The Ministry of Truth is Now Accepting Job Applications
by Sinclair Noe
DOW + 207 = 15,248
SPX + 20 = 1643
NAS + 45 = 3469
10 YR YLD + .08 = 2.16%
OIL + 1.17 = 95.93
GOLD – 29.10 = 1385.60
SILV – .90 = 21.79
It’s the first Friday of the month and so today we start with the jobs report. The economy added 175,000 net new jobs in May. The unemployment rate moved up to 7.6% from 7.5%. I’ll explain how that works in just a moment. The March and April jobs numbers were revised slightly, and the final numbers are 12,000 less than previously reported. The headline number was slightly above expectations of 165,000 jobs added.
So, another month of moderate job growth, why did the unemployment rate go up? More people jumped into the labor pool, looking for work. The participation rate increased to 63.4% in May from 63.3% in April. This is a measure of the working age population in the labor force, and historically this number is closer to 66%; some of the decline is due to people who have dropped out of the labor pool, but some of the decline is due to demographics. About 420,000 people got back into the market for a job and 319,000 found a job, but the additional 101,000 who are now in the market for a job and did not find work – that pushed the unemployment rate higher.
There are still 7.9 million involuntary part time workers, basically unchanged from the prior month. There are 4.3 million people who have been unemployed for 26 weeks or more but still want a job. That number decreased slightly last month. The U6 is an alternate measure which includes long term unemployed and underutilized, or involuntary part time, workers; U6 unemployment decreased from 13.9% to 13.8%.
There are a couple of ways to consider this; first, the jobs market is improving enough that discouraged workers are now getting back into the labor pool, or discouraged workers have exhausted all other options and are getting back into the labor pool. As more people look for jobs, this is likely to make it difficult to see the unemployment rate drop, even if more jobs are added. To absorb the people returning to the labor force and added to the labor force as population grows, the economy would need to add more than 250,000 jobs per month to bring the unemployment rate down, even if incrementally.
Total nonfarm employment is up 2.115 over the past 12 months and up 946,000 so far this year. For 2013 we are looking at an annualized pace of 2.27 million jobs. Private employment is up 2.173 million over the last year. That means that public employment continued to shrink; down 58,000 over the last year, part of a 4 year trend of lower public employment.
Government employment dropped 14,000 last month. Manufacturing lost 8,000 net jobs. The service sector, which includes bars and restaurants and retail, added 57,000 jobs. Temp hiring increased by 26,000 workers.
The average workweek, meanwhile, was unchanged at 34.5 hours, just one tick below a post-recession peak. The workweek usually rises when the economy gets stronger. Hourly wages of American workers edged up 1 cent in May to $23.89, and they have risen 2% over the past 12 months; that is not enough to provide any real spark to consumer spending.
The private sector does not appear to be cutting jobs. The percentage of the workforce losing jobs has fallen near an all-time low. Even though companies are not hiring as many people as expected at this stage of a recovery, they are increasingly reluctant to cut workers loose. For the politicians, the jobs data is just another opportunity to bash the other side, no matter what side you’re on; and nothing gets done.
Remember the rally cry during the election? It was Jobs, Jobs, Jobs. The manufacturing sector lost 5 million jobs between 2000 and 2010. President Obama laid out a specific jobs goal that he said would help rebuild the country’s struggling middle class: add 1 million new manufacturing jobs by 2016. That goal is looking less and less likely. There may come a time where we lose so many manufacturing jobs that it destroys the manufacturing infrastructure.
The economy continues to add jobs, just not enough; and this has been the pattern for the past three years. After a while, not enough causes damage; the unemployment problems become structurally embedded in the economy and it just means that they will be harder to solve down the road, compared with tackling the problems head-on today.
The reaction to the monthly jobs report is also becoming predictable. The market traders and economists all fret and speculate about how the Federal Reserve will respond to the jobs data. The big concern is not about the economy but about the free flow of easy money. For the equity markets, the data is like a light switch for risk on/risk off. Wall Street wasn’t cheering job growth today; they were cheering weakness. The Wall Street crowd is acting like a child threatening a full blown temper tantrum. The financiers seem to think they have a divine right to profit from central bank largesse, even while they claim they deserve the big bucks for risk management and investing acumen.
