Shame all around (Michael Pento) and a few Grandpa comments

Thursday, December 16, 2010
Other Michael Pento Posts
By: Michael Pento

Shame on the Department of Labor for once again having to revise the previous week’s initial jobless claims number higher. In the week ending December 11th, Initial claims came in at 420k, after being revised up by 2k in the prior week.

The number of people continuing to collect jobless benefits rose by 22,000 in the week ended Dec. 4 to 4.14 million. The continuing claims figure does not include the number of workers receiving extended benefits under federal programs. Those who’ve used up their traditional benefits and are now collecting emergency and extended payments increased by 324,537 to 4.83 million in the week ended Nov. 27.

On another front, the U.S. continues to hemorrhaging red ink on every front. The U.S. current account deficit widened to $127.2 billion in the third quarter from $123.2 billion in the second quarter, the Commerce Department reported today. As a percentage of GDP, the deficit increased to 3.5% in the third quarter, which was the largest share since the fourth quarter of 2008, from 3.4% in the second quarter. The overall deficit widened as the deficit on goods hit $171.2 billion in the third quarter, compared with $169.6 billion in the second quarter. The current account deficit consists of the trade deficit (exports minus imports of goods and services), net factor income (such as interest and dividends) and net transfer payments (such as foreign aid) and is the broadest measure of capital moving outside of the United States.

So the ersatz recovery is well on track but it is completely based on massively upping the ante on borrowing and printing. Just a minor detail investors would do well not to ignore. Shame...

Michael Pento, Senior Economist at Euro Pacific Capital is a well-established specialist in the “Austrian School” of economics. He is a regular guest on CNBC, Bloomberg, Fox Business, and other national media outlets and his market analysis can be read in most major financial publications, including the Wall Street Journal. Prior to joining Euro Pacific, Michael worked for a boutique investment advisory firm to create ETFs and UITs that were sold throughout Wall Street. Earlier in his career, he worked on the floor of the NYSE.

Additional observation by Grandpa:

The Department of Labor's seasonal adjustments have not remotely accounted for the actual # of people filing initial jobless claims. Granted, the U.S. stock market does not care about any "real" figure given the fact that Bernanke has afforded the market manipulators ample capital to push stocks to the moon.

Today, the Department of Laughter Labor reported seasonally adjusted initial jobless claims of 420,000 although the non-seasonally adjusted claims (a.k.a. real people standing in line) was 486,284. For the prior week report (12/4/10), the Department of Laughter Labor reported seasonally adjusted initial jobless claims of 423,000 however the non-seasonally adjusted figure was 555,382. During this two week period, DOL seasonally adjusted out 198,667 Americans.

The DOL seasonally adjusted out the equivalent population of San Bernardino, CA and more than the entire population of Mobile, AL, Grand Rapids, MI or Fort Lauderdale, FL. Salt Lake City, UT would need to add 15,000 to their entire population just to equal the number of people DOL adjusted out of the initial claims report during the prior two weeks.

Obama rolling over for a Republican belly rub, sorry kids: Obama Near Deal to Extend All Bush Tax Cuts

CNBC and Reuters
12/6/10

President Obama is expected to announce shortly that he is close to a deal with congressional leaders to extend all the Bush-era tax cuts for two years, NBC News reported.

The deal is said to be "all but done," a source told NBC.

The broad outlines of the the agreement call for:

• Two-year extension of all Bush tax cuts
• A 13-month extension of unemployment benefits
• A two percentage point cut in the payroll tax for one year.
• An estate tax at 35 percent with a $5 million exemption, proposed by Republicans.

The overall cost in lost revenue to the government is at least $450 billion in 2011 and could climb as high as $600 billion depending on how much the economy grows over the next two years. Link to the Obama rollover belly rub

Happy Holidays, Congress Back and Unemployment Benefits NOT EXTENDED

800,000 of the 15 million unemployed

Americans received their final unemployment

benefits check. Happy Holiday Greetings

from your elected "representatives."

(No need to panic, Obama stated he had a productive meeting

with the Republican leadership yesterday...you know, that

bipartisan thing...)

The Associated Press, Reuters,
NBC News and msnbc.com staff
contributed to this report.
12/1/10

Extended unemployment benefits for nearly 2 million Americans begin to run out Wednesday, cutting off a steady stream of income and guaranteeing a dismal holiday season for people already struggling with bills they cannot pay.

