Monday, January 13, 2014

While the markets were surprised last month when the Federal Reserve’s Open Market Committee decided to chop off about $10 billion per month in monetary stimulus (also known as quantitative easing), it’s becoming clear that the jobs situation was not one of the driving forces behind the decision. 
While the topline jobs rate has plunged, it’s only because the labor force is contracting as people stop looking for work.

It looks like the Fed decided to cut down QE is spite of the poor jobs market. And that can only mean the Fed theoreticians are beginning to be worried about inflation.

The reduction in labor force in the U.S. is comparable to losing the state of Maryland or Missouri in terms of productivity and GDP. We are missing between $250 and $300 billion in lost GDP because of these jobs losses, which is right around 1.5 to 2% of GDP growth. Not coincidentally, that’s the same number that has been historically missing from Obama's stewardship of the economy.

And things are getting worse, not better.

The missing workers in August of 2012 were 4.4 million. Now it's grown 5.9 million according to an estimate from the union run Economic Policy Institute (EPI). It’s worth noting that only 1,374,000 jobs have been created since Dec 2012, while an additional 1,500,000 workers have left the workforce according to the EPI estimate.

“The economy still needs the support of a very accommodative monetary policy,” said William Dudley, last fall in a speech in New York according to the text of the speech provided by Dudley is vice chairman of the Federal Open Market Committee, the committee that decides on continued quantitative easing measures. “Improving economic fundamentals versus fiscal drag and somewhat tighter financial conditions,” he said, “are pulling the economy in opposite directions, roughly cancelling each other.”

Dudley later more closely defined what he meant regarding fiscal drag by pointing to: 1) tax increases and 2) government budget cuts. But he also pointed out that the jobs picture isn’t quite a rosy as all that, either.

The unemployment rate, which had declined from 8.1 percent to 7.3 percent, topline, by fall, and now all the way down to 6.7 percent “overstates the degree of improvement” that jobs have made in the economy overall, he said

In December of 2012 Fed chair Ben Bernanke said that the reserve bank would like to see stimulus measures end when unemployment reached 6.5 percent.

But in June of this year, Bernanke then introduced new math to the equation by saying that unemployment would likely be around 7 percent when the tapering of quantitative easing would end.

“In this scenario when asset purchases ultimately come to an end the unemployment rate would likely be in the vicinity of 7%,”Bernanketold a press conference, “with solid economic growth supporting further job gains — a substantial improvement from the 8.1% unemployment rate that prevailed when the committee announced this program.”

Bernanke said back then that quantitative easing would be wrapping up sometime next year, while actual tapering would likely begin last fall.

And what’s changed since then?

As Dudley has pointed out, the labor market isn’t as robust as the underlying numbers would suggest.

The labor market is being adversely affected by Obamacare.

“I think businesses are very uncertain as to what's going to happen,” Bob Funk, CEO of Express Employment Services, the country’s fifth largest staffing company toldCNBC. “And many companies are going to flexible staffing, instead of full-time employment. And our position as a company we want to go from part-time staffing or temporary staffing to full-time employment. The government's going just the opposite direction, from 40-hour workweek down to 29-hour workweek. Great for our company, but not healthy for the country.”

So why the decision to cut QE now, even with all the labor market uncertainty? I can’t say for sure without speaking with each of the Fed regional presidents. But if it’s not because jobs are plentiful, it must be to address the risk of inflation.

In early September noted monetary hawk Dallas Fed president Richard Fisher said that Obamacare was hurting the economy and quantitative easing was not helping with hiring. He is widely quoted as saying “I was against QE3. I don’t believe it had any efficacy” in terms of the labor market and hiring.

“Ask any manufacturer what holds him or her back and they will tell you that they can’t operate in a fog of total uncertainty concerning how they will be taxed or how government spending will impact them or their customers directly,” Fishertold US manufacturers in August “And as to asking their opinion of the impact of regulation on their businesses—from the Affordable Care Act to the thousands of other regulations enumerated in the Federal Register—don’t even go there, unless you delight in hearing profanities.”

