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Has the Permabear's favorite employment statistic already peaked?

Recs

33

September 29, 2009 – Comments (29)

My previous post stating that the United States might return to job creation in April of next year certainly generated quite a bit of discussion.  So I am going to up the ante further with the following statement:

The permabear's favorite employment statistic, U6 aka "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" may have already peaked.

Unlike the more widely publicized unemployment rate which has continued to rise, U6 actually seems to have peaked at 16.8% in June of this year.  It has since fallen to 16.5%.  It certainly is not rising at the astronomical rate that many of the negative nancies imply in their constant wave of doom and gloom posts.

How is it possible for U6 to have peaked when the main unemployment rate is still rising you ask?  Well, I'll tell you (even if you didn't ask ;) ).  Remember that the U6 statistic includes people who are "employed part time for economic reasons."  The first thing that companies do when the economy begins to recover isn't run out to employment agencies to try to find new employees.  Instead they increase their labor input by bringing part-time workers back on full-time.  This may be what we are seeing happening right now.  The record number of people working part-time when they would rather be working full-time has stabilized and is slowly beginning to fall.

The fact that part-time workers are being called back to full-time work may be a leading indicator that a peak in the main unemployment number is just around the corner and a sign that the economy is improving, albeit slowly.

I realize that saying something relatively positive like this here in CAPS is as a fellow CAPS player rofgile hilariously put it the equivalent to "throwing sunlight upon a vampire crypt!" but I just call 'em like I see 'em.  As anyone who has read some of my previous posts can attest, I am hardly wildly bullish on the U.S. economy. 

I suspect that the level of unemployment that many have come to regard as "normal" over the past several decades will prove to be anything but.  The new "normal" unemployment rate may end up being closer to 7% in the future...which is hardly a pleasant prospect.  Many of the jobs that we have lost, such as those that are related to housing (i.e. mortgages, construction, etc...) may be gone for good.  There was a housing bubble there and no amount of magic from the government is going to be able to completely reflate it. 

On a related note, want to know how to figure out if something is a bubble?  My brother clued me in on this one.  It's called the stupidest friend from high school indicator.  When the stupidest person that you knew back in high school is making huge bucks, we're talking well into the six figures here, in an industry...chances are it is a bubble that will eventually implode.  I digress.

I think that the recovery will be slow and that we will experience much slower growth than we have become accustomed to for years to come.  This is why I have been purchasing mostly dividend paying stocks and interest paying bonds for my portfolio.  Still, make no mistake about it, the economy will eventually stabilize and begin to recover.

Deej

Source: Table A-12. Alternative measures of labor underutilization

29 Comments – Post Your Own

#1) On September 29, 2009 at 2:06 PM, RonChapmanJr (94.82) wrote:

-1 rec

You and Alstry need to get a room.  You always post about how you are trying to ignore him and for him to stop leaving comments on your blogs and then you write this.  Make up your mind.

And like I often post in response to your misguided views, you have no idea whether the economy will ever really get better and recover.  You are taking a guess like everyone else.  Eventually the U.S. will go into a decline that will be permanent, this may be it or it may happen in 100 years.

ron 

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#2) On September 29, 2009 at 2:36 PM, jstegma (29.19) wrote:

+1 rec

This is a pretty sensible analysis.  I don't think unemployment has peaked or the recession is really over, but it will eventually, and you are probably right that we'll have a new higher "normal" unemployment level.  I also agree on buying dividend paying stocks right now.  When people start declaring "buy and hold is dead", that means it's time to go and buy some good buy and hold stocks and hold em.

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#3) On September 29, 2009 at 2:43 PM, checklist34 (99.71) wrote:

-1 rec to ron for always -1 recing people

+ 1 rec.  i like optimism.

+1 rec to jstegma for his comment on buy and hold.  that was awesome

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#4) On September 29, 2009 at 2:51 PM, TMFDeej (99.41) wrote:

Hi Ronald.  I'm so glad that you stopped by.  Thanks for sharing your usual insightful thoughts.

This post has as much to do with CAPS' resident permabear Alsty as it has to do with a million of the other people out there who blog on other sites or wherever who often cite U6 as the proper gauge of unemployment.

Your comment was somewhat hypocritical don't you think?  Surely a person with an Ivy League education should be able to see the irony in criticizing someone for "guessing" that the economy is in the midst of a recovery and following it up immediately with a guess about how the U.S. will go into a permanent decline.

Say, you don't happen to know where I can buy a pamphlet on how to survive the inevitable decline in America that you mentioned do you?  If only someone had written a for-profit guide on what I need to.  Oh wait, that's right you did.  You don't have a vested interest in spreading the idea that we're all doomed do you?

+ 1,000 recs for me. 

Deej

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#5) On September 29, 2009 at 3:06 PM, alstry (35.41) wrote:

CEOs see sales growing, but many still not hiring

And a few are firing!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Gordon Bros. wins bid to shutter 49 Finlay stores

200 Game Crazy Stores to Close in October

Frontier Airlines Closes Las Cruces N.M Operations 

Portec Rail Products - 20

Finnish Vacon - Temporary 160 Layoffs

University of Princeton - Layoffs Coming?

