The latest unemployment numbers are out and the situation continues to look grim. While layoffs slowed to 539,000 jobs lost in the month of April, down from 699,000 jobs in March, the unemployment rate continues to rise. The official government reported number currently stands at 8.9%, though the argument could easily be made that true unemployment is significantly higher.

Yes, the job loss rate slowed in April. That is nothing to get excited about, especially when you consider that this is the 16th consecutive month of job losses AND there is no sign of increased hiring activity. Simply put, the U.S. economy is far from recovery.

Only 4 months into the year, I still hold to my view that unemployment will hit 10% by the end of December.

UPDATE: The TRUE Unemployment number is…

Above I noted that the 8.9% unemployment rate is debatable. Why is that? The 8.9% represents “Totally unemployed, as a percent of the civilian labor force”.

Got that? Good. When one looks at “Total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers” then unemployment jumps to 15.8%

But what is this whole “marginally attached workers” thing you speak of?

Simply put, a marginally attached worker is a person who currently is neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the recent past.

They are the despondent, those who have given up hope. So, take those who still are looking for work (hopeful) and those who are not (given up) and one arrives at 15.8% – that is your TRUE unemployment number.

The automotive maker report yet another horrific month of sales.

U.S. auto sales fell 37 percent in March, a smaller-than-expected drop that encouraged hope the world’s largest car market is nearing a bottom after a freefall that has pulled the industry into a deepening crisis.

Break down the numbers:

• GM sales were down 45%
• Ford Down 41%
• Chrysler and Major Japanese Automakers down 36% to 39%

Of the current conditions, an S & P analyst said:

“We believe we may be at or near the trough of the industry’s year-to-year comparisons but do not see an uptick in industry demand before (the fourth quarter) at the earliest,”

Just to point out, this is the third month in a row that someone from S & P has stated we are at or near the industry year-to-year bottom. I guess they are following the theory that if one says it enough it will come true.

Update – 11:09 PM: For perspective, take a look at the sales numbers from Jan 09.  The latest numbers are far worse for GM and Ford. So much for finding a bottom, huh?

GM – also known as Government Motors – ask for ANOTHER 2.6B from the government

General Motors looks to be heading toward bankruptcy… a “controlled” bankruptcy… backed by taxpayer funding. 

Aside from the fact that GM obtained Billions from the government simply to stay alive this far into 2009, they still have the balls to ask for EVEN more money but this time they are playing the “clean technology” card.

General Motors Corp has asked for $2.6 billion of low interest government loans to support the development of three new hybrid vehicles, according to a business plan update released on Wednesday.

GM’s loan request, which would help develop two spinoffs from its all-electric Chevrolet Volt, raises to $10.3 billion the aid it is seeking under a U.S. Energy Department program designed to support development of fuel-efficient vehicles.

It will be interesting to see if the Department of Energy approves the loans or not. At this point it has become virtually impossible to even form a guess as to what is going to happen next in the automotive industry.

ADP Unemployment Report

Friday the U.S. Department of Labor is expected to announce the NonFarm Payroll report. While economists are predicting a loss of 670,000 jobs, ADP, one of the largest payroll company in the world, release actual number on Wednesday for the month of March – 742,000

Where will the unemployment rate under up this month? We are already 8.1% but with such a large number of layoffs in the month of March, I’m guessing we will be up to 8.5%… maybe a bit higher.

With no end in sight to the layoffs I still suspect the U.S. economy will see a recorded rate of unemployment of 10% by the end of the year.

Gas

Depending on where you live in the country, the price of gas will vary.  There are a number of factors that play into the regional price – local emission requirements, demand, refinery capabilities – but overall the price should be semi-reflective of the oil consumption/demand of the nation (or world) in general.

Have you noticed that the price of oil has dropped within the last year?  Damn right you did, because you say the price of gas drop significantly. Within the last month, however, have you noticed that the price of gas is starting to slowly creep upward?  You may not have noticed yet, but I’m guessing you will shortly.

In Chicago, the price of gas is ranging from $2 to $2.25.  Seeing that the price of oil is range bound from $35 to $45, doesn’t it see peculiar that the price of gas is starting to rise?

The rise in gasoline is directly tied to the oil companies – this time.

