"Grand Coalition" Led by Merkel, Not Going to Happen; Expect a Shocker in Germany Election

I am going to stick my neck out with a pair of predictions:

1. Forget about a "Grand Coalition" led by Merkel. It's not going to happen.
2. The AfD anti-euro party will be in the next German parliament.

AfD had been polling around 2.5%. However, in the wake of Finance Minister Wolfgang Schäuble (CDU) stating a need for more aid for Greece, one pollster has AfD at 4%.

Reader Bernd from Germany (not AfD party leader Bernd Lucke) says the 4% figure is significant. If a party shows four percent in polls, potential voters are drawn in because they no longer fear their vote will be "lost", due to the 5% threshold.

The election is on September 22. Yet 30 percent of voters are still undecided.

Coalition Possibilities

1. "Same" CDU/CSU + FDP
2. "Grand Coalition" CDU + SPD led by Merkel
3. "Grand Coalition" CDU + SPD led by someone else
4. "Red Green Coalition" SPD + Grüne (Greens) + DieLinke
5. "CDU/CSU+AfD Coalition" 

IF FDP can reach 5% of the vote, it is possible the same yellow-black coalition (CDU/CSU+FDP) rules as today. If FDP fails to reach 5%, then several alternate scenarios come into play:

There has been no talk at all of possibility number five above. Yet, if AfD can gather 6-7% (a number I think is possible), then there could be a coalition that includes AfD.

None of the "Grand Coalitions" seem stable.

Reader Bernd Comments

• FDP does not make (or barely makes) the 5% margin in two polls
• AfD is at 4% in at least one poll
• 35% of voters are undecided, so much movement to come
• Recent momentum has been away from CDU
• In the "undecided" voter column, Steinbrück leads 44% over Merkel 38%.
• A big problem for CDU and Merkel is to get their supporters to vote. CDU and Merkel followers are deeply convinced that Merkel has such a massive lead, that there is no cause for fear.
• The State elections in Bavaria are held one week before federal elections. In Bavaria, Steinbrück's SPD will be trounced. Less than 20% of popular votes are a real possibility and might put a serious damper on the mood for the SPD in the last week of federal campaigning.
• Die Linke is stable. However, many "Die Linke" voters are probably hidden in the undecided block. I would give them more than 9%

After reading, analyzing and comparing statistics, figures and the whole nine yards, my latest prediction is as follows:

• CDU/CSU: 37%
• SPD: 24%
• Grüne: 11%
• Die Linke: 10%
• AfD: 06%
• FDP: 05%
• Total: 94%
• Lost votes due to 5% threshold: 6%

I have the most serious difficulty to assess FDP. It is really  possible, they might not make it into Parliament. Reason: most Germans highly prefer a coalition between CDU/CSU and SPD over the current one of CDU/CSU and FDP.

Such being the case, strategic voters might support CDU directly, rather than giving their votes to FDP (remember, Germans have two votes, so "strategic splitting" is common).

The real dark horse is the AfD.

AfD is perceived to be positioned firmly in the center-right of the German political spectrum.

In reality, this is not so. AfD is more libertarian than right. But who would know the difference in a country, where being called a NAZI has become an every day affair of political opponent bashing.

If FDP and AfD make it into Parliament, a coalition between CDU/CSU/AfD/FDP might be an option for a stable Government. In reality, their positions are a lot closer together, than most people think or perceive.

Mr. Steinbrück will not be part of a "grand coalition".

Clearly, and there can not be any doubt: German voters want a grand coalition, with Mm Merkel as Chancellor and Steinbrück as second in command. Yet, Steinbrück has repeatedly said, again and again, he can only be the "King of Schnitzel" or he will resign as a politician after the campaign. I tend to believe him!

SPD party leader, Mr. Gabriel, may enter a Grand Coalition, but such an arrangement may not be very stable. If SPD goes for such a coalition, it will be the final demise of that party.

