The Beginning Of The End
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Economic Bizarro World: Persistently High Unemployment And Skyrocketing Bond Yields Are Good?

Bizarro Up Is Down - Photo by RRZEiconsThe mainstream media is heralding today's "fantastic" employment numbers as evidence that the U.S. economy is steadily recovering.  But is that really true?  The number of jobs created in June was just a little bit more than what is required to keep up with population growth, and the official unemployment rate remained at 7.6 percent.  And if you look deeper in the numbers, they don't look very good at all.  The percentage of low paying part-time jobs in the economy continues to rise, the number of full-time jobs actually decreased and the U-6 unemployment number jumped from 13.8% in May to 14.3% in June.  That is a stunning increase.  And if the labor participation rate in this country was at the level it was at prior to the last recession, the official unemployment rate would be sitting at 11.1%.  But according to the mainstream media, all of this is wonderful news.  It is like we are in some sort of economic bizarro world where bad is good and down is up.

When the jobs numbers were released on Friday, Business Insider breathlessly declared that it "was jobs day in America, and America crushed expectations."

USA Today ran an article on the jobs numbers with the following headline: "First Take: As job gains grow, optimism rises".

But should we really be celebrating?

Posted below is a chart that shows the percentage of working age Americans with a job since the beginning of the year 2000.  This chart does include the jobs numbers that were released on Friday...

Employment-Population Ratio 2013

Can you see a "recovery" in there somewhere?

Am I missing something?

Let me look again.  This time I will squint really hard.

Nope - I still can't see a recovery.

For three and a half years we have been stuck in a range between 58 percent and 59 percent.  We are way, way below where we were before the recession.

So can we please not even begin to use the word "recovery" until we at least get above the 59 percent level?

And most of the jobs that are being created are of very poor quality.  As I mentioned above, the figures show that the number of full-time jobs actually decreased last month.  And as Zero Hedge pointed out, manufacturing employment has actually declined for four months in a row...

Even as the manufacturing jobs continue to collapse, posting their fourth consecutive monthly drop in June to 11.964 million jobs, minimum wage waiters and bartenders have never been happier. In June Restaurant and Bar employees just hit a new all time high of 10,339,800 workers, increasing by a whopping 51,700 in one month.

Things are pretty good in America right now if you want to flip burgers or wait tables.  But if you want a good job that you can support a family with, things are getting even worse.

Meanwhile, bond yields soaring into the stratosphere.

The yield on 10 year U.S. Treasuries absolutely exploded today.  It opened at 2.50% and closed at 2.71%.  When I saw what had happened I could hardly believe it.

If bond yields continue to climb like this, it is going to cause some massive problems in the financial markets.  The following is from an article by John Rubino...

A few things to look for: recalculations of the deficit in light of spiking interest costs, comparisons of US and Japanese yields and speculation about what this means for Japanese rates — followed by dire analyses of Japan’s future borrowing costs — and last but not least, a growing concern for the hundreds of trillions of dollars of interest rate derivatives that now have one counterparty deeply in the red.

Most Americans don't think too much about bond yields, but if they keep spiking it is going to dramatically affect every man, woman and child in the entire country.

Yesterday, I described some of the consequences that rapidly rising bond yields would have...

And if interest rates on U.S. Treasury bonds start to rise to rational levels, the U.S. government is going to have to pay more to borrow money, state and local governments are going to have to pay more to borrow money, junk bonds will crash, the market for home mortgages will shrivel up and economic activity in this country will slow down substantially.

Plus, as I am fond of reminding everyone, there is a 441 trillion dollar interest rate derivatives time bomb sitting out there that rapidly rising interest rates could set off.

Never before have we had anything like the gigantic derivatives bubble that is hanging over global financial markets like a sword of Damocles.

As interest rates continue to go up, the derivatives bubble could burst at any time.  When it does, we are going to see financial carnage unlike anything we have ever seen before.

2008 was just the warm up act.  What is coming next is going to be the main event.

But in the economic bizarro world that we are living in, the mainstream media insists that skyrocketing interest rates are nothing to worry about.

Today, USA Today ran a headline that declared the following: "Investors: Don't panic over bond yield spike".

And Yahoo actually ran a story entitled "Why higher U.S. yields should cheer investors".  Needless to say, the arguments in that story are not very convincing.

And in that story they even admit that record amounts of money were being pulled out of bond funds in June...

Capital is already flowing out of low-yielding bonds. PIMCO Total Return fund, the world's largest bond fund, suffered record outflows of $9.6 billion in June, in a second straight month of withdrawals.

Mutual and exchange-traded bond funds lost a record $79.8 billion in June, according to TrimTabs Investment Research.