The problem says Fisher is how to end quantitative easing without killing the financial markets. As time goes on the expectation is that inflation will eventually kill the economy.

"Especially given that we have a surfeit of excess liquidity sloshing about in the system, the idea of ramping up inflation expectations from their current tame levels strikes me as short-sighted and even reckless," said Fisher last month.

One need only look at the rally in theTen-Year Treasuryon the heels of the bad jobs report to see how stimulus dependent financial markets are.

Financial markets aren’t necessarily healthy when they are making new highs on expanded price earning multiples versus expanded profits.

That’s one of the inflationary effects of QE.

But when tampering starts in earnest you could see that liquidity stop pushing the markets higher, while pushing the prices of things that you buy at the store higher.

And it’s inflation that the Fed dreads more than unemployment.

They just proved it.
The wide discrepancy between jobs and employment continues for a third month.

Jobs vs. Employment Discussion

Before diving into the details, it is important to understand limits on data, and how the BLS measures jobs in the establishment survey vs. employment in the household survey.

Establishment Survey: If you work one hour that counts as a job. There is no difference between one hour and 50 hours.

Establishment Survey: If you work multiple jobs you are counted twice. Neither the BLS nor ADP weed out duplicate social security numbers.

Household Survey: If you work one hour or 80 you are employed.

Household Survey: If you work a total of 35 hours you are considered a full time employee. If you work 25 hours at one job and 10 hours at another, you are a fulltime employee.

Following are numbers from today's BLS jobs releases.

December 2013 vs. December Prior Years
DEC 2008
DEC 2009
DEC 2010
DEC 2011
DEC 2012
DEC 2013
Employed Household
Jobs Establishment

Monthly Averages December 2013 vs. December Prior Years
DEC 2009
DEC 2010
DEC 2011
DEC 2012
DEC 2013
Yoy Change Household
Yoy Change establishment
Monthly Average Household
Monthly Average Establishment

Notice how closely in sync the household survey has been to the establishment survey in terms of average gains or losses. A divergence developed in 2013.

Here is the data I posted last month (I did not check for revisions).

November 2013 vs. November Prior Years
Nov 2008
Nov 2009
Nov 2010
Nov 2011
Nov 2012
Nov 2013
Employed Household
Jobs Establishment

Monthly Averages November 2013 vs. November Prior Years
Nov 2009
Nov 2010
Nov 2011
Nov 2012
Nov 2013
Yoy Change Household
Yoy Change establishment
Monthly Average Household
Monthly Average Establishment

Last month the discrepancy between reported employment and reported jobs was 191,000 - 92,000 = 99,000.

This month the discrepancy between reported employment and reported jobs is 182,000 - 115,000 = 67,000.

These discrepancies started in 2013.

I asked the BLS to take multiple social security numbers into consideration. They cannot because all they have is raw counts. ADP could, but wouldn't, citing privacy issues.

However, there are no privacy issues. A program would be trivial to write, but most likely one would not even have to do that. A sort utility extracting and counting duplicate social security numbers would suffice.

I believe Obamacare is the reason for the discrepancy.

Obamacare Effect

Prior to Obamacare
34 hours worked = 1 parttime job household survey
34 hours worked = 1 job establishment survey

Enter obamacare
Person cut back to 25 hours and takes a second job for 10 hours
Here is the new math

25 + 10 = 1 fulltime job on the household survey.
25 + 10 = 2 jobs on the establishment survey.

In my example, the household survey totals up all the hours and says, voilla! (35 hours = full time). So a few extra hours that people pick up working 2 part time jobs now throws someone into full time status – thus no surge in part-time employment, but there is a surge in jobs.