Best wishes
Bernd

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Establishment Survey: +169K Jobs, June and July Revised Lower; Household Survey: Employment -115,000, Not in Labor Force +516,000; BLS in Wonderland

Initial Reaction

The establishment survey showed a gain of 169,000 jobs.

For the second consecutive month, the previous two months were revised lower. The employment change for July was revised down by 58,000 (from +162,000 to +104,000). Last month the BLS revised June employment down by 7,000 (from +195,000 to +188,000).

This month, the BLS said June was still not correct and revised June lower by another 16,000 to +172,000.

See the change in pattern here? Earlier in the year, revisions were to the plus side.

In spite of the above, the unemployment rate dropped 0.1 to 7.3%. After all, it's the household survey that determines the unemployment rate, not the establishment survey baseline jobs number. So let's take a look at the factors.

Explaining the Unemployment Rate Drop

• Employment fell by 115,000 
• Those in the labor force fell by 312,000 
• The civilian population rose by 203,000.
• The Participation Rate (The labor force as a percent of the civilian noninstitutional population) fell 0.2 to 63.2%, beating the low of 63.3% dating back to 1979.

Employment fell by 115,000 but the labor force fell more (in spite of a population rise of 203,000). That's why the unemployment rate dropped.

August BLS Jobs Statistics at a Glance

• Payrolls +169,000 - Establishment Survey
• US Employment -115,000 - Household Survey
• US Unemployment -198,000 - Household Survey
• Involuntary Part-Time Work -334,000 - Household Survey
• Voluntary Part-Time Work +211,000 - Household Survey
• Baseline Unemployment Rate -0.1 - Household Survey
• U-6 unemployment -0.3 to 13.7% - Household Survey
• Civilian Labor Force -312,000 - Household Survey
• Not in Labor Force +516,000 - Household Survey
• Participation Rate -0.2 at 63.2 - Household Survey

Quick Notes About the Unemployment Rate

• The unemployment rate varies in accordance with the Household Survey, not the reported headline jobs number, and not in accordance with the weekly claims data.
• In the last year, those "not" in the labor force rose by 1,554,000
• Over the course of the last year, the number of people employed rose by 2,006,000 (an average of 167,000 a month)
• In the last year the number of unemployed fell from 12,483,000 to 11,316,000 (a drop of 1,167,000)
• Percentage of long-term unemployment (27 weeks or more) is 37.9%, an increase of 0.9 from last month.
• The mean duration of unemployment also increased this month, from 36.6 weeks to 37 weeks.
Once someone loses a job it is still very difficult to find another.
• 7,911,000 workers who are working part-time but want full-time work. A year ago there were 8,043,000. There has been almost no improvement in a year. This is a volatile series.

August 2013 Jobs Report

Please consider the Bureau of Labor Statistics (BLS) August 2013 Employment Report.

Total nonfarm payroll employment increased by 169,000 in August, and the unemployment rate was little changed at 7.3 percent, the U.S. Bureau of Labor Statistics reported today. Employment rose in retail trade and health care but declined in information.

Click on Any Chart in this Report to See a Sharper Image

Unemployment Rate - Seasonally Adjusted



Employment History Since January 20000



click on chart for sharper image

Change from Previous Month by Job Type



Hours and Wages

Average weekly hours of all private employees rose 0.1 to 34.5 hours. Average weekly hours of all private service-providing employees was flat at 33.3 hours. Average hourly earnings of all private workers rose $0.05 to $24.00. Average hourly earnings of private service-providing employees rose $0.05 to $23.76.

Real wages have been declining. Add in increases in state taxes and the average Joe has been hammered pretty badly. For 2013, one needs to factor in the increase in payroll taxes for Social Security.

For further discussion of income distribution, please see What's "Really" Behind Gross Inequalities In Income Distribution?

BLS Birth-Death Model Black Box

The BLS Birth/Death Model is an estimation by the BLS as to how many jobs the economy created that were not picked up in the payroll survey.

The Birth-Death numbers are not seasonally adjusted, while the reported headline number is. In the black box the BLS combines the two, coming up with a total.