The rush for the exits in the bond market is threatening to become an avalanche.

I hope that this is not the beginning of a financial panic.  I hope that we have more time before the next major wave of the economic collapse strikes.

But I certainly cannot guarantee that things will remain stable.  Once fear starts to sweep through financial markets, things can change very, very quickly.

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  • Rodster

    The government media complex strikes again or as I prefer to say. “It just goes to show how figures lie and liars figure.”

  • K

    Michael you are just so negative. Do you not know? All you have to do is click your heals together 3 times and yell recovery. Next morning everyone will have full time jobs, and be being paid at least a 100 grand a year. This is from the Wizard of Oz school of economics. Most likely as good as any plan, the government is using.

    • MichaelfromTheEconomicCollapse

      That made me smile. :)

      Michael

    • Michael from Australia

      With your Wizard Of Oz school of economics, you may actually be right, seriously.

      There is a belief that the story is based on economic problems in history.

      The yellow brick road is meant to be going on the gold path, Dorothy’s silver shoes, scarecrow are the farmers, the tin man represents workers dehumanized by industrialization, “Oz” is the abbreviated form of ounce.

      Just Google “wizard of oz gold” & see results.

    • markthetruth

      Or the Great Gazoo from Fred Flintstones.

      the end…

  • markthetruth

    The volume was so Low one day trader could move the market.

    the end…

  • JailBanksters

    If there are less Manufacturing and more people serving their Masters at tables and bars, then that also means even less tax collected as most of their money is unaccounted for. The Government might be thinkin’ Whoo Hoo, but they are actually collecting less tax than if they were real salary paying jobs. It also means the country is reverting back to a Master / Servant arrangement.

    • lipstick on a pig

      big gov will just keep raising taxes and borrowing trillions like it’s goin out of style, jobs like these breeds never ending dependecy on the endless government assistance flow chart

  • markthetruth

    I need to read Economics for Dummies ! To see what i missing.

    the end…

    • Gino

      Try. Stocks for the long run. Great book. The end (not)

      • markthetruth

        Only if you have 20 + years to invest.

        the end…

  • Gino

    Rates are still near historic lows. Stop making a big deal about it. Unemployment improving. So are home sales.

    • Shmeggle Marxist

      LMAO. massive increase in pt jobs, LOLOLOLOL

      • Rodster

        Taco Bell is hiring, so is Burger King. They need more cashiers.

    • Gay Veteran

      Gino, can you read? many of the jobs are low paying, many are part-time

  • Gino

    The rotation into stocks from bonds. People coming to their senses. Stocks for the long run. Economy will only continue to improve.

    • Chuck

      That’s a joke… right ?

  • g

    Isn’t long term yields good for investors? Why would investors be leaving higher yielding bond markets?

    • Tim

      There’s an inverse relationship between the price and yield of a bond. That is, as yield rises the bond price decreases. As yield drops the bond price increases. If a bond is held to maturity, the investor is guaranteed to get their principal back. However, bonds don’t have to held to maturity. They can be sold in the open market like any other security.

      • Gay Veteran

        and who wants to hold a 30 year bond to maturity if its interest rate is 2% while current rates are going up, up, up

  • markthetruth

    ∞ * ∞ = ∞

    the end…

    • Shmeggle Marxist

      how he does that infinity thing?

  • Louise in MO

    I went grocery shopping today. The rising costs of food and everyday items needed by everyday people are skyrocketting! Just a few that startled me:

    Bacon $6.99 lb.
    Butter $4.25 lb.
    Peaches $2.99 lb.
    Cantalope $2.49 ea.
    Pint of

    watermelon $5.99

    There are hundreds more but you get the picture.

    Our children are raised and on their own, so it’s just my husband and I. Can you just imagine what it is costing a family of four?

    There is NO recovery going on in the country. Part time jobs cannot support a family….there is no way.

    Now, our fearless leader wants to shut down coal powered plants so that winter heating bills will hit the ceiling. All in the name of climate change. I think he has lost all touch with reality.

    If this keeps up, Egypt won’t be the only country protesting! If we are still the home of the brave which I sometimes wonder if we are.

    • pqibex

      but but but there is no inflation!!?? Opps I mean core inflation.just dont count food and fuel..sheesh

    • Ayn Rand

      Seriously. Even at cheaper stores you see it. How can anyone feed themselves anymore, much less children?

  • Rodster

    47% of all adults have a job. Yeah great recovery. Those are deep depression stats. ;)

    • ResilientNews

      You may have read that wrong.. its 47% of adults have a FULL TIME job..

    • ResilientNews

      58.7% of adults are working.

