Posts filed under “Think Tank”

King Report: Productivity Gains Not What They Appear



U.S. productivity rises at fastest pace in six years So what. Over the past decade productivity gains have NOT been accompanied by higher real wages and living standards – a first in US history.

Long-time readers know our crusade to debunk the ‘Great US Productivity’ miracle, which rests on faulty, if not fraudulent US economic data that understates inflation, which overstates production (GDP)

Years ago (Sept. 2003 IWRC), Sen. Robert Bennett (R-UT), a former banker, told CNBC that when Easy Al saw that productivity numbers were not showing bigger gains, the worst Fed CEO in history went to the BLS and told them ‘this cannot be true!’ Bennett added, ‘and do you know what, when the BLS reworked the numbers they found huge productivity gains.’

We literally jumped out of our chair when the naive senator unintentionally suggested that Easy Al had the BLS cook the books so Al could keep pumping credit and paper over declining US living standards due to the massive transfer of wealth abroad.

We elaborated on Bennett’s unintended expose in our ensuing missive. A day or two later we got a call from a West Coast Democratic Senator’s chief of financial affairs.

Productivity is defined by the BLS as ‘output per hour of all persons in the nonfarm business sector.’

The BLS reports that hours worked plunged at a 7.6 percent rate in the second quarter and unit labor costs declined 5.8 percent, the biggest decline since the second quarter of 2000.

By understating inflation and overstating GDP/output, productivity soars when hours worked plunges.

And didn’t we just learn that GDP had been overstated the past few years?

Yesterday afternoon rumors spread that the BLS had reported an erroneous productivity report. The BLS website: The Productivity and Costs: Second Quarter 2009 Preliminary news release issued on the morning of Tuesday, August 11, 2009, contains errors in Tables 1 through 5 and Appendix tables 1 and 2. The series containing the errors are compensation per hour, real compensation per hour, unit labor costs, and unit non-labor payments. A corrected version of this release will be posted as soon as possible.

Unfortunately most of the marketplace makes decisions based on US government economic statistics. And those that understand this folly must go along f- or awhile. But one must be alert when non-government data usurps fallacious government data; because when the inevitable readjustment to reality occurs, mucho dinero is lost.

And then most of the marketplace brays, ‘no one could have seen the biggest financial and economic collapse since The Great Depression coming.’

Category: Data Analysis, Economy, Think Tank

3 year note auction

The 3 year note auction, the easiest of the big three this week because of its short maturity, was very good. The yield was about in line with expectations but the bid to cover of 2.89 is well above the average this year of 2.52 and the highest since Nov ’08. Indirect bidders totaled 62.5%…Read More

Category: MacroNotes

Wholesale Inventories

June Wholesale Inventories, which make up about 25% of Business Inventories, fell a greater than expected 1.7% vs a forecasted drop of .9% and May was revised down by .4% to show a decline of 1.2%. The greater than expected fall IF followed by a similar drop in Business Inventories, will lead to a revision…Read More

Category: MacroNotes

Baltic Dry Index falls for 9th straight day

Coincident with the July slowdown seen in the new bank loan data in China and also with a short term topping out in their stock market, the Baltic Dry Index today fell for a 9th straight day to the lowest level since May 18th. It’s down 25% over the 9 day stretch.

Category: MacroNotes

Productivity, NFIB and China

Over time, GDP growth is equal to population growth + productivity. With population growth in the US at about 1% and the 60 year average of productivity being 2.3%, GDP growth should be between 3-3.5% in order to maximize the country’s asset base. Anything below that means the US is not producing to its potential…Read More

Category: MacroNotes

Where to Next for Commodities?

Good Evening: U.S. stocks took a bit of a breather today after seeing little to dislike in Friday’s nonfarm payrolls report. The slight trimming to Friday’s gains came on light volume, and then only after another series of afternoon upticks. The weakest performers on Monday (and, actually, for much of the past week) were the…Read More

Category: Markets, Think Tank

Rate hike odds

After fully pricing in a 25 bps rate hike by the January FOMC meeting midday Friday after the better than expected jobs data, the February fed funds contract is backing off and now pricing in a 76% chance of a hike. There are a few levers the Fed will undertake before they start raising the…Read More

Category: MacroNotes

King Report: NSA 1.33 Million Lost Jobs

> The US economy lost 1.33 million jobs NSA in July. Hallelujah! WooHoo! The recession is over!! Last July the US economy lost 1.401 million jobs NSA. The 68k gain is about the 66,848 per month margin of error for the BLS’s NFP prelim estimate. (Table 2F) The Net Business Birth/Death jobs for July are…Read More

Category: Think Tank

Show us the money

On the heels of Friday’s payroll data, consequent rise in interest rates and ahead of $75b of Treasury auctions this week (3, 10 and 30 yr maturities), Treasury Secretary Geithner likely spent the weekend doing his best Jerry Maquire imitation yelling ‘Show me the Money’ to the Chinese and others in order to avoid any…Read More

Category: MacroNotes

Words from the (Investment) Wise August 9, 2009

Words from the (investment) wise for the week that was (August 3 – 9, 2009)

Risky assets last week again marched higher to the tune of economic data supporting the argument of a global economic recovery. A realization among investors that the economic transition from recession to recovery was gaining momentum resulted in many global stock markets and commodities scaling fresh peaks for the year.


Source: Steve Breen

The S&P 500 Index closed the week above the psychological 1,000 level, marking its highest level since November and capping four consecutive weeks of gains. And more upside lies ahead, said Abby Joseph Cohen, Goldman Sachs’ market strategist, who expects the Index to reach the 1,100 point by year end. (Is this a contrary indicator coming from a permabull?)

Many commodities such as crude oil, copper, aluminum, nickel, lead and zinc hit their highest levels of the year, not to mention sugar recording a 28-year peak. “The financial crisis has been addressed, the commodity crisis has not,” warned Goldman Sachs (via the Financial Times), predicting that this year’s rise in prices was “just the beginning” of another rally that was “ultimately likely to be even more extreme” than those seen in the past. However, the Baltic Dry Index – a measure of freight rates for iron ore and bulk commodities that correlates very well with base metal indices – has broken technical support on the downside and short-term weakness in metals prices looks likely, possibly as a result of the Chinese buying frenzy having come to an end.

While high-yielding commodity-linked and emerging-market currencies were in favor, the US greenback dropped to its weakest level since October before staging a rally on Friday after the announcement of the US employment data had pleased some traders (see comments in the “Economy” section below). Government bonds (with the exception of emerging markets) again sold off as the bond vigilantes cottoned on to the improved economic outlook.

The past week’s performance of the major asset classes is summarized by the chart below – a set of numbers that indicates continued investor appetite for risky assets (albeit with investment-grade and high-yield corporate bonds taking a breather).



A summary of the movements of major global stock markets for the past week, as well as various other measurement periods, is given in the table below.

Read More

Category: Think Tank