The Birth Death number influences the overall totals, but the math is not as simple as it appears. Moreover, the effect is nowhere near as big as it might logically appear at first glance.

Do not add or subtract the Birth-Death numbers from the reported headline totals. It does not work that way.

Birth/Death assumptions are supposedly made according to estimates of where the BLS thinks we are in the economic cycle. Theory is one thing. Practice is clearly another as noted by numerous recent revisions.

Birth Death Model Adjustments For 2012



Birth Death Model Adjustments For 2013



Birth-Death Notes

Once again: Do NOT subtract the Birth-Death number from the reported headline number. That approach is statistically invalid.

In general, analysts attribute much more to birth-death numbers than they should. Except at economic turns, BLS Birth/Death errors are reasonably small.

For a discussion of how little birth-death numbers affect actual monthly reporting, please see BLS Birth/Death Model Yet Again.

Table 15 BLS Alternate Measures of Unemployment



click on chart for sharper image

Table A-15 is where one can find a better approximation of what the unemployment rate really is.

Notice I said "better" approximation not to be confused with "good" approximation.

The official unemployment rate is 7.3%. However, if you start counting all the people who want a job but gave up, all the people with part-time jobs that want a full-time job, all the people who dropped off the unemployment rolls because their unemployment benefits ran out, etc., you get a closer picture of what the unemployment rate is. That number is in the last row labeled U-6.

U-6 is much higher at 13.7%. Both numbers would be way higher still, were it not for millions dropping out of the labor force over the past few years.

Labor Force Factors

1. Discouraged workers stop looking for jobs
2. People retire because they cannot find jobs
3. People go back to school hoping it will improve their chances of getting a job
4. People stay in school longer because they cannot find a job 
5. Disability and disability fraud

Were it not for people dropping out of the labor force, the unemployment rate would be over 9%. In addition, there are 7,911,000 people who are working part-time but want full-time work.

Grossly Distorted Statistics

Digging under the surface, much of the drop in the unemployment rate over the past two years is nothing but a statistical mirage coupled with a massive increase in part-time jobs starting in October 2012 as a result of Obamacare legislation.

Wonderland Statistics

Compared to recent Gallup surveys, these BLS stats regarding the base unemployment rate and the alternative measures as well are straight from wonderland. For details, please see Gallup Says Seasonally-Adjusted Unemployment Climbs to 8.6%; Who to Believe (Gallup or the BLS)?

I believe Gallup. Thus, I expect more downward revisions in jobs, and upward revisions in the unemployment rate.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Gallup Says Seasonally-Adjusted Unemployment Climbs to 8.6%; Who to Believe (Gallup or the BLS)?

The payroll report tomorrow is going to be interesting. The discrepancy between what Gallup reports and the BLS reports is widening.

Last month, the BLS reported the seasonally-adjusted unemployment rate at 7.4%.

Today Gallup reported Unadjusted unemployment climbs to 8.7% (The seasonally adjusted rate is 8.6%).

Even if there is a huge jump of half a percentage point in unemployment, there will still be a major difference of opinion as to what the rate is.

Here are some charts and discussion from the Gallup report.

The U.S. Payroll to Population employment rate (P2P), as measured by Gallup, dropped to 43.7% in August, from 44.6% in July, and is down from 45.3% in August 2012.



Gallup's P2P metric estimates the percentage of the U.S. adult population aged 18 and older who are employed full time by an employer for at least 30 hours per week. P2P is not seasonally adjusted.

August marks the seventh month this year that the P2P rate failed to improve over the same month in 2012. In fact, so far this year, P2P has declined an average of 0.3 percentage points in terms of monthly year-over-year changes. That is a reversal from last year, when 11 out of 12 months showed year-over-year increases in P2P and there was an average 0.8-point increase for the year.



