Sunday, June 7, 2009

Birth-Death Model

No, this isn't a recent summation of our capital markets, it's the antiquated method our government uses to calculate unemployment figures. The same formula that magically yielded 200K less job losses than ADP numbers, you know, the company that actually looks directly at payrolls. No, the BD is much better. It tries to estimate the number of new jobs created by LLCs and new filings against companies that go under. The truth is, most of these LLCs only superficially "create" 1 job, and most of these companies fail in the first six months. My wife for example, formed her own LLC for her marketing venture, Brand You. Fortunately, she is still up and running and she has actually created a job. Perhaps the BLS looks at Brand You and says, hey, there's a marketing company, 20 jobs created! Well done. Meanwhile, companies like AmEx and GM lay off a few thousand people, but somehow the numbers seem to add up. It was interesting to note that despite the initial jump in futures, the markets finished flat, perhaps finally in disbelief of the bogus numbers we've been fed for months now.

Consumer credit managed to fall by another $16 billion in April, just short of March's record. With unemployment very unofficially at 9.4%, it's quite unclear as to where the green shoots of spending are actually taking place. Retailer numbers for May were awful, much worse than expected. I've recently been inundated with Dunkin' Donuts coupons (something I've never received before) from corporate and local participants. I commented to my wife that I think they're trying to put the boots to Starbucks rotting carcass, but she wondered if they're just trying to make up for lost commuter business during the week. Well, for a grand total of $6 for 2 lattes, 2 sandwiches, and a few munchkins for my girls, I'll take it either way.

I'm curious to see why Timmy has requested a Congressional audience this month. Is it to inform us that China is going to play ball with our treasuries, or to pump up the markets after some impending bad news? Always a pleasure to watch him talk and say nothing.


Anonymous said...

Ax... Would high unemployment suggest taht CRE and banks could be in for another round of beatings? Consider the duration of the current recession, and the length that people are out of work... (28.9 weeks) and no access to home equity...and once again, we see a recipe for disaster...

Or, are we to believe the masses on Wall Street who have discounted our unemployed countrymen, and claim the recovery is upon us?

AX said...

High unemployment suggest that our entire economy is in for a beating as it is 70% consumer driven. Longest recession with rising unemployment ever over this span, U6 numbers beginning to have unfavorable comparisons with Great Depression. Obama and the MSM circus is pushing hard on the green shoots theme, and Krugman has suddenly sold his soul. But the next wave is coming, will our shorts hold up until then is the question?