Friday, November 5, 2010

You took a death pledge

New unemployment claims were up sharply and have not in three years to dropped to levels where you could think jobs were being created. Yet the government survey says 151,000 jobs were created October. The apparent contradiction is accounted for by where the jobs were created, almost entirely in temp services, retail and health care. Corporations continue to pad the bottom line by firing people and replacing them with cheaper workers.

Even though overall they are hiring more people, the high unemployment rate gives corporations the leverage they need to drive down wages. The latest scam, cutting nursing home workers from $10/hour to $8 because Obamacare cut Medicare payments, this is not true of course, nursing homes continue to be highly profitable and are a growth industry.

Temp workers accounted for 35,000 new jobs mostly in October with strong demand for professionals in accounting, IT and finance. All used to be good paying middle-class jobs but no longer. Retail is hiring on stronger sales but they are up on heavy discounting and those jobs are not likely exist after inventory is sold down again after Christmas. The fundamentals of the economy are getting worse and not better.

Sale contracts for existing homes dropped in September. Foreclosure malfeasance by the banks is being suggested as the cause but taking a couple of million houses off the market should be pushing up prices but it isn’t. Four million home owners are estimated to owe twice what their homes are currently worth. A banker would walk away from an investment that bad, but a banker will spit nails at the suggestion a home owner do that. In English the word mortgage means “death pledge”, bankers take that seriously, no matter that they created the housing bubble. In bankruptcy, a rich guy can have the mortgage on his vacation bungalow or yacht reduced to the market value, not so for the middle-class homeowner, pay or die.

You can expect to find bargains at Christmas if you still have money to spend, especially on Chinese made products (the renminbi is still tied to the USD) but your canned goods and such will be going up with the weak dollar and from Wall Street using its free money from the Federal Reserve to run up the commodity markets. Obama could force commodity traders to have higher margin reserves and that would drop oil prices back down close to the cost of production that is around $30 a barrel or less.

Gold set a new record, closing in on $1400/oz and oil is edging toward $90/barrel (3 times what it should be). But Wall Street has to make money somehow, you can’t expect rich people to go out and get jobs in this economy.


Anonymous said...

Last post I think you hit the nail on the head by mentioning 401-k’s padding the Wall St. bankroll. I’ve been saying that since the 2008 TARP fiasco. Back then, it was pretty interesting to me how the DOW went from record lows back up to 10k in a matter of months, but only after the Fed started printing money. I mean let’s face it; we didn’t exactly increase our GDP by 500% to account for such an awesome economic rebound. Similarly, if you look at a graph of the Dow there’s that infamous spike occurring right around 1980—ironically at the same point at which all of the major corporations began nixing pensions and offering 401-k plans. What's common denominator here: liquidity--not growth. In fact it seems to me the only thing that has kept the market up to levels we’re used to since the early 80s is good old fashioned liquidity. And since we can’t get the liquidity from the workers anymore, because there aren’t enough jobs in America for people to put a significant amount of money into the markets, I guess they just have to print it instead. And just like the crash of 2008 the people are going to pay for this new, even bigger crash too, but the sad thing is that it won’t be in a form they’re likely to recognize—it will happen slowly, by devaluing the dollar and reducing spending power rather than taking it out of their sad little Wall St retirement accounts. This time there will be no face to the enemy. A pretty ingenious plan if you ask me—and evil.

Anonymous said...

It did cross my mind today, when I heard the news about the new jobs added, that it was due to the temporary/seasonal hiring for retail. Was browsing the Macy's job board yesterday and noticed that they have job postings for this type of work. I couldn't help but chuckle when I saw that you need to apply first to get into their "Holiday Job Fair", and only then do you have a chance to interview for part-time/seasonal work. You have to laugh or you would just cry. By the way, love your blog!

Steve said...

Haven't you ever heard of PEAK OIL??? The world hit Peak Oil in 2005 at 85 million barrels/day.
With the growth in China and India there will be a mad dash to secure the remaining oil reserves. China is already signing exculusive contracts with oil producing countries ex. Venezuela, Sudan and others to meet their giant demand.
The U.S. free marketeers will soon find that the rest of the world is much more pragmatic about securing energy. Read the Hirsch Report to the Dept. of Energy. also PEAK EVERYTHING by Richard Heinberg...
Have a nice weekend,

prairie2 said...

peak oil is not factor in the price as there is still excess supply. it still costs only 10-25 a barrel to pump oil. Oil that is already owned doesn't really bring 90 a barrel, that's the spot market but it drives up the price of gas to some extent. That's why the price of gas doesn't move in direct proportion to oil price.

Anonymous said...

U-6 is 17% that is the only number I really watch. ..