Unemployment Rises to 8.7% in August

Gallup's unadjusted unemployment rate for the U.S. workforce was 8.7% in August, up from 7.8% in July and from 8.1% in August 2012. Similar to P2P, unemployment fluctuates seasonally, and the year-over-year change is the most informative comparison. The uptick in unemployment this August compared with August of last year is the first year-over-year increase since Gallup was able to begin tracking yearly changes in 2011.

The increase is partly due to the decline in the size of the workforce. Because the unemployment rate is based on the size of the workforce, if people drop out of the workforce but the number of unemployed remains relatively flat, the unemployment rate will actually increase, even though the same number of people are unemployed.

Gallup's seasonally adjusted U.S. unemployment rate for August was 8.6%, up from 7.4% in July. Gallup calculates this rate by applying the adjustment factor the government used for the same month in the previous year. Last year, the government adjusted August's rate down by 0.1 points, but adjusted July's down by 0.4 points, which partly accounts for the increase in seasonally adjusted unemployment.



Underemployment 17.4%

Underemployment, as measured without seasonal adjustment, was 17.4% in August, essentially unchanged from July (17.3%), but up slightly over August 2012 (17.1%).

Gallup's U.S. underemployment rate combines the percentage of adults in the workforce who are unemployed with the percentage of those who are working part time but looking for full-time work.

Bottom Line

Gallup's seasonally adjusted U.S. unemployment rate -- the closest comparison it has to the official numbers released by the BLS -- increased in August. The BLS is not likely to report a decrease in unemployment when the numbers are released on Friday, and may even report a slight increase.

However, it is important to note that Gallup's adjusted number is based on past seasonal adjustments made by the BLS, and that this year's BLS adjustments may not be the same when the government releases its number. Additionally, while both Gallup and BLS numbers are based on robust surveys, there are important methodological differences between the two. Thus, although Gallup's employment numbers are highly correlated with BLS rates, Gallup's numbers tend to have more month-to-month variability, and the unemployment rate as reported by the BLS each month does not always track precisely with the Gallup estimate.

The decline in the workforce, combined with the drop in P2P and increase in unemployment, indicates that little job growth occurred last month over August 2012. Unemployment rates, which are based on the workforce, can actually decline if unemployed people become frustrated with the job search and drop out of the workforce. This decline in unemployment masks a lack of job growth, and makes the employment situation appear to be improving when in fact little has changed. Many economists have attributed recent improvements in unemployment partly to a shrinking workforce rather than true job growth.

BLS vs. Gallup

• Gallup has the seasonally-adjusted unemployment rate at 8.6%
• The BLS has the  seasonally-adjusted unemployment rate at 7.4%
• Gallup has the unadjusted underemployment rate at 17.4%
• The BLS has the unadjusted underemployment rate at 14.3%.

Who To Believe?
 
Gallup notes seven consecutive months of declining full-time employment. Because of Obamacare effects , the Gallup P2P statistic is entirely believable. The rising trend in unemployment is also believable.

Unless the BLS heavily modifies its August seasonal adjustment factors, I expect the BLS reported unemployment to spike higher over the next two months and for full-time jobs to disappoint as well.

Tomorrow we see, but I am inclined to believe Gallup has this correct regardless of what the BLS reports.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Is the Selloff in Treasuries Overdone?

Curve Watcher's Anonymous notes that yields on US treasuries are the highest since mid-2011.



click on chart for sharper image

• $TYX: 30-Year Long Bond
• $TNX: 10-Year Note
• $FVX: 05-Year Note
• $IRX: 03-Month Discount Rate

$TNX Daily Chart



Since May, the yield on 10-Year treasuries is up 137 basis points (1.37 percentage points) to 2.98%.

Mortgage rates are up similarly.

Here is set of charts from Bankrate.

30-Year Mortgage Rate on June 11



15-Year Mortgage Rate on June 11



30-Year Mortgage Rate September 5



15-Year Mortgage Rate September 5

• Since the beginning of May 30-year fixed rates have gone up from 3.36% to over 4.5%.
• Since the beginning of May 15-year fixed rates have gone up from 2.6% to over 3.5%.