Establishment Survey Jobs Surge Ended This Month

Interestingly, the surge in jobs in the establishment survey ended today. See Big Miss: Nonfarm Payrolls +74,000 vs. 205,000 Expected; Unemployment Rate 6.7% as Labor Force Shrinks by 347,000.

Two Possibilities
  1. Perhaps today's weak job report is a one-time thing. Some economists blamed the weather.
  2. The other possibility is the Obamacare effect has mostly played out, and Establishment Survey results going forward will not get a multiple job boost for the rest of the year.
If the Obamacare multiple job surge has indeed played out, monthly establishment survey job gains are going to be weaker than most expect for 2014.

And the hatchet-job on Christie continues...

CNN: Feds Investigating Christie over Alleged Misuse of Sandy Relief Funds
By Melanie Batley

Image: CNN:  Feds Investigating Christie over Alleged Misuse of Sandy Relief FundsFederal investigators have launched an inquiry into whether New Jersey Gov. Chris Christie improperly used Superstorm Sandy relief funds to produce tourism ads that featured him and his family during his re-election campaign.

According to CNN, federal auditors will be examining the use of $25 million of public funds for a marketing campaigning aimed at reviving tourism on the Jersey Shore after major parts of the coastline had been decimated in the 2012 storm.

New Jersey Democratic Rep. Frank Pallone prompted the inquiry after asking the inspector general of the Department of Housing and Urban Development in August to examine how Christie spent the marketing money approved by the department.

"This was money that could have directly been used for Sandy recovery. And, as you know, many of my constituents still haven't gotten the money that is owed them to rebuild their homes or raise their homes or to help," Pallone told CNN.

Pallone cited concerns about the bidding process for the firm that was awarded the marketing plan after it charged the state roughly $4.7 million, about $2 million more than the next lowest bidder, according to CNN. The winning bid featured Christie and his family in advertisements while the losing proposal did not.

Pallone told CNN that a preliminary review of the spending has already been concluded and that there was enough evidence to launch a full-scale investigation into the use of the funds. The probe will take several months to complete, with findings to be issued in an official report.

Any wrongdoing unearthed from the probe would likely further dim the presidential chances of Christie, who shot to national prominence on the basis of his performance during and after the superstorm.

News of the inquiry could also deepen the controversy surrounding the embattled governor who last week fired top aides and gave a lengthy public apology over revelations that they had ordered lanes to be closed to the George Washington Bridge in September as a possible act of political retribution.

Subpoenas could be issued as soon as Monday for Christie’s former deputy chief of staff and campaign manager, the New York Post reported. And New Jersey state Senate Democrats also have delayed the confirmation hearing for Kevin O’Dowd, Christie’s nominee for attorney general, who is his current chief of staff.

Meanwhile, in a sign that Christie's troubles are further deepening, his earliest political mentor, former New Jersey Gov. Tom Kean, has also distanced himself from the governor, suggesting Christie's aggressive character marks a sometimes "dangerous" approach to governing, and one that may be undesirable in a presidential candidate, The Washington Post reports.

"On the one hand, I think he's got a lot to offer. I think he's the most able politician since Bill Clinton," Kean said. "On the other hand, you look at these other qualities and ask, do you really want that in your president?"

He also hinted at Christie's hardball politics, citing tactics by Christie last year when he unsuccessfully tried to oust his son, Thomas Kean Jr., from his position as State Senate Republican Minority Leader as part of a deal with South Jersey Democrats who were helping the governor with bipartisan legislation.

"If you come at him, he's going to come back at you harder," Kean said.

Robert Gates: Obama Didn't Make Troops Believe He Supported Their Sacrifice

Image: Robert Gates: Obama Didn't Make Troops Believe He Supported Their SacrificeBy Newsmax Wires

Former Defense Secretary Robert Gates said says he doesn't regret anything he wrote in his controversial new book and calls the memoir "an honest account."

