interconnected trading partners. Without a doubt, we also stand on unsteady ground, where any system shock would easily drive us into recession. Those risks loom; one of which is hinged to the risk of some sort of escalation of issue with Iran. Today, the noose is tightening on Iran, as sanctions against its oil trade hit home. The Iranian regime is cornered, and a cornered dog is a desperate one. Europe has not mitigated its crisis as yet, as yields remain elevated for Spain and Italy and as the German economy shows small cracks. Fiat currency continues to flow as freely as central banks can pour, so that even while deflation weighs, inflation may loom – or even worse, stagflation. So, as you can tell, I’m anxious about our future and your money.

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