Given mortgage rates generally follow the 10-year treasury, it is likely that current mortgage rates are about 10 basis points higher than shown in the September 5 charts above.

Bill Gross's View

Bloomberg discussed Bill Gross's view in a report Treasury Yields Reach Highest Since 2011 on Bets Fed to Taper QE

Gross’s View

Pacific Investment Management Co.’s Bill Gross, manager of the world’s biggest bond fund, said investors should buy short-term Treasuries and credit securities that will be bolstered by the Fed’s intent to keep benchmark lending rates at almost zero.

“The safest pitch to swing at may not be stocks, but the asset that will soon be the nearly sole focus of central banks,” Gross said in his monthly investment outlook on Newport Beach, California-based Pimco’s website today. “Central bankers are shifting to forward guidance, which if reliable, allows financial markets and real economies to plan several years forward in terms of financing rates and investment returns.”

Gross’s Pimco Total Return Fund (PTTRX) has dropped more than $41 billion, or 14 percent of its assets, in the past four months through losses and investor withdrawals. The fund suffered $7.7 billion in net redemptions in August, Chicago-based researcher Morningstar Inc. (MORN) said yesterday in an e-mailed statement, the fourth straight month of withdrawals and the second highest amount this year.

Not That Simple 

If things were that simple, the 10-year yield would not be at 3% right now, and Gross would not have suffered a drop of $41 billion in assets.

Yet, I sympathize with the viewpoint.

Is the Fed going to raise rates? Nope. There is a zero percent chance of that.

Should Fed tapering purchases from $85 billion to $75 billion or $65 billion have that much effect?

All things being equal, the answer is no. But all things are seldom equal. Rates should not have gotten as low as they did for as long as they did. 

Historical Perspective



On a historical perspective, rates have never been where they have been for the past few years. On that basis alone, there is plenty of reason for yields to rise further.

One statement in the article is rather curious. Did you catch it?

Here it is: "Pacific Investment Management Co.’s Bill Gross, manager of the world’s biggest bond fund, said investors should buy short-term Treasuries and credit securities that will be bolstered by the Fed’s intent to keep benchmark lending rates at almost zero."

Did Gross Really Say That?

The short-term treasury rate is a mere 0.15%. There are no capital gains to be had by interest rates falling. And short-term rates are not rising either (a point on which I agree with Gross).

So there is nothing about short-term bonds that will be bolstered except perhaps in relative terms (meaning everything else - stocks and bonds - lose money).

This is precisely what Gross said, straight from Seventh Inning Stretch

...the safest pitch to swing at may not be stocks but the asset that will soon be the nearly sole focus of central banks. Instead of QE, central bankers are shifting to “forward guidance” which, if reliable, allows financial markets and real economies to plan several years forward in terms of financing rates and investment returns. If unemployment and inflation rates can be at least closely guesstimated, then front-end yields become the most reliable bet in the ballpark, Pete Rose notwithstanding. While low, they can at least form the basis for curve rolldown and volatility strategies that have higher return/risk ratios than alternative carry options such as duration, credit or currency. With Big Investor unsure or perhaps unable to catch stock, long bond or currency fly balls in today’s afternoon sun, it’s perhaps best to field boring slow-rolling grounders based on policy rate stability for “an extended period of time.” Recall as well that the result of Minsky’s “Big Government” and “Big Bank” policies has always been accelerating inflation at some future time. We recommend longer-dated TIPS as insurance against just such an outcome.

Gross never used the word "bolstered".

He did say "front-end yields become the most reliable bet in the ballpark".

Gross also stated "the result of Minsky’s Big Government and Big Bank policies has always been accelerating inflation at some future time. We recommend longer-dated TIPS as insurance against just such an outcome. "

There is a difference between "reliable" and "bolstered". And as protection against inflation, Gross also recommended longer dated TIPS.

If the selloff on the long end is over, or nearly over (I don't know, nor does anyone else) then it is long-term treasuries that will be bolstered.