And in an interview Sunday with CBS News, he offered perhaps his harshest yet criticism of President Obama's wartime leadership: that he didn't reach out to American troops and make them believe he supported their sacrifice.

"You say about President Obama that as much as you admired him on so many levels, he never really had a passion for pursuing the war in Afghanistan, and that kind of bothered you," CBS News correspondent Rita Braver asked Gates.

"It's one thing to tell the troops that you support them. It's another to work at making them believe that you believe as president that their sacrifice is worth it, that the cause is just, that what they are doing was important for the country, and that they must succeed," said Gates.

"President (George W. ) Bush did that with the troops when I was Secretary. I did not see President Obama do that," he said. "As I write in the book, it was this absence of passion, this absence of a conviction of the importance of success that disturbed me."

In "Duty: Memoirs of a Secretary of War," the former Pentagon chief raises questions about Obama's war leadership and harshly criticizes Vice President Joe Biden.

Gates told CBS' "Sunday Morning" that people credited him with being blunt and candid while he was in the Cabinet and that "I could hardly be any less in writing a book."

Click on link to see video...

Gates say how some are looking at the book reflects the country's polarized political process.

He says he didn't think that waiting until 2017 — after the next presidential election — to weigh in on important issues "made any sense."

"So why was I so angry all the time? Why did I want to leave all the time? . . . It's just because getting anything done in Washington was so damnably hard," he said.

Lawmakers in Congress were "uncivil, incompetent in fulfilling basic Constitutional responsibilities, parochial, hypocritical, egotistical . . . too often putting self and reelection before country."

"I thought about that sentence a lot," Gates told Braver," and whether it was too strong. And I decided at the end of the day, that that's what I believe."

Gates praised Obama for facing down political opposition from his own party. But he is still very critical of the president and says Obama was at skeptical of his own strategy in Afghanistan.

But he saves much of his criticism for the president's staffers. The  national security staff under Obama was the most micromanaging and controlling since Richard Nixon and Henry Kissinger.

But, Braver asked, "Did you ever tell the president about it directly?"

"No," Gates said. "And I acknowledge that in the book."

"Should you have, do you think?"

"Well, first of all, things don't happen that way if the president doesn't want them to happen that way."

"Do you have a sense that's changed? Or do you think they are still running things from the White House?"

"I actually think it's gotten worse," Gates said.

His disagreements with Vice President Joe Biden were especially harsh.

"You are not very flattering to Vice President Biden in this book," said Braver.

"Actually I think I am in some areas complimentary of him," Gates responded, "but where I had a particular problem with the vice president was in his encouragement of suspicion of the military and the senior military with the president: 'You can't trust these guys. They're gonna try and jam you. They're gonna try and box you in,' and so on. And that did disturb me a lot."

But Gates said he did occasionally see eye-to-eye with Biden.

"One time when I agreed with him on something -- often Admiral Mullen, the Chairman of the Joint Chiefs, and I would ride back to the Pentagon together from the White House -- and Mullen turned to me at one point [and] said, 'You know that you agreed with the vice president this morning.' And I said, 'Yeah, that's why I'm rethinking my position.'"

Gates says he was "dismayed" when he heard Secretary of State Hillary Clinton tell Obama that her opposition to the 2007 troop surge in Iraq had been "political, because she was facing him during the primary season."

But Gates also has high praise for Clinton, saying she became one of his closest allies in the administration.

"The thing that I liked best about Secretary Clinton, other than the fact that she has a great sense of humor, was she is very tough-minded," he said.

"Do you think she'd make a good president?" Braver asked.

'Actually, I think she would," Gates replied.

"And how about Vice President Biden? There is some talk he might run."

"Well, I suppose to be even-handed, I would have to say I suppose he would," he laughed.

Winter Olympics: Russia arrests five jihad terror plotters

From Jihad Watch / Posted by Robert Spencer

Thumbnail image for 130703-umarov-9a.photoblog600.jpgUmarov

Jihad leader Doku Umarov said that Muslims should “use maximum force on the path of Allah to disrupt this Satanic dancing” – by which Patrick Swayze-evoking locution he referred to the Games.

