Unemployment

The gender unemployment gap

Changes in the Gender Unemployment Gap during Recessions

Another interesting piece was written by the St Louis Fed showing the gender unemployment gap of men relative to women. A negative spread shows that women have lower risk of unemployment relative to men in the 24 months after the start of a recession. Looking at the chart we see that in 1960 & 1969 female unemployment tended to rise relative to men after a recession began but in the following downturns of 1973, 1980, 1990, 2001 and 2007 the situation reversed. Participation rates for women in the workforce hovered at around 40% in 1970 vs 60% today. In 2007, the most aggressive spread emerged in favour of women by over 2%. The Fed report does not include what types of roles that women tend to do. Switching to the Bureau of Labor statistics (BLS) it makes sense that women over time have been retrenched at lower rates than males due to field of employment.

Women today tend to occupy more jobs in education, nursing, healthcare (defensive industries) whereas men tend to work in more construction, agriculture and manufacturing specialties (levered industries).

In 2017, employment breakdown between men and women was as follows.

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Another interesting table from the BLS was that of educational standards of 1970 compared to 2010. As we can see more women are pursuing higher levels of education. 67% in 2010 took some college or higher degree vs only 22% in 1970. One would imagine in 2018 those numbers are higher again.

Where men once went to college in proportions far higher than women—58% to 42% as recently as the 1970s—the ratio has now almost exactly reversed with women comprising more than 56% of students on campuses nationwide, according to the U.S. Department of Education (DoE). Some 2.2 million fewer men than women will be enrolled in college this year. By 2026, 57% of college students in the US will be women.

It will be interesting to see how the gender unemployment gap develops during future recessions with a far higher level of educated women in the workforce.

Priorities, priorities…

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Maryland (MD) – 2018

  • High school graduation rate: 87.6% (12th highest)
  • Public school spending: $13,075 per pupil (19th highest)
  • 8th grade NAEP proficiency: 34.7% (math), 37.4% (reading) (11th highest).
  • Adults with at least a bachelor’s degree: 39.3% (3rd highest)
  • Adults 25-64 with incomes at or above national median: 61.6% (2nd highest)
  • Violent crime 4.72/1000 residents (national average 4.0/1000) (9th highest)
  • Crimes per square mile 57 (national average 31.9)
  • Baltimore, MD most dangerous city (out of biggest 50) in America.
  • Opioid death rate 29.7/100,000 (3rd highest) – national average 13.3/100,000

Good to see where things are ranked among the worst, Democrats wish to put the least focus and vice versa. Rather telling. Where is the focus on healthcare and climate change? Even more telling.

Does Trump have a right to brag about unemployment?

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The Trump vs Obama camps are lighting up over who was responsible for the drop unemployment rates. Looking at the long term decline one could argue that Obama was a key part of the decline and the incremental drops in the rate are Trumps. Here are the raw figures.

In Jan 2009, according to the Bureau of Labor Statistics, Obama had 115.818m people full time employed. In December of 2012 that number was 115.791m. (-270,000). There were 8.046m and 7.943m part time jobs over the same period. Minus 103,000. At the end of his 8 years, there were 124.3m FT jobs and 5.554m PT jobs. All told his FT workforce went up 8.48mn and PT fell 2.492m. So gross employment increased 5.98m.

Trump started at 124.3mn FT and as of May 2018 there are 128.657m FT jobs and 4.948m PT jobs. So he’s increased FT 4.347m and cost PT 606k. Net increase of 3.741mn jobs. So even if you ran the narrative that Obama’s second term was enough to put the “Great Recession to bed”, Trump has achieved 63% of Obama’s employment legacy in only 30% of his first term as president.

The number of people working two or more jobs surged to over 8mn (a record) under BHO as did food stamps (doubled to c.48m before coming down to 43m by his term end). SNAP stands at 40m now. 3mn fewer.

