Morning in Arizona

Morning in Arizona
Rainbows over Canyonlands - Dave Stoker

The Headline Animator

Monday, June 08, 2009

Green Shoots Are Poisonous to Your Wealth



I remember a conversation I once had with a 20 something. I ask her about the colorful tiger on her keychain. “Is that Tony the Tiger?” I asked. Or, was it the Exxon Tiger, I thought to myself. She politely and proudly corrected me by announcing that it was Tigger, a character from the Disney Channel 1983-1986 television series “Welcome to Pooh Corner”. I am a child of the 1950’s and she is a child of the 1970’s. There was no need to mention Tigger first appeared in A.A. Milne’s 1928 book “The House at Pooh Corner”. The takeaway from that exchange is one man’s Tigger is another man’s Tony the Tiger. However, they are not the same nor are all green shoots.

Everyone enamored with green shoots sightings are convinced that the dubious vegetation is proof of the Second Derivative test at work in the economy. Therefore, the market rally is real because the economy is strengthening. At best, these sighting are a false positive. At worst, I see a pause in the economy before another wave of contraction occurs. A tree branch breaking your fall 10 stories down, after falling from a 20-story rooftop does not reverse the accident; it merely delays the consequences of falling.

Before everyone became an expert in deflation economics, an additional 200,000 newly created jobs each month was necessary to keep up with population growth. This growth in jobs supported economic expansion, which in turn, allowed for market multiples expansion. Looking at the recent employment figures from the Bureau of Labor Statistics (BLS), Monthly Data A-1/ Household Data Historical, with my population adjustment, the numbers are stunning.

Total Unemployed

New Jobs Needed per mo.

Total Jobs Needed

May 08

8,536,000

200,000

8,736,000

June 08

8,662,000

200,000

8,862,000

July 08

8,910,000

200,000

9,110,000

Aug. 08

9,550,000

200,000

9,750,000

Sept. 08

9,592,000

200,000

9,792,000

Oct. 08

10,221,000

200,000

10,421,000

Nov. 08

10,476,000

200,000

10,676,000

Dec. 08

11,108,000

200,000

11,308,000

Jan. 09

11,616,000

200,000

11,816,000

Feb. 09

12,467,000

200,000

12,667,000

Mar. 09

13,161,000

200,000

13,361,000

Apr. 09

13,724,000

200,000

13,924,000

May 09

14,511,000

200,000

14,711,000

Net 1 Yr. Lost Jobs

5,975,000

2,600,000

8,575,000

People are seeing green shoots when in the last 12 months our economy is down 8.57 million jobs! Even if we maintain the current unemployment rate of 9.4% until the economy begin expanding again, we are still falling behind by 200,000 jobs every 30 days. We have 44 states unable to balance their budgets for the coming year, which should lead to layoff notices starting this summer, and one of the largest industries lost its largest company, General Motors, to bankruptcy a week ago.

I hope my analysis is too pessimistic but the numbers speak for themselves.

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