Vermont Layoffs might Hit Local Services Hard

Siemens Company - 750

First Industrial Retail Trust Inc - 15% of Workforce

Update: California Department of Corrections - 1,443 Layoff Notices

Teamsters Chief Faces Layoff

Gnip - 7

South Gloucestershire Council ( International ) - 317

Update: Air Jamaica starts Layoffs of 300 workers

Funcom Game Developer - 20% of Workforce

And the above are just a few of today's releases..........

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#6) On September 29, 2009 at 3:18 PM, bigpeach (29.27) wrote:

My company is hiring. A friend of mine just got a promotion (with accompanying pay raise) last week. Two other friends have recently found new jobs. We were all laid off in March. Life continued, and eventually returned to normal as it always does.

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#7) On September 29, 2009 at 3:23 PM, bigcat1969 (92.39) wrote:

Deej, when I bait or alstry baits or jstegma baits, we are just part of the pack of fools who can easily be ignored.  When you bait with titles about permabears, you make TMF look bad.  If this were a simple info post you would have headlined it "U6 has peaked".  As long as you have TMF in your name, you are the public face of TMF and right now you are doing thema disservice.  I've was on that side of the fence for two decades in media and as someome charged with keeping the peace in message board space for a gaming company.  In both cases I had to remember that I represented those companies and restrain my smartass mouth (or fingers).  You are a smart, interesting and talented guy who has suddenly forgotten your job.

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#8) On September 29, 2009 at 3:49 PM, TMFDeej (99.41) wrote:

Hi Big Cat.  Thanks for reading and for the kind words.  I think that you're being a little overly sensitive.  I'm not mocking anyone by using the phrase "permabears."  Why is the term considered to be baiting when members of the mainstream media, including CNBC, Bloomberg, Marketwatch, etc...all use it regularly?  Would it have been better if I had used the phrase "bears' favorite unemployment metric."

Heck, TMF published an official article from one of its top people a week or two ago that used the term "permabear" right in the title (Don't Feed the (Perma-) Bears).

The headline "U6 has peaked" is about as exciting as plain vanilla ice cream.  I doubt that many people would have read that.

I'm not trying to disturb the peace here at CAPS, just to provide another side to what in my opinion has become an overly bearish tone here.  There's nothing wrong with a spirited, civil debate about a subject like the economy.  It's not like we're dropping all sorts of four letter words and talking about each other's mothers here or anything like that.

Deej

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#9) On September 29, 2009 at 4:14 PM, MyDonkey (< 20) wrote:

I agree with bigcat1969; this article reflects poorly on TMF.

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#10) On September 29, 2009 at 4:21 PM, Rehydrogenated (32.59) wrote:

Wow deej, just wow. First you write an article. And then you call people who only like to use the most extreme examples of things to prove their point 'permabears'.

We aren't all permabears OMG! We might be drama queens, trolls, spammers, or just annoying people in general, but please don't insult (or even point-out) our investing strategy. That's just bad manners.

Good Day Sir,

R*h*d*o*e*a*e*

*e*y*r*g*n*t*d

(I have no idea why people sign their posts...)

 

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#11) On September 29, 2009 at 4:39 PM, Rehydrogenated (32.59) wrote:

Oh yeah, and as for that discussion you wanted...

If i had time to write about how unemployement will decline for the next quarter because of stimulus and rising consumer sentiment, only to  continue its decline when the government decides that high unemployment is bad for political stability and implement new programs to get people to sit around and do nothing productive I would have written it.

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#12) On September 29, 2009 at 4:52 PM, booyahh (< 20) wrote:

is it politically incorrect to use the term permabear now ? 

U6 really is one of the favorite statistics that permabears such as Roubini and Prechter like to bandy about.

oops, hope i didn't hurt anyone's feelings !!! sorry Roubini, sorry Prechter, i hope i didn't hurt your feelings for using the term permabear.

permabear permabear permabear permabear !!!!
hahaaaa!!!!!

 

 

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#13) On September 29, 2009 at 4:53 PM, kfisherprotege (30.31) wrote:

U6 actually seems to have peaked at 16.8% in June of this year.  It has since fallen to 16.5%

Look at the table again.  You have your numbers reversed.  August was 16.8% and June was 16.5%.  New numbers come out this Friday and I'll bet U6 climbs higher than 16.8%.

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#14) On September 29, 2009 at 5:16 PM, bigcat1969 (92.39) wrote:

Thanks for your polite response (and for not pointing out my spelling errors).  I believe I'm correct, but I've been wrong often enough to know its possible.  I enjoy reading your posts, but lately they seem to have a bitter edge to them that seems out of place for who and where you are.  Regardless, you raise interesting and valid points and I hope you continue to do so.

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#15) On September 29, 2009 at 5:18 PM, TMFDeej (99.41) wrote:

Good observation, Mr. Fisher (I heard an interesting interview with him on Bloomberg radio the other day BTW).  Now Ken Fisher is someone who is really bullish.  Much more so than I am.

