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Wednesday 04.06.2016

How Can a Jobs Recovery So Historic Be So Disappointing?

These might be the two most important questions about the U.S. economy: Are more people working? And are they making more money?

There are some common and well-understood answers to those questions. First, one could easily argue that the U.S. is in the midst of a historic job recovery. With the most consecutive months of private-sector job growth in history, this is, to honor the beginning of baseball season, truly a DiMaggio Economy. Even better, the job growth in the last three months has, by one measure, been the strongest of any quarter-year since 1983. The entire recovery has been in full-time work. Surely, the economy is working its way back to normal.

Meanwhile, it’s clear that wages aren’t enjoying the same renaissance. Despite a recent uptick in wage growth, average hourly earnings have been somewhat stuck in the last few years. This is perplexing, even to the wisest U.S. economists. “I’m somewhat surprised that we’re not seeing more of a pickup in wage growth,” Federal Reserve Chair Janet Yellen admitted in a press conference just three weeks ago.

But several studies from just the past few weeks suggest that both of these stories—that the labor market is basically back to normal and that wages aren’t rising for workers—might be slightly misleading, or even significantly off-base. Let’s start with the first storyline: That the economy is returning to normal, as the labor force is on a historic streak of creating full-time jobs. There is some evidence that the nature of work—and the relationship between employers and employees—is undergoing a major shift that is more complicated than the “return to normal” narrative. For several years, economists wondered whether freelancers or on-demand jobs, like Uber drivers, were growing. It was hard to know for sure, because the Bureau of Labor Statistics hasn’t conducted a proper survey on it since 2005. So, economists Lawrence Katz and Alan Krueger did their own.

Global recovery 'too weak, too fragile': IMF chief

Global economic recovery is still "too slow" and "too fragile" in the face of growing risks from a slowdown in China and subdued growth in developing economies, International Monetary Fund chief Christine Lagarde said on Tuesday (Apr 5).

"The good news is that the recovery continues; we have growth; we are not in crisis," Lagarde said in a speech in Frankfurt. "The not-so-good news is that the recovery remains too slow, too fragile, and risks to its durability are increasing," she warned.

The IMF has already hinted it will cut its current 2016 global growth forecast of 3.4 per cent next week when it publishes fresh forecasts at its traditional spring meeting with the World Bank in Washington. "There has been a loss of growth momentum," Lagarde said. "Overall, the global outlook has weakened further over the last six months - exacerbated by China's relative slowdown, lower commodity prices, and the prospect of financial tightening for many countries," she continued.

"Emerging markets had largely driven the recovery and the expectation was that the advanced economies would pick up the 'growth baton.' This has not happened." Lagarde said other risks were exacerbating the situation, such as uncertainties from terrorist attacks, "the silent threat of global epidemics; and conflict and persecution that force people to flee their homes."

The two kinds of anger in America

Michigan governor to spend over $1M in taxpayer money for attorneys

As the Flint water crisis drags on, so does the cost of the investigation. Gov. Rick Snyder is now making the decision to spend more than $1 million on outside council, including a top-notch criminal defense attorney who will receive $800,000. A group of local defense attorneys is questioning the governor’s decision to make taxpayers pay the legal bills.

Snyder is adamant that he did not commit any crimes in the Flint water crisis, which has some wondering out loud why he hired a top criminal defense lawyer and why he is making taxpayers pay for it. "Why are we funding the possible criminal problems of a billionaire?" attorney David Lee said.

The new attorneys are in addition to the dozens of attorneys at the governor's disposal through his state office and the attorney general's office. About $400,000 is going to civil attorney Eugene Driker and $800,000 is going to criminal defense expert Brian Lennon, who specializes in defending white-collar crimes. The fact that taxpayers are paying for it has some local criminal defense attorneys crying foul. "Every penny of that money should be going to helping the people of Flint," criminal defense attorney James Burdick said.

Three local criminal defense attorneys came together to call out the governor, insisting it's not about politics, it's about the ability to pay, saying only people who cannot afford a lawyer should be using tax dollars to pay for legal fees. Snyder's net worth is estimated at more than $200 million. Flint residents, along with the rest of the states' taxpayers, are paying his legal fees. "What they shouldn't be expected to do is pay the lawyer fees for the person who may have caused the problem," attorney Shannon Marie Smith said. "That is absurd."

Two U.S. Labor Market Indexes Predict Slower Employment Growth

Job growth in March posted a solid gain, inspiring a new round of upbeat comments on the outlook for US payrolls and the economy generally. But newly minted numbers for two multi-factor measures of the labor market hint at a weakening trend. In contrast with the upbeat message in the latest data for payrolls, broadly defined benchmarks of the labor market published yesterday by the Federal Reserve and the Conference Board (CB) reveal a worrisome round of deceleration unfolding in the first quarter. The conflicting signals raise a question: Is the US labor market weaker than the non-farm employment numbers imply?

