Washington, DC -- (ReleaseWire) -- 03/11/2015 --The unemployment numbers released by the Bureau of Labor Statistics last Friday gave the White House a lot to crow about. The headline unemployment number, the one they like to talk about was 5.5%, down from 5.7% in January, and the economy created nearly 300,000 new jobs, the twelfth month in a row with more than 200,000 jobs created. This sounds great, and both the President and Jason Furman, the Chairman of the Council of Economic Advisers, wasted no time blowing the trumpet.
If you dig in to what those numbers actually mean, though, the trumpet sounds more like a kazoo. That headline number, which the BLS refers to as U3 Unemployment, only includes those who have actively looked for work in the four weeks prior to the survey. Four weeks plus one day since looking for work? You are considered a "marginally attached" or "discouraged" worker, and not counted in the U3 number. Want to work full-time, but can't find anything but part-time or temporary work? Not counted. Not looking because you believe there simply aren't any jobs for you? Not counted. The U6 number, which includes those classes of workers, is 11%. All told, however, including those who have been effectively dropped from consideration as part of the labor force, 23.1% of Americans who are able and willing to work are not working. Labor force participation remains flat, and significantly lower than ten years ago, and real wages are also stagnant.
Not only that, but 58,700 of those jobs that were added in February were waiters and bartenders, which is the highest monthly increase in this minimum wage category in 18 months. Even the Wall Street Journal is calling this the 'waiter and bartender recovery.' Where are the full time jobs? Overseas. An article published by the Campaign for America's Future on its website ourfuture.org examined the historical claims made about free trade agreements and concludes that the effect, rather than being beneficial as is so often promised, has been devastating for the U.S. jobs market. The 1994 North American Free Trade Agreement which was supposed to create jobs and increase American prosperity. Instead, after NAFTA the U.S. trade deficit with Mexico totaled about $97.2 billion and it displaced 682,900 U.S. jobs. That is net jobs, taking into account jobs gained. When China became a member of the World Trade Organization in 2001, U.S. workers were again promised that this would create long-term full-time jobs and increase prosperity. Instead, this is what happened: in August of 2012, the Economic Policy Institute (EPI), estimated that the U.S. lost about 2.7 million jobs as a result of the U.S.-China trade deficit between 2001 and 2011. And 2.1 million of them, of course, were in manufacturing. In addition from job loses, U.S. wages fell due to the competition with cheap Chinese labor costing a typical U.S. household with two wage-earners about $2,500 per year. Another example is the economic aftermath of the 2012 U.S. and Korea Free Trade Agreement. In the year that this agreement took place, the U.S. trade deficit with South Korea increased by $58.5 billion dollars. That cost us more than 40,000 U.S. jobs. At least we have more waiters and bartenders, though.
To add to the unemployment blues that really analyzing the BLS numbers leaves us with, the future looks equally bleak if we examine the reality behind the S&P and NASDAQ. There was a negative 12% year-over-year drop in Q4 S&P 500 reported earnings, which makes it likely that corporations will soon be cutting back, and laying off workers once again. Additionally, the NASDAQ bubble's over-inflation is masking insider selling at the heaviest pace seen in at least 8 years and covering up a severe emerging market slump which most are not acknowledging.
Sundial Capital's Jason Goepfert says the best way to figure out whether tech stocks are overvalued is to look at the executive insiders and what they're doing. That means the public tech companies' directors and senior executives, who know their company better than anyone else. Right now they're extremely vocal about selling their shares. The punchline is that these tech insiders are not only selling a record amount of their own shares and personal stock, but they're actually selling it back to the companies, who are buying back a record amount of shares.
The other clue is that the NASDAQ bubble might be about to pop is that it is hiding a severe emerging markets slump, something you have to watch now because we cannot just be US-centric any more, we need to be world-centric. Countries like Turkey, Greece, Peru, Mexico, Columbia, Brazil, China, Indonesia, Korea and Egypt are down an average of negative 24% and the divergence between the depressed emerging markets, which reflect the true global economy, and the quantitative easing-boosted NASDAQ is startling. Mark Cuban, the owner of the Dallas Mavericks and a noted tech investor, wrote an Op-Ed piece last week, where he stated that the second tech bubble we are heading into is going to be worse than the first dot-com bubble in 2000. Those investors and traders who weren't active yet fourteen years ago are in for an interesting ride. When a bubble pops, the smoke and mirrors are swept aside, the dust clears, and the truth is revealed. A correction is coming.
In July of last year, the Washington Post published an article on vanishing middle class wealth that contained the quote, "Nostalgia is just about the only thing the middle class can still afford. That's because median wealth is about 20% lower today in inflation-adjusted dollars than it was in 1984." Our Founding Fathers warned against large concentrations of wealth and power because they tend to funnel the rewards of society into the hands of a select few. We need to change the rules of the game so that the entrepreneurs and small businesses and average workers can thrive in this country once again. Big government and corporations continue to gobble up more wealth and power and the inequality grows. With 23.1% real unemployment, a quarter of us have nothing but the crushing weight of debt, worry and poverty. That burden must inevitably lead to social problems, which call to mind another important event that was in the news last week.
This past weekend marked the 50th anniversary of the first Selma to Montgomery march, a turning point in the American civil rights movement that opened the eyes of America and the world to the true depth and brutality of the civil rights struggle. The unemployment numbers released on Friday open a window on just how far we've come, or haven't. The President touts decreasing unemployment for African-Americans as improving faster than many other categories, but that number is still at 10.4%, nearly double the average and more than double the 4.7% figure for white workers. The fact, though, is that all Americans outside the wealthiest one to three percent are now suffering.
When we consider the importance of Selma, we remember the courage of protesters fighting for equality in the face of police brutality and societal pressure. We remember the brave words and actions of Martin Luther King, Jr. and the other leaders. When we consider the increasing, inexorable trend toward economic inequality our nation is struggling with, what will it take to find the courage, the spark to speak up? How is it that we can stand up for the economically disenfranchised? What action will we take that will lead toward a sea-change in our markets and businesses and, most of all, our government that works to alleviate that inequality? These are questions that every American citizen and corporation and government official should be asking.
All data sourced through Bloomberg
Securities offered through Western International Securities, Inc., Member FINRA & SIPC. Bennett Group Financial & Western International Securities, Inc. are separate and unaffiliated companies.
About Dawn Bennett
Dawn Bennett is CEO and Founder of Bennett Group Financial Services. She hosts a national radio program called Financial Myth Busting http://www.financialmythbusting.com
She discusses educational topics and events in the financial news, along with her thoughts on the economy, financial markets, investments, and more with her live guests, who have included rock legend Ted Nugent, as well as Steve Forbes and Grover Norquist. Listeners can call 855-884-DAWN a as well as take podcasts on the road and forums for interaction.
She can be reached on Twitter @DawnBennettFMB or on Facebook Financial Myth Busting with Dawn Bennett or email@example.com