I was referring to the raw aka non-seasonally adjusted numbers, not the seasonally adjusted ones.  Seasonal adjustments often do more harm than good.  The unnadjusted dropped from 16.8% in July 2009 to 16.5% in August. 

Deej

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#16) On September 29, 2009 at 5:33 PM, 4everlost (29.36) wrote:

The non-seasonally adjusted numbers for U6 went down - from 16.8 in July to 16.5 in August.  The seasonally adjusted numbers went up - from 16.3 in July to 16.8 in August.

So, who is right here?  I don't think anyone knows if we are headed for better economic times or not.  The facts are that there are a lot of layoffs still going on - though they may be slowing.  There is a lot of debt being racked up, yet the market continues to improve.  I think everyone knows that the market can stay irrational for a long time - but what does that mean these days?  I think you can interpret the data and see it as positive or negative.  If you have a conclusion before you investigate you can find data to support it easily.

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#17) On September 29, 2009 at 5:33 PM, RonChapmanJr (94.82) wrote:

Wow, you got me, Deej.  I sell my guide for $1 if people are not interested in giving me their email address for it.  Gracious, I better go repent of my horrible ways. 

So I think bad things might happen and I want people to be prepared for it.  Geez, I really am a bad person.

I still maintain that my position is better than yours because if my predictions come true, at least people will be ready.   If people read your blogs and don't prepare for anything negative, they will be totally screwed if something does happen.  Better to have and not need than need and not have. 

And you didn't mention why you keep baiting Alstry in one blog and then wishing he didn't comment in others.  Are you having DID issues?

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#18) On September 29, 2009 at 7:25 PM, checklist34 (99.71) wrote:

fwiw:  my former businesses have hired recently

another, larger, biz they share an industrial campus with has done not only call backs but mandatory overtime, which supports Deej's thesis

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#19) On September 29, 2009 at 7:37 PM, Mark910 (< 20) wrote:

Why are you using the not seasonally adjusted numbers.  By your logic bathing suit companies are now out of business since it is fall.

U6

Picture is worth a thousand words..

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#20) On September 29, 2009 at 8:00 PM, ChrisGraley (29.76) wrote:

You beat me to the punch on that one Mark. I was about to ask if the numbers were seasonally adjusted as well.

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#21) On September 29, 2009 at 9:17 PM, rofgile (99.30) wrote:

The bottom of unemployment doesn't necessarily mean that it will fall immediately, too.  Could end up being a bouncing bottom for a while.

I'm hoping for the fastest recovery that is possible and sustainable...

-Rof 

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#22) On September 29, 2009 at 11:17 PM, tonylogan1 (27.92) wrote:

 I'm looking forward to the blog battle coming this week with the release of the auto sales.

Let me summarize results in advance...

Deej "I was right"

Alstry "I was right"

Unsure which one weighs in first.

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#23) On September 30, 2009 at 12:44 AM, awallejr (83.92) wrote:

Debated this point with Alstry in older threads of his.  Ironically Alstry predicted U3 to cap at 11% while I submitted 12% (hence making me actually more bearish than him).  U6 can be misleading since the impact of part time work is not the same as fulltime.  A household with 2 fulltimers with one forced to part time does not mean that household is insolvent, for example. A household of 1 fulltimer going to part time can be.  Also people can work 2 part time jobs, and wanting a fulltime job.  Just too many variables involved.

Unemployment in my opinion is the most important issue which needs to be addressed now.  I am disappointed with Obama so far on this point, but I will reserve judgment until next year.  And next year will be pivotal.  Unemployment simply needs to start declining by then.

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#24) On September 30, 2009 at 7:48 AM, Mark910 (< 20) wrote:

Deej,  please address comment #19.  Since most media reports adjusted, and most discussions involve adjusted, for you to point to non adjusted without clarififying what numbers you are using is quite misleading. (which I don't think was your intent). 

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#25) On September 30, 2009 at 11:23 AM, outoffocus (22.83) wrote:

OMG! Deej is officially the anti-alstry.  They both have the same CAPS rating and they are number 1 and 2 most recommended bloggers. =O

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#26) On September 30, 2009 at 12:20 PM, Bays (30.24) wrote:

Great rebuttals on comments 1 and 7.

Cheers

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#27) On September 30, 2009 at 12:31 PM, jddubya (49.10) wrote:

#25 - lol... this reminds of a schoolyard fight, where neither cares to fight, but the crowd pushes them into it.

"Anti-Alstry" is WAYYY to strong a word to use.  There is no one in the world with a twisted enough mind to behave like Alstry in an equal and opposite manner.

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#28) On October 02, 2009 at 1:27 PM, RonChapmanJr (94.82) wrote:

Shock and awe, U6 did not peak at 16.8

"If laid-off workers who have settled for part-time work or have given up looking for new jobs are included, the unemployment rate rose to 17 percent, the highest on records dating from 1994."

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#29) On October 02, 2009 at 1:34 PM, russiangambit (29.25) wrote:

> "Anti-Alstry" is WAYYY to strong a word to use.  There is no one in the world with a twisted enough mind to behave like Alstry in an equal and opposite manner.

How about Larry Kudlow? Or Dennis Knealy?

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