Should rates rise much further, and housing take a huge hit as a result, a genuine buying opportunity in long-term treasuries may present itself.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Separating Politics and War From Oil and the Economy

Following two consecutive posts on Syria, one reader asked "Can we get back to economics Mish?"

That's an interesting question given that my discussion never left economics!

• How can one talk about Europe without discussing the politics of the euro?
• How can one discuss economics without discussing the politics of war and its effect on oil prices?
• Is not Obamacare and its repercussions a discussion about politics?
• Did not a regime change in China affect its growth rate (as I said in advance it would)?
• Is Abenomics in Japan not a fair game for discussion?
• Is not the Fed playing politics of the worst kind?
• What about beggar-thy-neighbor and war-mongering politics in Congress and by the Obama administration? Do those not play a role in the economy?

Unfortunately, it is increasingly difficult to discuss the economy without diving into the political landscape that shapes it.

In Warmongers Unite (As They Always Do); Boehner Caves In, Backs War; McCain Caught Playing iPhone Poker During Syria Hearing, I made the claim ...

The Difference Is Oil

The US is in Syria for two reasons.

1. Oil
2. Warmongers promote war on the flimsiest of excuses every chance they get

Were it not for oil, the warmongers probably would not have succeeded in this case. Oil is the only real difference between this case and numerous slaughters in Africa in which the US stood by and did nothing.

Syria Has No Oil

One reader responded "Oil?!! Seriously? Syria has no oil." 

Indeed, Syria has no oil. Yet, I responded ...

We would not be in the region at all were it not for oil. Whether Syria has oil or not (it doesn't) is irrelevant. It's neighbors do. The US is aligned with Saudi Arabia and against Iran. So... Think!

Syria Connection

Does someone want to to revive the Trans-Arabian Pipeline (Tapline) that runs through Syria?



Who knows? I sure don't.

US Would Counter Syria Oil Spike With Reserves

I note with amusement that Analysts Say US Would Counter Syria Oil Spike With Reserves

A US strike against the regime of Bashar al-Assad is not expected to have any direct effect on oil supplies, but a release from oil reserves would be used to counter any disruption that hits oil-producing countries or trade routes.

The International Energy Agency, the rich countries’ watchdog, which would co-ordinate any joint international release of reserves, said last week: “While the IEA, as always, stands ready to respond in the event of a major supply disruption, the current situation does not call for an IEA response.”

But analysts say a US release, possibly co-ordinated with other countries, could curb any increase in prices.

Really?

What if Iran gets involved? What if Israel attacks Iran as a result of US meddling? What if tensions hit Saudi Arabia? What if a crisis lasts 8 months? What if all of the above happen?

Will releasing oil reserves solve the problem? The idea is ridiculous.

Is Obama doing the right thing? Is McCain proposing the right thing?

The right thing for who?

You? Me? The nation? How about the warmongers and the oil interests?

If you really think all this concern over Syria is truly about chemicals and humanitarian concerns you really are not thinking clearly.

I cannot separate politics from the war and the economy. Nor can anyone else (but at least I discuss the issues, no matter how intertwined they are, or who I offend in the process).

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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No Progress for Long-Term Unemployed; Ten Reasons the Problem is Structural

In Long-Term Jobless Left Out of the Recovery, the Wall Street Journal notes that Despite Improving Economy, Prospects Are Bleak for Millions of Unemployed.

More than four years after the recession officially ended, 11.5 million Americans are unemployed, many of them for years. Millions more have abandoned their job searches, hiding from the economic storm in school or turning to government programs for support. A growing body of economic research suggests that the longer they remain on the sidelines, the less likely they will be to work again; for many, it may already be too late.

The recession, for all its brutality, was comparatively egalitarian, said Gary Burtless, a Brookings Institution economist. It struck the young and old, educated and uneducated, white collar and blue collar. The recovery, by contrast, has been asymmetric: Those who held on to their jobs or quickly found new ones have made up much of the ground they lost, while the jobless continue to suffer.