    • Jim Davis

      I’m sure that’s because there are so many more people that are independently wealthy and don’t need a job. Obamanomics has been such a smashing success!

  • Kim

    This situation is like a tsunami– it’s starts out slow but steadily gains strength and by the time it hits a coastline, people aren’t quite sure what they are seeing, but once they are under water, they know. This has been building for a very long time and when it crashes, it will crash hard. Build your tree house, everyone!

    • pqibex

      eat another 2 big macs and suck down a big slurpy and all will be fine

      • garand555

        Mmmmmm, slurpy.

        OTOH, I had to “check” how big my beets were getting. Not quite big enough yet, but they sure taste good. And I’ll be “checking” my flour corn in a week or two to make sure it is growing fine. When it’s in the milk phase. Of course. Same with the green chile. Soooo many food things to check and only a limited size on my stomach.

  • Richard

    ” I hope that we have more time before the next major wave of the economic collapse strikes.”

    Why? What would you like to do with that extra “time”? Why don’t you just want to ‘bring it on’ now? Let’s get it out of the way ASAP, wouldn’t you say?

  • Neil Boxer

    The economy sucks but the feminists will continue to cry out for the high-paying jobs. Stats show that young women earn more money in several careers than men. It’s all about me, me, me. The investors want their profits, the politicians want to be in power, the leftwing groups want our jobs.
    This wasn’t the America I grew up in as a young toddler in the 1950s..

    • Rebecca from TN

      I agree with you that the feminist movement has drastically altered our society, but some of us women work at these high paying jobs because we have husbands who cannot work any more. Someone has to bring home the bread for the children, so don’t fault women who are wiling to step up to the plate and do what must be done to take care of the family.
      But I do agree that having 2 working parents as the norm has destroyed the fabric of society. Children are raised by day care now because of greed. People want more money and more stuff, and they want someone else to be responsible for the rearing of their children.

      • Gay Veteran

        in many homes both parents work because they have to

        • Shmeggle Marxist

          do both you and your husband work?

          • Gay Veteran

            I’m single and yes I work, I’m a patent attorney.

    • Gay Veteran

      hey Neil, everybody wants a good job

      • Shmeggle Marxist

        you are a piece of garbage

        • Gay Veteran

          sad pathetic little troll

          • Shmeggle Marxist

            ^ pathetic fellator of men, bwahahaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaa

          • Gay Veteran

            sad pathetic in the closet troll

          • Shmeggle Marxist

            ^pathetic fellator of men, bwahhaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaa

          • Gay Veteran

            life is tough in the closet, right

          • Shmeggle Marxist

            ^pathetic fellator of men, bwahhaaaaaaaaaaaaaaaaaaaaaa

          • Gay Veteran

            yawn, yet another “witty” post by the sad pathetic troll

    • Gay Veteran

      “…This wasn’t the America I grew up in as a young toddler in the 1950s….”
      in many ways that’s a good thing

      • Shmeggle Marxist

        keep suckingcock ole’ bull, keep drinking the ejaculate you pos

        • Gay Veteran

          sad little troll

          • Shmeggle Marxist

            you are a piece of SH********T and you know it.

          • Gay Veteran

            pathetic little troll

          • Shmeggle Marxist

            ^ pathetic little cocksucker who loves to lick the balls

          • Gay Veteran

            kiss your mother and kids with that mouth?

  • Nexusfast123

    The divergence of the panglossian world of finance from the real world the majority of us live is now glaringly obvious.

  • Bad_Mr_Frosty

    Don’t forget, we get 90,000 new legal immigrants every month. 50% of the jobs created in June went to “new Americans”. God only knows how many went to illegal immigrants. If amnesty passes, we’ll get at least 10-20 million “new Americans” in the job market.

  • Joe Kleinkamp

    I sat in a franchise restaurant yesterday watching a dozen servers wait on people. Their income is mostly from tips. At $2.30/ hr. their employer pays all twelve less than what one good lost manufacturing job paid!

  • Trailer Park Investor

    Yea, one minute you are relaxing watching TV with the wife and 3 kids, in your 4 bedroom home with the 4 car garage and in ground pool with your 3 luxury cars parked in your neat garages.

    AND the next minute you are sitting alone, living in a cardboard box down near the river cooking a freshly killed rat over a campfire wearing the same old tattered clothes, unshaven, haven’t brushed your teeth in a week.

    You will be asking: HOW DID THIS HAPPEN TO ME?

    Bankers and politicians put you in your cardboard box and they will be coming for that next, and your rat meat too.

    If we do not wise up and do what Iceland did, that is arrest the crooked politicians and jail the banksters. Or we will all be living in cardboard boxes down at the river.

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