Domestic Employment

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Weekly jobless claims have seen significant volatility since the beginning of the year. First we saw a massive drop, revisions, and then a huge increase. It had many economists scratching their heads primarily due to the revisions and “seasonal adjustment” factor, which goes unpublished. This seems to be the first week where volatility has subsided a little and the factor between “seasonally adjusted” vs. “non-adjusted” has narrowed.

The “seasonally adjusted” claims fell 27,000 to 341,000. Of course the previous week was revised higher, but that’s par for the course. That was far greater than what economists expected. Their expectations were for a smaller decline to 360,000. Ironically, if we look at the non-adjusted number it came in at 359,000, which is almost in line with the expectations. It’s that unpublished “seasonal adjustment” factor that throws a monkey wrench into the model and so far no one can tell you exactly how they “seasonal adjustment” actually works. Why? Because the Bureau of Labor and Statistics (BLS) will not publish it (I had once called them and they stated they don’t publish now because the “seasonal adjustment” has many factors and is adjusted throughout the year). So I guess what they are telling me is that the “seasonal adjustment” is also seasonally adjusted. Their excuse for this manipulation is to supposedly “smooth” out the results. Thanks, but no thanks. I would just rather have the actual number of how many people filed claims and please do NOT adjust it. The good news is that they do publish the unadjusted numbers on the website; the bad news is that they have marketed the “seasonal adjustment” as the official number and the media (and public) have taken the bait. No wonder the economists never get it right. The 4-week moving average increased to 352,500.

There continues to be a rather huge disparity between large global companies, which have been hiring over-seas as well as domestically, and small business which has remained stagnant. Small business makes up the vast majority of job creation in this country primarily because large multi-nationals are now global and the majority of their hiring is overseas. The President Obama name dropped a couple of companies (Apple, which had CEO Tim Cook sitting next to the First Lady during the State of the Union Address and also CATERPILLAR) that are “bringing back jobs to the US”, which was just more spin, because it implied that they are closing business overseas and bringing it back to the US, which couldn’t be further from the truth. Sure they are hiring domestically, but both of those companies continued and plan to continue to expand and hire overseas. Name dropping and rhetoric can certainly generated applause, but what the President didn’t touch on was the huge stagnation with the small business owners. It is small business that creates the vast majority of jobs in this nation. Drive around any city and look around at the restaurants, local stores, gas stations, offices, etc. That is the bulk and core of job creators in this nation, but name dropping “Bob’s repair shop” doesn’t have the gravitas of name dropping Apple and having the CEO sit with the First Lady. Any average size town in the US hires far more than the average S&P company; that is something to think about.

One of the few CEO’s that pulls no punches is Cisco’s John Chambers. He is one of the few CEO’s that will tell you how business REALLY is. The company saw growth continue overseas in the emerging markets. It also saw some early signs of improvement in northern Europe; however, it was southern Europe that continues to see long term problems. The interesting news is that the company has amassed over $45 billion in cash, with more than $30 billion overseas. Chambers said he would NOT repatriate the money to the US unless tax policy changes. Why be taxed twice on your money, once overseas and then again in the US? It would cost 30% to repatriate – who wants a 30% loss? Additionally, wherever they acquired the cash is where they plan on hiring and growing, that means Cisco will most likely NOT hire in the US. In fact, his tone seemed that he would even consider uprooting the company and moving it overseas at some point.

While Chambers doesn’t pull punches, I wonder how many other CEO’s are taking a similar (but non-vocal) opinion. That means we could see continued weak job growth in this nation if the small business is not hiring very many and the big multi-nationals are also not incentivized to do so.

Of course we could just “seasonally adjust” our problems away.

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