So, we’re probably approaching a point where the Fed will have to break the mold. This is not to say they will give up on their Zero Interest Rate Policy, but it might be time to alter QE. So far, QE has involved buying Treasuries and mortgage backed securities, to the tune of $85 billion per month. The result has been a bigger and bigger disconnect between weak fundamentals and more bubbly asset prices in the bond market, the stock market, and the housing market. If the politicians can’t deliver some sort of fiscal policy to deal with weak fundamentals, the Fed needs to. There are ways for the Fed to provide more direct stimulus. The only question is whether they have the guts.
Let’s look at the rest of the world.
The National Security Agency has obtained direct access to the systems of Google, Facebook, Apple and other US internet giants, according to a top secret document obtained by the Guardian, a British newspaper. The NSA access is part of a previously undisclosed program called PRISM, which allows officials to collect material including search history, the content of emails, file transfers and live chats, the document says.
The document claims “collection directly from the servers” of major US service providers. Although the presentation claims the program is run with the assistance of the companies, all those who responded to a Guardian request for comment on Thursday denied knowledge of any such program. Several senior tech executives insisted that they had no knowledge of PRISM or of any similar scheme. They said they would never have been involved in such a program.
The NSA access was enabled by changes to US surveillance law introduced under President Bush and renewed under Obama in December 2012. The program facilitates extensive, in-depth surveillance on live communications and stored information. The law allows for the targeting of any customers of participating firms who live outside the US, or those Americans whose communications include people outside the US. It also opens the possibility of communications made entirely within the US being collected without warrants.
Disclosure of the PRISM program follows a leak to the Guardian on Wednesday of a top-secret court order compelling telecoms provider Verizon to turn over the telephone records of millions of US customers.
Some of the world’s largest internet brands are claimed to be part of the information-sharing program since its introduction in 2007, including Microsoft, Yahoo, Google, Facebook, PalTalk, Skype, AOL, Apple, and more than likely just about any of them. The extent and nature of the data collected from each company varies. Companies are legally obliged to comply with requests for users’ communications under US law, but the PRISM program allows the intelligence services direct access to the companies’ servers.
What kind of data are they getting? Email, video and voice chat, videos, photos, voice-over-IP (Skype, for example) chats, file transfers, social networking details, and more. The document also shows the FBI acts as an intermediary between other agencies and the tech companies, and stresses its reliance on the participation of US internet firms, claiming “access is 100% dependent on ISP provisioning”. In the document, the NSA hails the PRISM program as “one of the most valuable, unique and productive accesses for NSA”.
So, the Guardian, a British news organization published these two NSA top secret documents and revealed that the government is tapped into everything on the internet and probably your phone as well. But wait, there’s more. The Guardian reporter Glenn Greenwald has published a third top-secret NSA document in less than 48 hours. The third document is entitled “Offensive Cyber Effects Operations” and it is described as a presidential directive which can “offer unique and unconventional capabilities to advance US national objectives around the world with little or no warning to the adversary.” The effects of such approaches “rang[e] from subtle to severely damaging.”
The document orders various government agencies to prepare for offensive cyberwarfare operations and says the government will “identify targets of national importance.” The article quotes an intelligence source with knowledge of NSA programs as saying the directive makes US complaints about China’s state-sponsored hacking “hypocritical,” because the US has “participated in offensive cyber operations and widespread hacking.”
“We hack everyone everywhere,” the intelligence source told The Guardian. “We like to make a distinction between us and the others. But we are in almost every country in the world.”
Some of the talking points in the directive were declassified in January, but the emphasis on offensive hacking wasn’t made public, nor was the order to create a specific target list.
This third leak comes at a sensitive time, as President Barack Obama prepares to meet Chinese President Xi Jinping in California today. One of the subjects Obama is expected to bring up is Chinese cyber-attacks. Just this morning Obama defended both the widespread collection of call data and the PRISM program that relates to collecting e-mails and other Internet information, saying the government had reached the “right balance” on civil liberties.
Your weekend reading list should include this article from Glenn Greenwald; he’s the reporter at the Guardian, who broke all this top secret information about how the government has destroyed any inkling of digital privacy and is involved in cyber attacks. This is what you need to read about these three big leaks of sensitive government shenanigans. Greenwald wrote an excellent article On Whistleblowers and Government Threats of Investigation.
And I’ll remind you that the Bradley Manning trial is currently underway, and Julian Assange is still in exile. And I’ll remind you that Assange has long promised he would have a data dump on the big banksters. We’re still waiting.
And a final note: US and British authorities are preparing to bring criminal charges against former employees of Barclays for their alleged roles trying to manipulate Libor interst rates. The current probe appears to be targeted at midlevel traders. So, the whole exercise really continues an established pattern of sacrificing underlings as human shields for managers and executives.