When the price of oil was at $147/per barrel, the oil companies had no choice but to raise the price of gas.  To place blame on those organizations for the jump was unfair as they had very little control over the energy market, the futures traders and investors did.  This time, it seems, the oil companies are moving the price up due to technical issues, as well as the decision to cut refinery capacity due to “a lack of demand”.

Such action on the part of oil companies appears as if they are testing the limits of the consumers.

Unemployment

Yep, the nationwide unemployment rate hit 8.1% this past February.  That is a jump of half a percent from January’s 7.6%.

Quite scary, no?

Here is something even scarier: If you are black, unemployment is now at 13.4%

“Unfortunately, the black unemployment rate is typically about twice the white unemployment rate,” said Algernon Austin, director of the Washington, D.C.-based Economic Policy Institute’s Race, Ethnicity and Economy Program.

“In recessions, you typically see a black unemployment rate increase significantly.”

The coming week doesn’t have a lot of economic data, but the market will continue to look for evidence of a recovery.  My guess would be that the market will continue to bounce around current levels.

Things to watch

I have the last Futurama Movie, “Into the Wild Green Yonder” in my possession and hope to watch and review at some point this evening.

I’m rather torn about watching this movie, as I believe this will be the last in the series.  The initial DVD Movie Release did very well despite the fact that the effort was sub par. The second movie was… just weird… while the third returned Futurama to the glory fans used to know. I would love to see the show continue on, but I fear the writers are trying too hard…

On to another show…

Season Three of Venture Brothers is coming out on 03/24/09.  If you’ve never experienced the joy that is Venture Brothers, I suggest you start with Season 1.  You’ll find some of the best comedic writing on television, hands down.

Do you, or your man, need a mirdle?

A London department store is hoping to cash in on the lucrative men’s underwear market Thursday by launching a throwback to the Victorian era, a gut-cinching garment that designers say will help men make it through these belt-tightening times.

The stretchy contraptions resemble normal sleeveless tank tops or long-sleeved T-shirts — only shrunk down two or three sizes in a special blend of Spandex, nylon and polyester. Control underwear will be launched later this year.

“It makes waists look trimmer, improves posture and helps men get into the latest slimmer-fitting suits,” said Gavin Jones, head of the Australian company Equmen, which launched its male shapewear line in Selfridges on Thursday. “Men are under a lot of pressure right now to perform financially, socially and romantically. Why shouldn’t we have the same products that women have had for years to make us feel better?”

Really?

It’s called eating less and working out.  Look into it.

UPDATE: 03/09/09

Yeah, no Futurama “Into the Wild Green Yonder” review this envieng.  I got caught up in another project I was working on.  I’ve added it to my list to do for tomorrow! Now I’m off to play some Bioshock.

Anyone who even casually follows the financial market is well aware that today a horrific day in the Stock market.  While the Economy (and stock market) experienced a large amount of pain over the last 6 months, today appeared to be even more painful for a number of reasons.

• General Motors finally admits “there is substantial doubt” about their survival

Despite massive restructuring efforts, despite the loans provided by the government, and despite everything the company has said previously, General Motors finally admitted what the rest of the world already knew – the end of the road is close for General Motors.

Deloitte & Touche, the GM’s auditors, made the following statement: 

The corporation’s recurring losses from operations, stockholders’ deficit, and inability to generate sufficient cash flow to meet its obligations and sustain its operations raise substantial doubt about its ability to continue as a going concern.

Having experience in the world of audit, this is the professional way of saying “Bankruptcy is going to happen”.  

The major question that is on the minds of most is how this bankruptcy take place?  Will the government act as the funding institution, propping up General Motors during the restructuring process, or will GM face a massive liquidation event pushing the into the pages of oblivion?

President Obama previously stated that he will not allow the American auto industry to fail, and Congress has already provided funding to GM and Chrysler, so what wouldn’t the Government act as the financier for a GM bankruptcy?  

Maybe government officials would fear the backlash from the general public.  

The world will not end when General Motors goes bankrupt, but it will be painful.  Other companies will suffer the same fate as a result and the stock market will whipsaw with uncertainty but we will all survive.  Politicians, however, may not survive the next round of elections if huge amounts of public funding are dedicated to propping up a company that has no hope of survival.

