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  • Almost Six Million Unfilled Jobs In America - Question Is Why?

    On Wednesday of last week, the Labor Department’s Bureau of Labor Statistics (BLS) reported that there were a record 5.9 million unfilled job openings in America as of the end of July. Unless you are a news junkie like myself, this number may well come as a surprise to you. And the reasons why we have such a huge number of unfilled jobs may also come as a surprise.

    With our official unemployment rate at 4.9%, we know that the labor markets have improved significantly in recent years. It’s great that US businesses are hiring, but these record numbers of job openings are also a sign that business owners can’t find the skilled workers qualified to fill the jobs they have available. We’ll find out why as we go along today.

    Before we get to that discussion, let’s briefly review two decidedly disappointing reports for August -- the ISM Manufacturing Index and the ISM Services Index. We’ll also look at another key report which significantly surprised on the upside. Let’s get started.

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  • Another Strong Jobs Report, But Economy Remains Weak

    Last Friday’s unemployment report for July was significantly better than expected for the second month in a row. This has led many analysts to upgrade their forecasts for growth in the second half of this year. Yet as I will argue below, forecasters often put far too much weight on one or two monthly economic reports that can be revised significantly in subsequent months.

    While new jobs were substantially above the pre-report consensus in June and July, let us not forget that job creation in May was almost non-existent, the lowest in several years. The fact is, the US economy continues to limp along at less than 2% growth.

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  • September Jobs & Manufacturing Reports Disappoint Again

    As is becoming increasingly frequent, we will touch on several bases today, given that there’s so much going on these days. (Speaking of bases, How ‘bout them Texas Rangers!!) Hitting several topics in a single E-Letter makes it more interesting and fast-paced for me, and I hope the same is true for you. After all, YOU are what this is all about. That’s why I always value your input, positive or negative, so much.

    Today, we’ll start with the latest economic reports. I wish I could tell you they were encouraging – most were not. There was last Friday’s disappointing unemployment report for September – which was below expectations for the second month in a row. Then there was last Thursday’s decidedly downbeat report on US manufacturing, which was yet another big disappointment.

    These two negative reports have most Fed-watchers very confident now that there will not be a rate hike this year. Most now believe that “lift-off” won’t happen until early 2016. Yet the Fed may fear it will lose its credibility if it doesn’t make at least one move this year. So expect this debate to continue at least until December 17 when we will know for sure.

    Last Wednesday, the head of the International Monetary Fund warned that there are new reasons to be concerned about the global economy, and emerging economies in particular. IMF Managing Director Christine Lagarde issued the latest warning, along with another call for the US Fed to delay the first rate hike until next year. But does the Fed care what she thinks? Probably not.

    Finally, I have just completed a new SPECIAL REPORT: Seven Risk Factors That Could Drive the Markets Lower. Back in March and April, I saw the storm clouds gathering on the horizon and warned my readers to reduce their long-only (buy-and-hold) positions in stocks and equity funds.

    Still, most investors don’t understand why this six year-old bull market seems to have run off the tracks. In this new Special Report, I discuss in detail the unique combination of risk factors that are weighing on the markets today and may continue to do so.

    Best of all, I offer advice on what you can do to protect yourself should the latest market downturn continue. If you are looking for some clarity in this crazy market and some advice on how to protect your portfolio, be sure to download my latest FREE SPECIAL REPORT at the end of today’s E-Letter.

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  • China’s Stock Markets Imploded In June - Why?

    While the mainstream media has been obsessed with Greece over the last month or so, there has been scant attention paid to the fact that China’s high-flying stock markets unexpectedly have plummeted in June and were down around 30% through the end of last week.

    China’s exploding economy in recent years has made it the hotspot for global investors. Mutual fund families and ETFs have rushed to add exposure to the Chinese markets. China’s two major stock exchanges have seen their share indexes surge over 100% in the last year, drawing ever more investors to jump in. This includes many middle class Chinese who have never invested in anything before (many of whom have borrowed money to invest).

    Yet as noted above, in the last month, share prices on China’s stock exchanges have plummeted by around 30% as of the end of last week, to the surprise of just about everyone. The decline continued overnight (Tuesday).  Many investors don’t even know it yet since they have not seen their June account statements.

    With the world’s attention focused on Greece over the last couple of weeks, the China story has not made its way onto the media’s radars for the most part. For that reason, I will focus on the latest disturbing developments in the China story today.