The Russians, he said, “plan to hold the Olympics on the bones of our ancestors, on the bones of many, many dead Muslims buried on the territory of our land on the Black Sea, and we Mujahedeen are obliged not to permit that — using any methods allowed us by the almighty Allah.”

"Winter Olympics: Russia arrests five 'terror suspects,'" from the BBC, January 11 (thanks to Lookmann):
Russian authorities say they have detained five members of a "banned international terrorist organisation" in the restive North Caucasus region. 
The arrests were made in the town of Nalchik, some 300km (185 miles) east of the Black Sea resort of Sochi, the host of next month's Winter Olympics.
Russia earlier announced it was deploying more than 30,000 police and interior ministry troops to the region.
The main concern is the threat of attack by Islamist militants.
Security fears have been heightened after two suicide bomb attacks killed 34 people in the southern city of Volgograd on 29 and 30 December.
The bombings were similar to previous indiscriminate attacks by Islamist militants operating from the North Caucasus, where violent anti-Moscow separatism is rife.
No group has said it carried out the attacks, but Russia's most wanted man, Chechen rebel leader Doku Umarov, has previously urged his fighters to target the Games.
'Explosive device'
The five suspects were in possession of "grenades, ammunition, and a homemade explosive device packed with shrapnel", the National Anti-Terrorism Committee said....
In recent years, a conflict between Russian forces and separatists in Chechnya has been the source of attacks by Islamists.
The violence has spread across the North Caucasus, including to mainly Muslim Ingushetia and Dagestan, killing hundreds of people, among them members of the government and security services.
Divert, deflect, and distract...the alphabet media's weapons of choice to protect Obama and Hillary
By: Diane Sori

What a sad commentary on the media in today's America when Chris Christie's ubber traffic jam fiasco dubbed 'BridgeGate' got more media coverage in the first 24 hours after the story broke than the IRS scandal was given in the past six or so months.

Jumping fast and hard on the news about the Republican governor and presidential hopeful...and as they try to turn 'BridgeGate' into a career ending scandal...the in-the-pocket-of-Obama alphabet media gave a solid 34 minutes and 28 seconds of air-time to said traffic jam that first day in the hopes that it would divert, deflect, and distract us away from ObamaCare, Benghazi, the IRS and NSA scandals, the economic numbers being manipulated, and of critical importance...deflect our attention away from former Defense Secretary Robert Gates' new tell all book...which in time could turn into the mother of all scandals because of Obama's "absence of conviction" in regards to Afghanistan and Iraq.

And of course the alphabet media jumped on Christie NOT just to ruin his political career but also to take the pressure and focus off their next in-line-for-the-presidency 'anointed one'...Hillary 'What does it matter' Clinton.

Divert, deflect, and distract...the fork in the road that the alphabet media travels that they rarely if ever exit to the right as they cover for Obama on a daily basis. And we know that so-called 'fair and balanced' reporting does NOT happen with today's left-leaning reporters, talking heads, and political pundits who seem to report only their news of choice and who actually fabricate and make-up news when need be. And sadly, sometimes even FOX is guilty of this...the very conservative leaning station who loves to tout the words 'fair and balanced' every chance they get.

And while we know how critical it is for 'We the People' to maintain a proper perspective on what's actually important vs. what's being reported as important by those in the alphabet media who deliberately initiate bias, it becomes harder to maintain focus when media malice is the hallmark of the leftist media establishment who stacks the deck against conservatives every chance they get.

Just a few cases in point...Christie's people having caused a traffic jam on the GW bridge gets major network coverage by the alphabet media, but Obama spitting in the face of our veterans by shutting down their access to the WWII Memorial instead had them either ignoring the story completely, or if they did cover it they twisted and distorted the facts to paint the 'bad' Republicans as the cause of the denied access, simply because they had to follow the Obama rhetoric that the Republicans forced the government shutdown.