• The list of 19 banks undergoing a “stress test” was released:

 

Name	Total Assets (Billions)
1. JPMorgan Chase	2,175
2. Citigroup	1,947
3. Bank of America (1)	1,822
4. Wells Fargo	1,310
5. Goldman Sachs	885
6. Morgan Stanley	659
7. MetLife	502
8. PNC Financial Services	291
9. U.S. Bancorp	267
10. Bank of New York Mellon	238
11. GMAC	189
12. SunTrust	189
13. State Street	177
14. Capital One Financial Corp.	166
15. BB&T	152
16. Regions Financial Corp.	146
17. American Express	126
18. Fifth Third Bancorp	120
19. KeyCorp	105

 
What does this say to you?  The majority risk really falls within 6 institutions.  Unfortunately, institutions 2 and 3 are suffering the most on this list.

• 12% of U.S. Mortgage holders are either behind in their mortgage payments or in forclosure

This one is HUGE.  A record number of mortgage holders, 5.4 million, are delinquent in with their monthly payments.  

The Mortgage Bankers Association said Thursday the percentage of loans at least a month overdue or in foreclosure was up from 10% in the July-September quarter and up from about 8% a year earlier.

The scary part of this information, aside from the drastic rise, is the location(s) of the delinquent mortgages – Louisiana, New York, Georgia, Texas and Mississippi.  The mortgage crisis is spreading beyond the borders of California, Florida, Arizona and Nevada.  What was once a localized but highly publicized event is truly becoming a nationwide crisis.  

• Citibank hits an all time low… of 97 cents

I never thought the day would come where Citibank, once the largest bank in the world, dropped below the one dollar mark today.  While this not “economic” news it is important none the less as the price is a psychological indicator – the stock market believes that Citibank will not survive the financial meltdown.

And what does tomorrow bring?

Pundits and market watchers expect Friday to be an extremely volatile day – at 7:30 AM the new Unemployment rate will be announced. Economists predict unemployment to come in at 7.9%.  Lower and the market may celebrate.  Higher and the day may see a sell off at the open.

No one knows what awaits for us tomorrow, but it sure will be fun to watch…

UPDATE: 03/05/09 - Treasury Secretary Geithner’s choice for deputy withdraws

The person Treasury Secretary Timothy Geithner wanted as his chief deputy withdrew from consideration Thursday, dealing a setback to the understaffed agency as it struggles to address the worst financial crisis in decades.

Annette Nazareth, a former senior staffer and commissioner with the Securities and Exchange Commission, made “a personal decision” to withdraw from the process, according to a person familiar with her decision.

The decision followed more than a month of intense scrutiny of her taxes and multiple interviews. No tax problems or other issues arose during Nazareth’s vetting, said the person, who requested anonymity because Geithner’s choice of Nazareth was never announced officially.

So, did Congress find something in her past or did she simply get fed up of the inquisition?

Within the last 6 weeks the nation was told that consumer confidence has dropped to an all-time low, foreclosure rates jumped 81% in 2008, unemployment now stands at 7.6%, the auto industry faces the worst market in decades, and the national deficit will be the largest ever – 1.5 trillion – what else is there that could be said that we don’t already know?

How about a bit of potential hope?

This morning, the Fed Chairman Ben Bernanke said the following:

In their economic projections for the January FOMC meeting, monetary policy makers substantially marked down their forecasts for real GDP this year relative to the forecasts they had prepared in October. The central tendency of their most recent projections for real GDP implies a decline of 1/2 percent to 1-1/4 percent over the four quarters of 2009. These projections reflect an expected significant contraction in the first half of this year combined with an anticipated gradual resumption of growth in the second half.

Federal Reserve policymakers continued to expect moderate expansion next year, with a central tendency of 2-1/2 percent to 3-1/4 percent growth in real GDP and a decline in the unemployment rate by the end of 2010 to a central tendency of 8 percent to 8-1/4 percent.

If actions taken by the Administration, the Congress, and the Federal Reserve are successful in restoring some measure of financial stability–and only if that is the case, in my view–there is a reasonable prospect that the current recession will end in 2009 and that 2010 will be a year of recovery.

With the inconsistent message coming out of the last two administrations regarding the economic climate, I’m unsure how to take Bernanke’s comments. Is he implying that, in the best of all possible worlds, if everything good that can happen does, the economy will start to grown once again at the end of this year?