Let's take a closer look at the data for some insight, starting with the CB's Employment Trends Index (ETI). This eight-factor benchmark ticked down last month, touching its lowest level since last spring. ETI is still higher on a year-over-year basis, but by a thin 1.1%.

"The Employment Trends Index has been showing signs of weakening in recent months, suggesting that employment growth is likely to slow through the summer," said Gad Levanon, Chief Economist, North America, at The Conference Board. "With GDP barely growing at a two percent rate, it's difficult to see how employment can continue to expand by 200,000 or more jobs per month."

In fact, a 2% rise in GDP constitutes wishful thinking at this point in the dark art of looking ahead to the "advance" first-quarter GDP report that's scheduled for release at the end of this month. The Atlanta Fed's GDPNow model as of Apr. 1 is projecting a weak 0.7% growth rate (seasonally adjusted annual rate) in Q1 - down from the already sluggish 1.4% gain in last year's Q4 GDP.

Gold Prices: Here’s What the Federal Reserve Doesn’t Want You to Know

It is my view that we will get the answer as to whether or not the gold market has really turned for the better this month. I think the action in April will set the tone for the days and weeks to come. This month, gold prices could soar like an eagle. Or drop like a stone.

The ongoing shenanigans in the gold pits are so strange and so bizarre, that one almost pines for the days of old when, for a few coins, you could engage the services of a local soothsayer—she would then kill a nearby fowl, examine the entrails, and tell you, with certainty, what was to come.

Well, those days are long gone. Instead of entrails, we will have to make do, in this massively (and deliberately) opaque market, with whatever data we are able to glean.

In my earlier essays, I covered the basics of the gold market over the last few decades. What, arguably, made my views stand out from the “politically correct” coverage that seems to permeate this sector is that I have never hesitated to use the “M” word (manipulation) where appropriate, and its usage has never been more appropriate than in the gold pits of today. The irony is that those in denial about the true nature of the gold market are not merely delusional in their own right, but are also ignoring history. The first Great Gold Smash was the London Gold Pool in the 1960s. This is not speculation, conjecture, or a conspiracy theory. This is fact. It even has its own Wikipedia entry!

Ford Plans to Add Auto Plant, 2,800 Jobs in Mexico

In a move that is sure to draw ire on the presidential campaign trail, Ford on Tuesday announced that it will be adding a new assembly plant in Mexico. The Detroit automaker said it will invest $1.6 billion into the facility and create 2,800 jobs by 2020, with construction expected to begin this summer.

Joe Hinrichs, president of Ford of the Americas, told CNBC that the new plant does not mean Ford is moving jobs out of the U.S.

"We're proud to be an American company," he told CNBC. "We've invested $10.2 billion here in the U.S. over the last five years and that commitment won't change even as we expand around the world." The Mexican plant, in San Luis Potosí state, will build small cars that will be exported for sale in the U.S. and other countries, though the automaker has not decided which vehicles will be built there.

The company already has two final assembly plants and one engine plant in Mexico. It has a total of 8,800 employees there, compared with 85,000 in the U.S.

US to Try to Block Halliburton From Buying Rival

The U.S. Justice Department is expected to sue this week to stop Halliburton Co. from acquiring rival Baker Hughes Inc., according to a person familiar with the matter. The person spoke on condition of anonymity Tuesday because the lawsuit had not yet been announced.

Representatives of Halliburton and Baker Hughes did not immediately return messages seeking comment. The $35 billion deal would combine two of the world's three leading providers of oilfield services to oil and gas companies and create a bigger rival to the industry leader, Schlumberger Ltd.

Halliburton and Baker Hughes announced their plan to combine in November 2014, shortly after oil prices began to fall. Few, however, predicted the depth and duration of lower prices caused by a global oversupply of oil. The glut has slowed demand for drilling services and crushed the stock price of both companies.

The Justice Department indicated its concern about the acquisition in a lawsuit that it filed Monday against ValueAct Capital, a hedge fund that had bought more than $2.5 billion in stock of Halliburton and Baker Hughes.

Watch Japan – For All Is Not Well In The Land Of The Rising Sun

One of the epicenters of the global financial crisis that started during the second half of last year is Japan, and it looks like the markets in the land of the rising sun are entering yet another period of great turmoil. The Nikkei was down another 390 points last night, and it is now down more than 1,300 points since a week ago. Why this is so important for U.S. investors is because the Nikkei is often an early warning indicator of where the rest of the global markets are heading. For example, the Nikkei started crashing early last December about a month before U.S. markets started crashing really hard in early January. So the fact that the Nikkei has been falling very rapidly in recent days should be a huge red flag for investors in this country.