Unless Congress changes its mind, benefits that had been extended up to 99 weeks will end this month.

Hours before beefed-up benefits were set to expire at midnight on Tuesday, Democrats sought to extend them for another year. But they were blocked by Republican Senator Scott Brown, who said Democrats should have taken time to work out a compromise.

"It's not the way to do business in the United States Senate, and if it is it needs to change," Brown said.

With the unemployment rate stuck at around 9.6 percent, the two parties have been sharply divided over how to cover the cost of weekly checks that help jobless people stay afloat.

'Immediate crisis'
Congress has let jobless benefits lapse twice already this year as Republicans insist the cost — $160 billion in the last fiscal year — be offset by cuts elsewhere to prevent the nation's $13.8 trillion debt from growing further.

"I think we have to deal with the immediate crisis," Democratic Senator Jack Reed said. "I think we have to deal with the families that are struggling today."

Jobless benefits usually expire after six months, but since the recession took hold in 2007 Congress has voted to extend them for up to 99 weeks.

Nearly half of the 15 million unemployed people in the United States have been out of work for more than six months, the highest level of long-term unemployment since the government began keeping track in the 1940s.

Christmas is out of the question for Wayne Pittman, 46, of Lawrenceville, Ga., and his wife and 9-year-old son. The carpenter was working up to 80 hours a week at the beginning of the decade, but saw that gradually drop to 15 hours before it dried up completely. His last $297 check will go to necessities, not presents.

"I have a little boy, and that's kind of hard to explain to him," Pittman said.

The average weekly unemployment benefit in the U.S. is $302.90, though it varies widely depending on how states calculate the payment. Because of supplemental state programs and other factors, it's hard to know for sure who will lose their benefits at any given time. But the Labor Department estimates that, without a Congress-approved extension, about 2 million people will be cut off by Christmas. Complete MSNBC Article

Unemployment Limbo, "A Terrible, Terrible Thing"

CNBS Really Needs to Get Out and Spend

a few Minutes on Main Street.

The glass is not always 1/2 full Erin.

By Arthur Delaney
Huffington Post
11/24/10

WASHINGTON -- Rona Wells of Las Vegas worries that she'll be homeless in no time if Congress fails to reauthorize extended unemployment benefits that are scheduled to expire next week.

"That's it. I'll be out on the street," Wells, 60, told HuffPost. "I have two checks left and those two checks are going to the rent. I'm not paying any bills, and so my bills are gonna be overdue, but I feel it's more important to have a roof over my head."

Wells said she lost her job as a telemarketer in January, along with 80 other people. "I was making very good money and they just closed the office," she said. "I came in on a Friday afternoon and right after lunch they said, 'Everybody go home.'"

She's been getting by thanks to the $375 she receives every week in unemployment benefits. The first six months were covered by the state. The federal government covered the next five as the first "tier" of a program called Emergency Unemployment Compensation, which, along with a program called Extended Benefits, provides up to 73 weeks of federally-funded jobless aid.

Those programs expire next week. About 800,000 people on Extended Benefits will be dropped almost immediately, according to the National Employment Law Project, and another 1.2 million will find themselves ineligible for the next tier of Emergency Unemployment Compensation over the course of December.

Nobody knows what to expect, but many suspect that Democrats will cut a strange deficit-busting deal with Republicans to preserve the benefits by attaching them to a reauthorization of expiring tax cuts for the rich. A coalition of 28 Senate Democrats led by Sen. Bob Casey (Pa.) sent a letter to Senate Majority Leader Harry Reid (D-Nev.) Wednesday urging a hasty reauthorization.

"For the past six decades, Congress has provided federally funded unemployment insurance benefits during every recession," the letter said. "Further, federal unemployment insurance benefits have always been provided until the economy was on a stable path of growth. In fact, the highest unemployment rate at which federally funded unemployment benefits were not extended was 7.2 percent."

Wells said her job search has been "horrible." The unemployment rate in Nevada is 14.2 percent, the highest of any state. "I've been sending out resumes every week," Wells said. "I've been sending out maybe about 50 a week, sometimes more, sometimes less, and nobody ever answers you."

Members of Congress have no understanding of what it's like to struggle to find work, she said. "They don't understand that. They go home to their comfy homes and wonderful families and they have a paycheck that's given to them by us," she said. "I hope they [reauthorize the benefits] not only for myself but for everybody that's out there suffering. It's just a terrible, terrible thing."