30 million people claim disability and welfare in the US. The Social Security Administration (SSA) highlighted that back pain and musculoskeletal problems are 33.8% of claims for disabled workers, followed by mental illness at 19.2% in 2013. This compares to 8.3% and 9.6% respectively in 1961. Half of claims in the 1960s came from heart attack/stroke and ‘other’ categories which made up only 17% of the 2013 figure.

Yet the truth is that if Americans wanted more of Obama’s successful policies, Hillary was Obama 2.0. No change in policies. Sensible to keep if they wanted the status quo. Ironic that 19 out of 25 states that voted for Trump had poverty levels exceeding the national average. Which means that had the “marry the state” policies of the Obama admin resonated with the poor it would have been a coronation for Hillary. This is a perfect example as to why a hollowed out middle America want to live the American dream rather than queue up for more welfare. God Bless America?

 

Waking up to a horror of our own creation

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Some will say I am a pessimist. I’d prefer to be called an optimist with experience. At only age 16 (in 1987) I realized the destructive power financial markets had on the family home. Those memories were etched permanently. We weren’t homeless or singing for our supper but things sure weren’t like they use to be. It taught me much about risk and thinking all points of view rather than blindly following the crowd. That just because you were told something by authority it didn’t mean it was necessarily true. It was to critically assess everthing without question.

In 1999, as an industrials analyst in Europe during the raging tech bubble, we were as popular as a kick in the teeth. We were ignored for being old economy. That our stocks deserved to trade at deep discounts to the ‘new economy’ tech companies, no thanks to our relatively poor asset turnover and tepid growth rates. The truest sign of the impending collapse of the tech bubble actually came from sell-side tech analysts quitting their grossly overpaid investment bank salaries for optically eye-watering stock options at the very tech corporations they rated. So engrossed in the untold riches that awaited them they abandoned their judgement and ended up holding worthless scrip. Just like the people who bought a house at the peak of the bubble telling others at a dinner party how they got in ‘early’ and the boom was ahead of them, not behind.

It was so blindingly obvious that the tech bubble would collapse. Every five seconds a 21 year old with a computer had somehow found some internet miracle for a service we never knew we needed. The IPO gravy train was insane. One of my biggest clients said that he was seeing 5 new IPO opportunities every single day for months on end. Mobile phone retailers like Hikari Tsushin in Japan were trading at such ridiculous valuations that the CEO at the time lost himself in the euphoria and printed gold coin chocolates with ‘Target market cap: Y100 trillion.’ The train wreck was inevitable. Greed was a forgone conclusion.

So the tech bubble collapsed under the weight of reality which started the most reckless central bank policy prescriptions ever. Supposedly learning from the mistakes of the post bubble collapse in Japan, then Fed Chairman Alan Greenspan turned on the free money spigots. Instead of allowing the free market to adjust and cauterize the systemic imbalances, he threw caution to the wind and poured gasoline on a raging fire. Programs like ‘Keep America Rolling’ which tried to reboot the auto industry meant cheaper and longer lease loans kept sucking consumption forward. That has been the problem. We’ve been living at the expense of the future for nigh on two decades.

Back in 2001, many laughed me out of court for arguing Greenspan would go down in history as one of the most hated central bankers. At the time prevailing sentiment indeed made me look completely stupid. How could I, a stockbroker, know more than Alan Greenspan? It was not a matter of relative educations between me and the Fed Chairman, rather seeing clearly he was playing god with financial markets.  The Congressional Banking Committee hung off his every word like giddy teenagers with a crush on a pop idol. Ron Paul once set on Greenspan during one of the testimonies only to have the rest of the committee turn on him for embarrassing the newly knighted ‘Maestro.’ It was nauseating to watch. Times seemed too good so how dare Paul question a central bank chief who openly said, “I know you think you understand what you thought I said but I’m not sure you realize that what you heard is not what I meant.”

We all remember the horrors of the collapse of Lehman Brothers and the ensuing Global Financial Crisis (GFC) in September 2008. The nuclear implosions in credit markets had already begun well before this as mortgage defaults screamed. The 7 years of binge investment since the tech bubble collapse meant we never cleansed the wounds. We would undoubtedly be in far better shape had we taken the pain. Yet confusing products like CDOs and CDSs wound their way into the investment portfolios of local country towns in Australia. The punch bowl had duped even local hicks to think they were with the times as any other savvy investor. To turn that on its head, such was the snow job that people who had no business being involved in such investment products were dealing in it.