I want you to study the chart below very carefully. It shows the performance of the Nikkei over the past 12 months. As you can see, it kind of resembles a giant leaning “W”. You can see the stock crash that started last August, you can see the second wave of the crash that began last December, and now a third leg of the crash is currently forming…

And of course the economic fundamentals in Japan continue to deteriorate as well. GDP growth has been negative for two out of the last three quarters, Japanese industrial production just experienced the largest one month decline that we have seen since the tsunami of 2011, and business sentiment has sunk to a three year low.

The third largest economy on the entire planet is in a comatose state at this point, and Japanese authorities have been throwing everything but the kitchen sink at it in an attempt to revive it. Government stimulus programs have pushed the debt to GDP ratio to 229 percent, and the quantitative easing that the Bank of Japan has been engaged in has made the Federal Reserve look timid by comparison.

San Francisco becomes first US city to set six weeks of fully paid parental leave

San Francisco became the first U.S. city to mandate six weeks of fully paid parental leave, requiring employers to shoulder much of the cost and exceeding federal and state benefit rules for private-sector employees, a city supervisor said on Tuesday (Apr 6).

The law, unanimously approved by the San Francisco Board of Supervisors, grants six-week leave for fathers and mothers working for companies with 20 or more employees, nearly doubling the pay they are now eligible to collect under California law.

"Our country's parental leave policies are woefully behind the rest of the world, and today San Francisco has taken the lead in pushing for better family leave policies for our workers," Supervisor Scott Wiener said in a statement.

Better benefits for parents are part of campaigns across the nation aimed at combating rising income inequality. California's governor on Monday signed into law a bill raising the state's minimum wage from $10 to $15 an hour by the year 2023. San Francisco already offers 12 weeks of fully paid parental leave to its approximately 30,000 city employees. On Monday, New York's governor signed a bill granting 12-week paid family leave for private-sector workers that will phase in by 2021. California and New Jersey provide up to six weeks of partial pay, while Rhode Island offers four, according to the National Conference of State Legislatures.

Want to Get a Job? Attending a For-Profit College May Not Help

A bachelor’s degree may be the price of admission for many jobs, but not all college degrees are created equal. Job applicants who have a degree from a for-profit, online college are less likely to receive a call back from an employer than those who had a degree from a public, four-year university, according to the results of a new study by researchers at Harvard University.

“Employers appear to view for-profit postsecondary credentials as a negative signal of applicant quality,” the authors of the study, which was published in the American Economic Review, wrote. To get a sense of what employers really thought of online and for-profit degrees, the researchers sent more than 10,000 resumes in response to postings for jobs in business and healthcare in five large U.S. cities. Some fictitious resumes listed a bachelor’s degree from an online, for-profit college, some from a public university, and some from a for-profit college with a physical location in the area. Aside from the different educational backgrounds, the fake candidates all had equivalent skills and experience.

Having a bachelor’s degree from an online, for-profit school decreased a person’s chances of getting a call back for jobs in accounting, customer service, and sales by 22%, the researchers found. Employers were more receptive to degrees from local brick-and-mortar for-profit schools, but they were still 10% less likely to respond to candidates with that educational background.

Having an online degree from a for-profit school also hurt applicants applying for jobs in healthcare, but only if they were seeking a position that didn’t require a license. For jobs where an additional credential was necessary, employers seemed more concerned with whether the person was properly licensed rather than with where they attended school.

US shuts door on tax inversions

Food-stamp rolls up 60 percent since Obama took office

Despite an improving economy, the share of Americans dependent on government for part of their income remains near historical highs, and the candidates running for president mostly have been mum on how to reverse a decades-long trend.

The economic collapse in 2008 sent millions of Americans to government safety net programs like food stamps and Medicaid. Millions more swelled the disabilities rolls when they exhausted unemployment benefits. Last year, there were 45.8 million food stamp recipients, down slightly from the all-time high in 2013 but 60 percent more than in 2008. The story is similar with disability, where the number of recipients grew by more than 1.7 million between 2008 and 2014.

The share of personal income coming from government social services payments hit an all-time high of 18.3 percent in 2010. That is a category that includes everything from food stamps to Social Security — any income from the government that does not come from salaries or contracts. Since then, the percentage has tapered off, falling to 17.1 percent in 2015. But that is still 3 full percentage points higher than it was a decade ago.