Wells said she'll be unable to afford her COBRA health insurance payment in December. She's particularly annoyed that members of Congress receive comprehensive health insurance on the taxpayer dime. (If they paid for it themselves, it would save a few million dollars every year.)

"I think it's time that they start paying for their own medical care," she said. "People who go to work have to have their money taken out to pay for their own health care. Why shouldn't Congress do it? Why should they get a free ride?"

In addition to CBNS visiting Main Street, the Department of Labor could use some Main Street time in an effort see faces of those they seasonally adjust out of their reports. DOL seasonally adjust out 55,000 people

Thirty one states have borrowed nearly $41 billion from the federal government as their unemployment insurance well is dry

"This is something that is going to impose

an additional payroll tax on businesses

in almost all those states just at the time when

we're trying to keep the cost of hiring down,"

By SARA MURRAY
The Wall Street Journal
11/19/10
State governments are borrowing heavily from the federal government to keep paying unemployment-insurance benefits and, even with the weak job market, most states are raising payroll taxes to pay off the loans.

Thirty one states, their unemployment-insurance funds empty, have borrowed nearly $41 billion from the federal government. California alone has borrowed nearly $8.8 billion as of mid-November, according to the Labor Department.

As states try to replenish the funds and begin to repay the loans, employers are facing increases in both state and federal payroll taxes, a potential barrier to new hiring.

"Employers were hit with these adjustments quite a bit last year," said Richard Hobbie, executive director for the National Association of State Workforce Agencies. A National Employment Law Project analysis found 41 states increased unemployment-insurance payroll taxes this year by an average of nearly 33.9%. The largest was a 168.5% boost from 2009 in Hawaii.

Payroll taxes levied by states fund unemployment benefits for up to 26 weeks—and longer in some states. The federal government requires states to pay benefits even if their unemployment funds run out of cash. As in past periods of high joblessness, the federal government has paid for extended unemployment benefits, this time for as long as 99 weeks.

The unemployment-compensation system, initiated during the Great Depression, was designed so most states build reserves when jobs are plentiful and few workers are receiving benefits, and then draw down the reserves in bad times. But few states were prepared for a recession as deep and lasting as the recent one, with unemployment remaining at a historically high 9.6% a year after the economy resumed growing.

During the 2008-09 fiscal year, states collected $31 billion of unemployment-insurance taxes and spent $79.4 billion on jobless benefits. Taxes are typically levied on a per-worker basis.

Arizona, which owed the federal government $172.8 million as of mid-November, increased its tax on employers by more than 50% at the beginning of this year to an average of $145.60 a year per employee. "The dilemma we face is, how do you do that without hurting the economic recovery we all hope is coming?" said Steve Meissner, communications director for the Arizona Department of Economic Security. "No one wants to do anything that would impose a new tax burden on businesses that are trying to come back in a tough economic time."

Indiana Gov. Mitch Daniels proposed cutting unemployment benefits earlier this month despite his state's 10.1% unemployment rate. Indiana has borrowed nearly $1.9 billion from the federal government to shore up its unemployment-compensation fund; next year, the state is to begin taxing businesses more to replenish the coffers.

Federal loans to states have so far been interest-free under a provision in the Obama administration's 2009 fiscal-stimulus law. But that waiver expires in January.

Texas, which has borrowed nearly $1.6 billion from the federal government and raised employer taxes, is offering $1.1 billion in tax-exempt bonds to repay loans before Washington begins imposing interest charges because, said Ann Hatchitt, a spokeswoman for the Texas Workforce Commission. The state, which employed the same strategy in the early 2000s recession, figures it will pay investors less than it has to pay the federal government.

The federal government also imposes a payroll tax on employers to fund unemployment compensation. In certain circumstances, Washington will increase its tax on companies in states that aren't repaying loans from Washington. Employers in as many as 26 states will face tax increases of between $21 and $84 per employee per year if their state governments don't repay Washington by November 2011. Employers in Michigan are already paying the added fee.

A business-advocacy group, Strategic Services on Unemployment & Workers' Compensation, is urging Congress to waive the interest on federal loans and delay the federally mandated tax increases until 2012. "This is something that is going to impose an additional payroll tax on businesses in almost all those states just at the time when we're trying to keep the cost of hiring down," said Douglas J. Holmes, president of the organization.