And then there's the IRS scandal...the scandal where TEA Party and conservative groups were denied or delayed in getting 501-C3 tax exempt status...which should be big news because Obama just appointed one of his own big money donors to head the investigation into the abuses. Talk about knowing the outcome of the investigation before the investigation even gets started...but only FOX is reporting on this...MSNBC, ABC, CBS, and even CNN are saying NOT a word.

And while our floundering economy trudges along, the alphabet media heralds the newest job's numbers showing that the unemployment rate has declined from 7.0% to 6.7%. Yet they fail to report that only 74,000 new jobs were created in December as more people dropped out of the job's market than entered it. In fact, they dare NOT tell you that since Obama took office more Americans have entered into poverty than have left it nor will you hear that to end poverty the focus should be on jobs creation NOT on increasing unemployment benefits as Obama wants to do...because if they did Obama would lose those loyal to him whose very existence depends on their living off his government freebies.

And then there's ObamaCare...the gift that keeps on 'We the People' heartburn that is. For example, the alphabet media bias for Obama was in-your-face-obvious last November when the NBC News hierarchy ordered that NO mention of the ObamaCare roll out disaster be mentioned on air for three days. NOT one word was said about the millions of Americans losing their health insurance nor was a word mentioned about the political damage that was done to Obama and the Democratic Party because of the website failures. An Obama policy disaster was ignored at the same time his LIES about being able to keep your current policy and doctors you liked was glossed over into becoming NOTHING but a slight misspeak, because 'We the People' should have known that Obama really meant we can keep both if they met ObamaCare's mandated coverage.

Oh the joys of the doublespeak of the alphabet media (gag).

And Benghazi...what Barack HUSSEIN Obama referred to as a 'bump in the road' while he watched four Americans die in real time. How the liberal alphabet media tried and still tries to cover and deflect blame off of and away from both Obama and Hillary. Reporting over and over for weeks on end what Obama told them to report about a YouTube video critical of mohamed being the cause of the attack on our compound, they deliberately did NOT report the documented facts that Ambassador Stevens had sent numerous pleas for help to then Secretary of State Clinton because he feared the embassy could NOT sustain an attack and that he was concerned about the increase in islamic presence in Benghazi. And they also did NOT report that NO US forces were put in place or even made ready to respond to a possible attack (especially with the anniversary of 9/11 close at hand) or that there were those willing to go help even after the attack began but were ordered to 'stand down'...NOT a word was said about this even though the media knew and still knows that only the president in his capacity as Commander-in-Chief can override the military command and issue an order to 'stand down'.

And the last of my examples is how the alphabet media is reporting on Former Defense Secretary Robert Gate's new book, 'Duty: Memoirs of a Secretary at War.' Painting a very unflattering picture of Barack HUSSEIN Obama as Commander-in-Chief, the media reports NOT on what Gates said or on his examples as proof given, but instead chooses to fuel negativity and controversy against the book in their effort to protect their anointed black 'savior' of us all. And Gates daring to tell the truth about the man who NOT only leads from behind but who actually does NOT lead at all, has the alphabet media scurrying to 'make the story go away' by giving it as little attention and airtime as possible.

So if those in the alphabet media who have now made the Christie 'BridgeGate' scandal their newest target to be focused on instead took a good, hard, unbiased look at the corrupt Obama administration and the true scandals of an anything but transparent administration run amok, and did the job they are supposed to do by reporting the truth instead of diverting, deflecting, and distracting all off Obama, this country would be a hell of a lot better off. But if all the alphabet media continues to do is cover for the Obama administration, they just might succeed in protecting and getting elected their 2016 candidate of choice...Hillary 'What does it matter' Clinton.

And that would be a nightmare courtesy of the alphabet media that America might NOT be able to wake up from.