Nicholas Eberstadt, an economist at the American Enterprise Institute who has studied the issue, said the dependence on government has increased through good times and bad, through Republican and Democratic administrations. The rate has increased an average of 3 tenths of a percent a year, or about 3.5 percentage points a decade.

This Shows Why Consumers Are Bogged Down

Our ever exuberant US consumers spent on average $89 a day in March on “discretionary” items, according to Gallup’s Daily Tracking survey. That was up five bucks from February, which is within the typical range of seasonal increases. It matched the previous high for a month of March since the Financial Crisis: March 2013. In March 2014 and 2015, consumers spent less: $87 and $86 respectively. Flat for the past four years!

But March is a peculiar month, with strong predictive qualities for the entire year. Gallup: For each of the past six years, the spending average for March has been a rough bellwether for that year’s spending, coming within $3 of the annual average. The months of April, June and October have come within this same range of the yearly averages since 2010. This did not hold true in March 2008 and March 2009, however — years in which the recession and the financial crisis dealt their immediate blows.

And just how flat have the past years been? This chart shows the monthly averages going back to 2008, when the survey began. The plunge and spike in 2008 was followed by the collapse as the Financial Crisis hit home. Then spending gradually recovered until 2013, when, at lower levels than 2008, it became range-bound — a spending pattern that Gallup calls euphemistically, “fairly consistent since then.” The stagnation zone:

Auto leases up 76% since 2008

It's no secret new car prices are going up. We reported last week that the average transaction price for a new car went up 2% last month.

Because the cars consumers want to buy cost so much, consumers are faced with the choice of financing for six or seven years to get an affordable payment, or leasing the vehicle. Increasingly, more consumers are choosing a lease. Experian Automotive has released a study showing auto leases have increased 76% since 2008, when the company began tracking them.

Back then, leases weren't all that common, except on luxury cars. Today, the average option laden sedan or SUV goes for what a luxury model did in 2008. There are a lot of things to consider before going into a lease, as we have reported. But if you are weighing a lease or the purchase of a late model used car, the proliferation of leases just might tip the balance toward a used car purchase.

Here's why; more than 1.8 million vehicles will come off lease by the end of this year. What happens to those cars? Almost all will end up on a used car lot. "With such a large volume of vehicles coming back into the market, consumers, dealers, and lenders will want to better understand the options available to them so they are able to take action," Melinda Zabritski, senior director of automotive finance for Experian, said in a statement. It's a matter of supply and demand. An increase in the supply of late model cars may mean those cars sell for less than they might otherwise. For a used car shopper, that means more to choose from a more leverage when negotiating with the dealer.

Third Chinese Bubble Set To Pop - Property, Stocks And Now Bonds

First, China’s property bubble popped. Then, China’s stock market bubble burst over the summer, and investors lost a ton of money before the government took control of the system. Now the concern floating around the world of markets is that the third in China’s “triple bubble” is about to burst.

That bubble is credit, especially corporate bonds, which have absolutely exploded over the past year as refugees from the other bubble bursts searched for yield. This one is going to be for a very straightforward reason, too — supply.

Simply put, there are about to be too many bonds in China, and that could ultimately harm the weakest part of the Chinese economy, the debt-loaded zombie companies that helped form the property bubble and are now unable to turn a healthy profit.

Here’s how all of this happened. When the Chinese stock market went careening downward last summer, a ton of the money that was invested in the market ran into the credit market, specifically corporate bonds. “In our view, China is in the midst of a triple bubble, with the third-biggest credit bubble of all time, the largest investment bubble (proxied by the investment share of GDP) and the second-biggest real-estate bubble,” Credit Suisse analyst Andrew Garthwaite wrote in a note back in July.

Charles Payne: It’s so expensive to do business in this country

U.S. trade deficit highest since summer despite rise in exports

The U.S. trade deficit widened 2.6% in February largely because of an uptick in imports, marking the third increase in a row and the biggest gap since the end of last summer.

The deficit increased to a seasonally adjusted $47.1 billion from a revised $45.9 billion in January, the government said Tuesday. The last time the trade gap was higher was in August 2015.

The bigger trade gap in the first two months of 2016 compared to a year earlier is expected to subtract from first-quarter U.S. growth. A higher deficit reduces gross domestic product.

Imports advanced by 1.3% to $225.1 billion in February, led by increases in pharmaceutical drugs, toys, games and sporting goods. The rise in imports suggests Americans may have boosted spending a bit, a sign that consumers are keeping the economy on a steady growth path. U.S. exports rose a smaller 1% to $178.1 billion, but that was the first gain since September.

Wednesday 04.06.2016

NEWS to Disturb the Comfortable...

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