Even the Perma Bears Are Bullish, But What About Unemployment

Kass, Ritholtz, Fleckenstein-all bullish. What's a guy who thinks there is more pain to come supposed to do? Pretty soon I'll be the only guy at the gin mill except for my good buddies Jim Beam and Johnny Walker. Please note that I was very long through lunch today and did very well thanks to AMZN and DRYS, but capped the day off with shorts in KFT, CPB and some select longs in SKF.

I still think the real harbinger of doom will be unemployment and I don't understand why it doesn't get more attention. We all know the consumer is 70% of the economy, yet last weeks number seems to have been viewed as one time anomaly and not the beginning of a series of numbers that could be much worse. Maybe I'm just thick.

John Crudele opines that

Last week Federal Reserve Chairman Ben Bernanke, a scholar of the 1930s Big-D, scoffed when a reporter asked him during a news conference if we're headed for horrible economic times.

The Fed head pointed out that the unemployment rate reached 25 percent during the Great Depression and the job market only revived because we had to spend a lot of money to fight the Germans.

Here's what the Obama White House should - but won't want to - know.

Right now, the unemployment rate would be more than twice as bad if you go back to the way this figure used to be calculated.

In 1994 the Clinton White House decided that the unemployment rate needed to be modernized.

So anyone who had been out of work for at least a year was no longer counted as unemployed - they were just too lazy and discouraged to find work.

Those clever Clintons also changed the way the questions were asked, so that more people would drop out of the unemployment statistics.

John Williams, an economist who tracks this stuff on his Web site ShadowStats.com, says today's unemployment rate would be 16.5 percent if we went back to the old way of measuring it.

As it stands, the government announced last Friday that the jobless number climbed 0.2 percentage points to 6.7 percent in November, when an astounding 533,000 positions were eliminated.

And the Labor Department also corrected the previous two months - now admitting that nearly 200,000 additional jobs disappeared right before the election.

The broader unemployment number that the Department does produce - called the U-6 - rose to 12.5 percent in November from the previous month's 11.8 percent.

This figure includes people who want to work full time but can only find part-time gigs.

There's a certain irony in the fact that Obama, the first Democrat to win the White House in eight years, is going to be deceived by employment numbers that were first fudged by the last person in his party.

Here are a few things Obama should know and maybe contemplate for a while.

The new president thinks rebuilding the nation's infra- structure is the kind of stimulus the economy needs to start cranking again.

But will any of the workers fired last week by, say publisher Houghton Mifflin, DuPont, Viacom, AT&T, Avis and dozens of other white-collar heavy companies, really want to pour cement, dig ditches and engage in the brutal tasks that repairing roads and bridges will create?

When Roosevelt created jobs with infrastructure stimulus in the '30s, America was a blue-collar society that employed mostly men.

We, white-collar prima donnas, aren't going to benefit from this program, no matter how many billions the government spends.

But a lot of illegal workers willing to work hard should do quite well. We'll be getting thank yous soon from the Mexican government, which could benefit more from this than Nafta.

- And the American job situation is worse than anyone can imagine.

Last Friday's disastrous labor numbers included 30,000 jobs that the government thinks were created by companies too small to count.

This is called the Birth/Death calculation. But don't count on these positions really existing.

This is a Labor Department trick: Count the numbers in the current month and subtract them later when the shock won't be so great.

January is the only month when this birth/death model deducts jobs from the monthly count. So the job figure coming out Feb. 6 - just weeks into the new administration - could be mind bogglingly bad.

In the weeks and months ahead we will see where this all lands, hopefully not on a mine. I think the FDX news/warning was a very loud signal as to where things are going. The bulls are arguing the worst is behind us, I say now is the time to be even more careful.