"If you've made it through and you're still employed, your stock portfolio has recovered, your house price is recovering, too," Mr. Burtless said. "For the unemployed, this has been a miserable recovery compared to pretty much any of the postwar recoveries."

Recent studies in both the U.S. and overseas found employers often won't even consider the long-term jobless for openings.

Many have given up applying. Nearly seven million people say they want a job but aren't actively looking for work. The share of the population that is working or looking for work—a measure known as the participation rate—stands near a three-decade low. The rate was falling even before the recession, partly because of the aging of the baby-boom generation, but economists disagree about how much of the more recent decline is tied to the weak economy.

For economists, the key question is how many of the labor-force dropouts will return when the economy eventually rebounds more strongly.



At least some of those who have left the labor force are unlikely to return. More than 8.9 million Americans were receiving federal disability payments in August, 1.8 million more than when the recession began. Experts suspect many of the new recipients would have kept working in a healthier economy; research has found that once people begin receiving disability payments, relatively few return to work.

But other workers, especially those in their 20s and 30s, will almost certainly return.

What is Happening vs. Why

The Wall Street Journal did a good job explaining "what" is happening. The Journal failed to explore "why" this is happening.

I will address the key question in a moment. First consider a few more charts.

Those Not In The Labor Force Who Want A Job



Those who want a job but don't have a job total 6,619,000. That is an increase of about 2.2 million from the pre-recession low.

Factor the "marginally attached" (those who want a job and do not have one, but did not look) and the unemployment rate is 8.8%.

Marginally Attached Unemployment Rate - U5



Factor in "Involuntary Part-Time employment" (U6) and the rate is 14.0%

U6 Unemployment



Taking into consideration millions of additional part-time jobs created as a direct result of Obamacare lowering the number of hours part-timers worked even further, and the base unemployment rate as well as the U5 rate would both be higher. I suspect the U-5 rate would be between 9.5 and 10%.

Cyclical or Structural?

Regardless of what the unemployment rate is, here is the key question: Is the problem cyclical or structural?

The Fed thinks unemployment is a cyclical problem. I don't.

Ten Reasons the Problem is Structural

1. The housing boom-bust is a once in a multi-generational phenomenon
2. Demographics - The boomer boom has turned into the boomer bust
3. Those graduating from college have unprecedented levels of student debt
4. Fed policies bailed out the banks at the expense of everyone else (and now is payback time)
5. The Fed holding rates low in conjunction with Obamacare costs has exacerbated the trend of businesses to seek new ways to eliminate employees in favor of hardware and software robots
6. In general, Fed policies of holding interest rates low screwed those on fixed income, screwed the middle class, and screwed the poor, all for the benefit of the top 1% (and those policies are not likely to change)
7. Housing formation by millennials is at a record low and because of student debt and a dearth of high-paying jobs is unlikely to change.
8. Pension promises by cities, states, and counties cannot and will not be met. Several cities in California and Detroit Michigan are the tip of this iceberg.
9. Slowdown in China, restructuring in Europe.
10. Debt, Debt, Debt. A debt crisis is everywhere you look: Japan, Europe, India, China, US. Debt acts as a drag on the global economy unless it is expanding rapidly (and it cannot without creating still more problems)

It will takes years, if not a decade, to sort out those issues. In the meantime central bankers around the world further distort the global economy for the benefit of banks and those with first access to money.

Inflation Benefits Those With First Access to Money

For an explanation of how Fed policies benefit the banks and the top 1% at the expense of everyone else, please see Reader Asks Me to Prove "Inflation Benefits the Wealthy" (At the Expense of Everyone Else).

Wonderland Economics

Compounding the problem is a massive hoard of economic illiterates who promote inflation as the answer. For a case-in-point, please see DeLong-in-Wonderland.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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McCain Proposes Military Aid to Al Qaeda; Mideast Map of Who Supports Who

Inquiring minds are looking a Map of the Mideast that details who backs who in the Syrian Civil War.