So Wall St was bailed out by Main St. Yet instead of learning the lessons of the tech bubble collapse and GFC our authorities doubled down on the madness that led to these problems in the first place. Central banks launched QE programs to buy toxic garbage and lower interest rates to get us dragging forward even more consumption. The printing presses were on full speed. Yet what have we bought?

Now we have exchange traded funds (ETFs). Super simple to understand products. While one needed a Field’s Medal in Mathematics to understand the calculations of a CDO or CDS, the ETF is child’s play. Sadly that will only create complacency. We have not really had a chance to see how robots trade in a proper downturn. ETFs follow markets, not lead them. So if the market sells off, the ETF is rapidly trying to keep up. Studies done on ETFs (especially leveraged products) in bear markets shows how they amplify market reactions not mitigate them. So expect to see robots add to the calamity.

Since GFC we’ve had the worst post recession recovery in history. We have asset bubbles in bonds, stocks and property. The Obama Administration doubled the debt pile of the previous 43 presidents in 8 years. Much of it was raised on a short term basis. This year alone, $1.5 trillion must be refinanced.  A total of $8.4 trillion must be refinanced inside the next 4 years. That excludes the funding required for current budget deficits which are growing despite a ‘growing economy’. That excludes the corporate refinancing schedule. Many companies went out of their way to laden the balance sheet in cheap debt. In the process the average corporate credit rating is at its worst levels in a decade. Which means in a market where credit markets are starting to price risk accordingly we also face a Fed openly saying it is tapering its balance sheet and the Chinese and Japanese looking to cut back on US Treasury purchases. Bond spreads like Libor-OIS are already reflecting that pain.

Then there is the tapped out consumer. Unemployment maybe at record lows, yet real wage growth does not appear to be keeping up. The number of people holding down more than one job continues to rebound. The quality of employment is terrible. Poverty continues to remain stubbornly high. There are still three times as many people on food stamps in the US than a decade ago – 41 million people. Public pension unfunded liabilities total $9 trillion. Credit card delinquencies at the sub prime end of town are  back at pre-crisis levels. We could go on and on. Things are terrible out there. Should we be in the least bit surprised that Trump won? Such is the plight of the silent majority, still delinquent after a decade. No wonder Roseanne appeals to so many.

A funny comment was sent by a dyed-in-the-wool Democrat, lambasting Trump on his trade policies. He criticized the fact that America had sold its soul for offshoring for decades. Indeed it had but queried that maybe he should be praising Trump for trying to reverse that tide, despite being so late to the party. Where were the other administrations trying to defend America all this time? Stunned silence.

Yet the trends are ominous. If we go back to the tech bubble IPO-a-thon example. We now have crowd funding and crypto currencies. To date we had 190 odd currencies to trade. Of that maybe a handful were liquid – $US, GBP, JPY, $A, Euro etc – yet we are presented with 1,000s of crypto currency choices. Apart from the numerous breaches, blow ups and cyber thefts to date, more and more of these ‘coins’ are awaiting the next fool to gamble away more in the hope of making a quick buck. Cryptos are backed by nothing other than greed. Yet it sort of proves that more believe that they are falling behind enough such they’re prepared to gamble on the biggest lottery in town. One crypto used Wikipedia as a source for its prospectus.

Yet the media remains engrossed on trying to prove whether the president had sex with a porn star a decade ago, genderless bathrooms, bashing the NRA, pushing for laws to curtail free speech, promoting climate change and covering up crime rather than look at reporting on what truly matters – the biggest financial collapse facing us in 90 years.

