Monday, December 6, 2010

US Unemployment Rate Unsurpirsingly Jumps, Austerity Spanish Style

12/6/2010 Portland, Oregon – Pop in your mints…
The drama in Europe continues.  We see that our beloved Spain has decided to calm the markets by, among other things, selling a stake in AENA, its airport authority.  Not surprisingly, the Spanish air traffic controllers went on strike and the Military having to step in and do air traffic control.  Privatization would hit this special interest group (the air traffic controllers) extremely hard.  How hard?  Will they lose their jobs?  Will their lives be endangered?  Will they be asked to work excruciating, long hours?
Viva España!
Having lived and studied in Spain for three years we suspected that the reason for the strike probably had something to do with losing a ridiculous privilege.  This strike is no exception.  It seems that the 2,400 air traffic controllers made an average of $463,600 per year by clocking overtime for attending union meetings and probably time spent merely thinking about work.  Privatization, the selling of a grossly mismanaged state enterprise to a buyer motivated to generate profits would mean an abrupt end to their supposed racket.  Are they overpaid?  We are not to judge.  But with the average Spaniard making $26,500, you can bet many of their countrymen do!
Back in the US, on Friday the Board of Labor Statistics dropped what theoretically would have been a bomb on optimism as it reported that the Unemployment rate increase to 9.8% for the month of November, up from 9.6% in October.  What does it mean?  Is 9.8% unemployment too high?  Here at The Mint we track the BLS Non-farm payroll unemployment rate as a key statistic.  Not because we believe that it is a real indication of how many persons are unemployed, but because it tells us what the FED will do next with respect to monetary policy.
It must be understood that the Unemployment rate and the Inflation rate (or CPI) are among data points that are shamelessly manipulated by the government and have little if no real value.  For a true picture of what is going on, many analysts turn to John Williams' "Shadow Government Statistics" site which attempts to track these and other data points without the modern adjustments that have been introduced to make the data "manageable" by the government.
Manipulated or not, generally rising unemployment, defined as the percentage of those who want to work but cannot find work, is a bad thing for two reasons.  First and foremost, one in ten people who want to work cannot find work.  Enough said.  Second, it gives the Federal Reserve technical ammunition to justify further debasing, devaluing, and generally trashing the dollar.  In the FED's dumb money machine, rising unemployment = lower interest rates or more quantitative easing (QE).  Low unemployment = raise interest rates.  After Friday's Unemployment Data, we see Ben Bernanke revving up the printing press again.  Of course, $600 Billion was not enough and we may get to a Trillion Dollars sooner than we think!
But the level of employment in a healthy economy should have NOTHING to do with monetary policy.  It is only in the insanity of our current "Debt is Money" system that this matters to some extent.  Unemployment is a result of policy failures that range from regulations and payroll taxes that make hiring cost prohibitive to government control of industries that makes start-up businesses impossible to launch in the current regulatory environment.  In short, if employees and employers could act more freely, unemployment would always be a short lived phenomenon for those willing and able to work.
While this may be obvious to you or I, intelligent, good looking fellow taxpayers that we are, it is completely lost to the Mainstream Media and most modern economists.  On Friday we see evidence of continued ignorance in academia regarding the causes of Unemployment.  From CNN Money, we see that apparently increased productivity is to blame.  Since when has doing more with less been a bad thing?  We are not sure.  Consumers are doing it, why wouldn't the businesses that hire them do it too?  It is healthy to trim the fat from time to time.  Just ask the Spanish government.  What is painful is that, in the case of the US economy and in Spanish control towers, there was an unprecedented amount of fat to trim!
When you begin to see hard work and wise decision making being chastised, a return to primitive production methods cannot be far behind as the answer.  If this happens, everybody loses even if Unemployment drops. 
Stay Fresh!
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Key Indicators for Monday, December 6, 2010
*See FED Perceived Economic Effect Rate Chart at bottom of blog.  This rate is the FED Target rate with a 39 month lag, representing the time it takes for the FED Target rate changes to affect the real economy.  This is a 39 months head start that the FED member banks have on the rest of us on using the new money that is created.