Map of countries surrounding Syria (red) with military involvement.

• Green: Countries that have given support to the rebels.
• Blue: Countries that support the Syrian government
• Yellow: Countries that have groups that support the rebels and other groups that support the Syrian government.
• Sky Blue: Countries that have groups that support the Syrian Government.

This is pretty messy with factions in Iraq on both sides of the issue.

Who Gains From Using Chemical Weapons?

Assad had the most to lose by using chemical weapons. Saudi Arabia, Turkey, and Qatar have the most to gain, especially if chemical use was attributed to Syria (not the rebels).

As noted in Warmongers Unite (As They Always Do), Syrians In Ghouta Claim Saudi-Supplied Rebels Behind Chemical Attack. Here are some additional links.

• Rebels Admit Responsibility for Chemical Weapons Attack
• Russia suggests Syria ‘chemical attack’ carried out by rebels, provocation not ruled out
• Syrian Rebels Caught on Tape Discussing Chemical Weapons Attack
• Russia says Syrian rebels used chemical arms near Aleppo
• US-Trained Rebels Moved Towards Damascus Days Before ‘Chemical Attack’

John Kerry says US tests prove sarin used in Syria attacks

Kerry never answered the question "By Whom?"

Who Are The Rebels?

Just who are the rebels seeking to overthrow Assad?

Wikipedia has the answer in Foreign rebel fighters in the Syrian civil war

There have been a number of foreign fighters that have joined the Syrian civil war in opposition to Assad. While some are jihadists, others, such as Mahdi al-Harati, have joined to help the Syrian revolution.[59] Some fighters have come from as far away as Chechnya and Tajikistan.[60] Another group, the Al-Nusra Front, is headed by Abu Muhammad al-Julani[61] The group includes some of the rebellion's most battle-hardened and effective fighters. However, U.S. has formally designated the Al Nusra Front as a foreign terrorist organization. "Extremist groups like Jabhat al-Nusra are a problem, an obstacle to finding the political solution that Syria's going to need," said the American ambassador to Syria, Robert Ford.[62]

Al-Qaeda and affiliates are anti-Assad. American officials believe that Al-Qaeda in Iraq has conducted bomb attacks against government forces,[63] and al-Qaeda leader Ayman al-Zawahiri condemned Assad.[64] Several groups, such as the Abdullah Azzam Shaheed Brigade, al-Nusra Front and Fatah al-Islam[65] have stated that they conducted operations in Syria. Jihadist leaders and intelligence sources said foreign fighters had begun to enter Syria only in February 2012.[66] In May 2012, Syria's U.N. envoy Bashar Ja'afari declared that dozens of foreign fighters from Libya, Tunisia, Egypt, Britain, France and elsewhere had been captured or killed, and urged Saudi Arabia, Qatar and Turkey to stop "their sponsorship of the armed rebellion".[67] In June, it was reported that hundreds of foreign fighters, many linked to al-Qaeda, had gone to Syria to fight against Assad.[68] In July, Iraq's foreign minister again warned that members of al-Qaeda in Iraq were seeking refuge in Syria and moving there to fight.[69] When asked if the United States would arm the opposition, Hillary Clinton expressed fears that such weapons could fall into the hands of al-Qaeda or Hamas.[70] In October 2012, the United States expressed concern and confirmed that most of the weapons fall into the hands of radical Islamist rebels.[71]

McCain Says "Arm the Rebels"

Bloomberg reports McCain Balks on Syria Measure Absent More Rebel Support

McCain, opposing the resolution in its current form, will seek changes to include provisions for arming Syrian rebels and assurances that military strikes would be able to deter further Syrian use of chemical weapons, according to an aide who asked not to be named because he wasn’t authorized to speak publicly.

Military Aid to Al Qaeda, Al Nusra

McCain wants to arm the rebels, but if we arm the rebels, we arm Al Qaeda, Al Nusra, and other  foreign terrorist organizations. It's as simple as that.

Warmongers like McCain do not care about such things. They just want war.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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