There is no ‘told you so’ in any of this. The same feelings in the bones of some 30 years ago are back as they were at the time of Greenspan and Lehman. This time can’t be avoided. We have borrowed too much, saved too little and all the while blissfully ignored the warning signs. The faith and confidence in authorities is evaporating. The failed experiment started by Greenspan is coming home to roost. This will be far worse than 1929. Take that to the bank, if it is still in operation because you won’t be concerned about the return on your money but the return of it!

When the “best” of today is far worse than the worst of the worst in 70 years

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The St Louis Fed records that in the last 70 years, the average time one is in a state of unemployment (i.e. duration) in America is now 25 weeks (6 months). Assuming that we are in the sweet spot of a tight labour market we can see clearly that this  post-GFC ‘recovery’ at its best is 25% worse than the worst we have seen over seven decades of post recession recoveries which has barely nudged over 20 weeks. Looking at CEO Bullard’s remarks in a presentation back in April 2016, titled ‘Slow normalization or no normalization?’ that these are extraordinary times.

US unemployed since 1948 – trend is our friend?

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This is a chart of unemployed persons in the US since 1948 published by the St Louis Federal Reserve. The shaded sections denote recessions. Interesting to note that the we are skirting the red line at present, one that has seldom been breached in 70 years. Will history be bunk or will the trend confirm economic slowdown? An eerie looking chart.

Poverty in America +16mn since 2000. +9mn since 2008

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Remember the feel good video Obama proudly displayed alongside his White House economics flunky. Poverty had fallen by the fastest rate since the 1960s. What a crowning achievement. While much praise was heaped upon this shift on searching through the St Louis Fed’s FRED stats database, the picture is disturbing. It is actually little to do with partisan politics but a cry from the disaffected to get anything to change their fortunes.

Let’s take a look at Ohio, a key swing state at the election. While Democrats were patting themselves on the back and staring at the huge drop in the unemployment rate…

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…poverty was climbing sharply. In fact ever since the tech bubble collapse, the plight of Ohioans has just gotten worse. From 1.1mn in poverty it is now over 1.8mn.

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On a national level there is little reason to cheer either. Since the tech bubble collapse America has added 16mn to the poverty queue. 7mn under Bush and another 9mn under Obama. This still remains a monstrous challenge for Trump to fix.

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When looking at poverty on a country level America (15%) fairs better than the UK (23%), EU (26%) and Greece (37%). One table that sends chills down my spine is unemployed persons. This trend has been rock solid for almost 70 years. When unemployed persons hit the following line, the US economy tends to head into recession (the grey shaded areas).

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With the Fed putting the brakes on low interest rates and the world economy drunk on debt there comes a time for payback. The press can be critical of his appointees and ridicule his executive orders but there is no question as to why he won. He answered the call to the increasingly impoverished people that missed out on the fruits of low interest rates and asset bubbles (incl 20,000 Dow). With more political turmoil awaiting us throughout Europe in the form of elections in France, Holland and Italy we are staring down the barrel of high risk geopolitical stakes.

We better hope he makes America great again with his policies of deregulation and downsizing government. The more the media and shocked liberals protest, loot, pillage and divide the more they trigger exactly what they do not want. For those calling for his impeachment be careful what you wish for. The world will not handle destabilized American politics. The world is well overdue a massive slap in the face. It needs to wake up. We are at a far more important economic juncture than at any time in the past 90 years. Victimology won’t help us. Virtual signaling is pointless. This has nothing to do with race, gender, sexual orientation or religion. These charts show we’ve been drinking our own Kool-Aid for too long. Governments have ignored your wishes and covered up gross negligence along with group think central banks via decades of crony-capitalism.

Trump has much to prove but a larger part of America is well behind the ‘change’ his administration could bring that decades of GOP and Democrat governments have failed to. Yet I ask all those who who litter social media and ask Americans to rise up and do their patriotic duty to resist Trump, “exactly what solutions do you have in mind?” As far as I can see your protesting  is little more than moral preening. You complain yet have nothing to offer in return. We are no longer living in a world where things are free. Eventually someone has to take a haircut. One things is a certainty though. The liberals that cry equality will be the first to cut and run if they become the target of common sense. Let that sink in.