The world we live in today has very, very pessimistic economic data in every category – none of which points to a near term recovery – so what information is Bernanke (and the Fed) looking at to draw this conclusion? Bernanke does not appear to be a person who would make a statement in order to calm the stock markets, so this just makes me wonder what else is going on that we are unaware of.

One thing I fear about the current economy, and the attempts to move a recovery forward is President Obama’s pledge to cut the federal deficit by roughly half over the next four years.

No detailed approach has yet to be presented to the public, but what little information that is known points to a significant cut in defense spending (ending/scaling back the war in Iraq) and raising taxes on the nations richest.

What bothers me about the heavier taxation is the potential effect on the recovering economy. During the Great Depression, Hoover raised taxes as an attempt to balance the budget. This decision only lengthened, if not strengthened, the economic downturn. While one would not expect the top marginal rate to rise to great depression levels, it still is a dangerous line to walk – less disposable income leads to less economic activity.

Another bit of promise was provided by Bernanke today when he plainly stated:

“We don’t need majority ownership to work with the banks,” Bernanke said today. “We have very strong supervisory oversight. We can work with them now to do whatever is necessary.”

Translation: There is no need to nationalize banks.

That is what the administration is saying right now, but as this entire situation has taught economists everywhere this is an ever-changing situation. What is workable today my not be so tomorrow.

With the President speaking this evening, and Treasure Secretary Tim Geithner presenting more information on the banking plan tomorrow, the next few days will be very interesting to watch.

2/24 – 8:17PM UPDATE

Calculated Risk has an interesting question/point on this very subject.

If the banks are seriously insolvent, this sounds like the zombie bank approach and rewards existing shareholders at the expense of taxpayers. If the banks are not seriously insolvent, this is a reasonable approach. But how does Bernanke know the solution before the data is available from the stress tests?

So how can Bernanke say that no nationalization will take place if the data to determine so has not yet been established?  Makes one wonder just a bit more, doesn’t it?  I want to know what Bernanke knows that he is not saying…and if he is not syaing it, why is he withholding the information?  It’s clearly positive if he can determine that no nationalization is needed.

At this very moment I happen to be watching a new Discovery Channel program called “One Way Out” and I’, not sure if the host is a total nut job, highly intelligent or both.  I’ll tell you this, it’s quite entertaining to watch.  It’s almost part Jackass and part Myth Busters.

It’s not for the faint of heart though.  

Anyway, there a number of things that happened today that I have some thoughts about.  Let’s start with Illinois Politics

Rod Blagojevich 

The impeachment trial of Rod Blagojevich started today, and guess what… we wasn’t there!  He decided that the trial “wasn’t fair” and simply decided he wasn’t going to show up.  Instead he was all over talk shows this morning acting as if this was no big deal.

When pressed on comments he allegedly made about selling the open Illinois Senate seat he said “I can’t confirm or deny anything when I haven’t had the chance to hear all the tapes. Whatever the tapes are, they will speak for themselves, I was working to try to make the right decision for the people of Illinois.” 

Is saying “I’ve got this thing and it’s fucking golden, and I’m just not giving it up for fucking nothing. I’m not gonna do it.” really looking out for the people of Illinois.  Yes, anything can be taken out of context, but there is a lot more in the transcripts that point to him trying to profit from the open position. Eventually, one can no longer take it out of context and see it is clear he was attempting to profit for himself and his wife.

The arrogance this man shows is amazing.

Timothy Geithner

As expected, the Senate confirmed Timothy Geithner as treasury secretary.  Let’s face it, the man is a crook. He cheated on his taxes multiple times and he employed an illegal immigrant.  He didn’t pay his taxes until it was clear he was going to be nominated for the treasure secretary, which makes one wonder if he would have ever paid at all if this position never came along.

Again, I want to know where the outrage is – in the press, in the Democratic and Republican parties, and the public in general.  A man who could not pay his taxes (either he forgot or chose to) is now in charge of the Internal Revenue Service.

More and more layoffs

When looking at things I could see happening in 2009, I suggested that economists were being overly optimistic and that I believe unemployment could hit 10%. All of a sudden the experts are starting to wonder the same thing. Today alone major corporations in the United States announced 40,000 layoffs.  40,000 in one day.  

