Friday, July 3, 2009

Half Full or Half Empty

The release of the employment data has rung many bells of warning and I am a bit puzzled. Let us spend a bit more time with the data for I see the glass half filled not half empty. Things are getting better, albeit admittedly not due to the stimulus package. Perhaps this is all a political argument and it would not be the first time.

I wish to look at two issue; the unemployment data and then the Fed yield curve spread.

Unemployment:

First let us look at the total numbers as shown below. This is the total employable base, always questionable, then those employed and then those declared unemployed.



















Now let us look at the unemployment rates over the past three years as shown below.



















Finally let us look at the changes by month in employed and unemployed. This is shown below.



















Note from the above that things are really getting better consistently since January. In particular the changes in June are smaller than half the other months. It appears as if there is a leveling off. We argued this yesterday but somehow the Press in its glory fails to do the analysis. One thing I have become aware of is that the Press reports a fact and NEVER analyzes the data, they have no competence to do so. Never met a reporter with a brain, pushy yes, but they never got names of facts straight. Thus why wonder that they cannot analyze data.

Yield Spreads:

We now look at the yield curve spreads on Treasuries. This has been a concern but it too is leveling off.

The first is the spread in 10 year and 90 day rates. It has flattened and remains so. Thus the pending concern may be reduced. The spread is still there but not growing.



















The second is the spread of the former but in bases points. In this view we see things actually improving.



















Finally we present the bases point spread for Q2 alone. This is a close up of the spread with the improvement throughout June.



















Thus we are led to conclude from the employment data and from the spread data that the economy appears to be slowly coming out of the slump, with not stimulus. The problem is the stimulus may fire up inflation and the moronic talk of an added stimulus would I fear lead to possible hyperinflation, and that is a small but now growing concern. The current Administration wants to control so many things and it has pushed so many programs that their effect has not even been imagined no less have taken root.