Last year the economy lost 2.6 million jobs, this year has the potential to match that number.  With the public worried about their jobs, or if they will be able to pay the bills tomorrow, why would big purchases on their mind?  Easy answer, they wouldn’t be.  Unless some massive tax credit is provided to people who buy a home, the real estate market won’t be picking up any time soon… nor will the automotive industry (though, I would never expect the government to offer large tax credits for stimulate the auto industry at this point).

I still believe things will get worse before they get better.

Well, off to finish my TheraFul… still trying to shake this flu/cold.

The last post about the S&P volatility got me thinking about what 2009 has to offer for the stock market (and the economy).  I don’t have a crystal ball, so don’t take what I am saying as gospel truth… just putting two and two together based on information that is publicly available.   

1. The economy will stay in recession for most, if not all, of 2009.
2. Stock markets will continue to have volatility and remain range bound until October, shortly there after the market begins to move out of the range toward the positive in anticipation of the Recession ending in 2010.
3. Due to the massive amount of capital put into the market the dollar will remain weak unless there is a major war that breaks out.
4. The housing market is in the crapper for most of the year, values continue to fall and foreclosures will continue to rise – the fed will take more action to stop the decline in values which will create an environment that will allow for the housing market to bottom late in the year.
5. Unemployment will catch most people off guard and may go higher than 10%.
6. The credit market will being to defrost (and in some regards it already has) which will help the economy come out recession.  The big indicator here will be when Companies start to merge/buy each other out by returning to the credit market.
7. Inflation will be a non-starter in 2009 but will come back in full force come late 2010/early 2011.
8. More bailouts to come…

Again, I have no clue what is going to happen, no one does.  Just experience and a bit of knowledge talking.  

The big unknowns are the global and geopolitical factors.  A war breaking out, a major terrorist attack or huge natural disaster in a major economic zone can change the playing field in the blink of an eye.

 

Friday was witness to an alarming bit of news.  Ok, “bit” of news is not the way to put it, shocking is more like it.  533,000 jobs were lost in the month of November due to worsening economic conditions, significantly higher than the expected 400,000 positions.  

As if the news today wasn’t scary enough, one needs to look at the jobs lost last three months to understand the big picture on employment. 

(from bizzyblog.com)

Folks, that is roughly 1.3M lost jobs in three months.  At this point, it is understandable how 1 in 10 American homeowners with a mortgage are either at least a month behind on payments or in foreclosure and that unemployment went from 4.7 percent just one year ago to 6.5 percent this past fall.

The discussion about another great depression continues to circle the media.  Some say yes, some say no. While unemployment is currently nowhere near great depression levels, but remember that unemployment didn’t it 25% until roughly 1933 – almost 4 years after the market crash of 1929.  

It didn’t happen overnight then, and wouldn’t happen overnight now.  I fear another depression is in the on the way, or a hard rescession that of the early 70’s.  Eitherway, I still believe we haven’t even begin to see how bad things are going to get.

It’s no secret the US auto industry has been hurting for years.  While quality from GM and Ford has slowly improved over the past few years, US automakers have been able to shake the “poor quality” image.  Tack on other issues, such as paying lifetime retirement benefits for former workers and large amounts of debt, and the auto industry has their ticket for disaster.

I’m torn on the idea of a bail out for Ford, GM and others…  Yes, the economic slowdown and credit freeze only made the situation more problematic but it wasn’t solely caused by what has taken place in the last few months.  The problems facing the big three are really due to years of mismanagement and poor business decisions.  However, not taking action I fear would be far worse than moving forward with a bailout.  

I believe the collapse of GM would be absorbed by the marketplace but a collapse of GM and Ford, or GM and Chrysler, would send shockwaves throughout the industry.  Creditors and supplies would also lose monthly payments, causing others to seek bankruptcy, and a giant wave of unemployment would ripple outward.  It would only become a downward spiral.

Ignore the survival of the impacted companies for a second, how will this impact the employees.  How many people will face unemployment?  How many will face an uncertain future?

I was surfing around and I found a very interesting article on the culture of GM and Toyota.  While this doesn’t reflect the ranting I was just doing… it does go on to talk about how the two companies look at their workforce.  It’s really worth a read….