    But before we get to the troubling news on China, let’s take a look at a few of the latest US economic reports – including the June unemployment report, the big jump in consumer confidence last month and the Gallup Job Creation Index which is at a new record high.

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  • Problems The Media Ignored In The April Jobs Report

    Today we’ll start with a look at last Friday’s unemployment report for April. If you read the mainstream media accounts, it was fantastic – the official unemployment rate fell to 5.4%, the lowest level since 2007. But as usual, if we dig into the internals of the report, we find that the results were much less than desired.

    One of those findings was the fact that the percentage of adult women in the workforce has fallen to the lowest level in 27 years, but you had to look deep into the report to discover that data. The reasons for this phenomenon are not entirely clear, but I will offer some suggestions, in what is a rapidly growing debate.

    Following that discussion, we take a look at the exploding growth in “margin debt” on the New York Stock Exchange. In March, margin debt soared to a new record high of $476.3 billion. Some analysts believe this is a major problem for the equity markets, while others think it’s a positive development. But what we do know is that margin debt peaks at major market tops. With the major market indexes at or near their all-time highs, the next few weeks should be very interesting!

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  • Why The US Unemployment Rate May Be Wrong

    Last Friday’s unemployment report for March was a stunner, no doubt about it. After 12 consecutive months of new job creation above 200,000 per month, the Labor Department reported that only a meager 126,000 new jobs were created in March.

    Theories abound as to the cause of the huge drop-off in new jobs last month, but the default reason cited, once again this year, is the severe winter weather. While bitter winter weather is a factor, questions arise as to whether this could be a sign of worse things to come in the US economy.

    We will focus today on the latest disappointing unemployment report and examine what the internals of the latest missive might mean for the economy, and for the Fed’s timing of its first interest rate hike.

    Following that discussion, I want to shift our sights to a new study which suggests that the government’s official unemployment rate, currently 5.5% is significantly lower than reality. This new study concludes that the real unemployment rate in America today is somewhere between 7% and 9% or even higher. I think you’ll find this discussion compelling.

    But before we get to today’s main topic on the latest unemployment report, I want to briefly share with you a new and disturbing economic forecast from none other than the Federal Reserve itself.

    At the end of March, the Federal Reserve Bank of Atlanta released a new forecast for US GDP growth of 0.0% for the 1Q. This surprising new forecast from the Fed itself has sparked a spirited new debate on the subject of where the US economy is headed this year.

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  • Strong Jobs Report Hits Fed’s Rate-Hike Target Zone

    Last Friday’s unemployment report for February was stronger than expected, both in terms of new jobs created and the headline unemployment rate which fell from 5.7% to 5.5%. This sparked growing fears among investors that the Fed will move to raise short-term interest rates sooner rather than later. Stocks fell sharply just after the report.

    The debate over when the Fed will raise interest rates this year, by how much and over what period of time, continues. The financial media hangs on the Fed’s every statement, looking for clues as to whether the first rate hike will happen in June or September or even later this year.

    Whenever “liftoff” happens, it is likely to be only a quarter-point hike in the Fed Funds rate – the interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution overnight – which is currently around 0.1%.

    How much the Fed Funds rate could rise over the next few years is a subject of much controversy – as I discussed in my blog last Thursday (you really should subscribe) – but most analysts don’t expect the key rate to rise above 1% by the end of this year.Today we will discuss when the Fed might make its first move and how much rates may rise over the next several years.

    But before we jump into that discussion, let’s take a look at last Friday’s unemployment report, which saw the headline unemployment rate drop to 5.5%, the lowest in seven years. However, as is often the case, not all the data in the latest jobs report were positive. I’ll explain the good and the bad as we go along today.

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  • November Jobs Report Wasn’t So Great After All

    Today we'll take a close look at the November employment report last Friday, which was a positive surprise.  The 321,000 new jobs added last month was the highest reading since January 2012 and was substantially above the pre-report consensus of 230,000. The headline unemployment rate remained at 5.8%. The question is, will such job growth continue, or was this a one-month, seasonal anomaly?

    Yet not all of the news in the November jobs report was positive. While the headline new jobs number was 321,000, a deeper dive into the data reveals that there were only 4,000 more Americans working in November than in October (details to follow). Full-time jobs declined by 150,000, while lower-paying part-time positions increased by 77,000 – that’s not good.

    President Obama praised the jobs report and suggested that the economy is nearing full employment. The truth is, the economy is still far from full employment. The unemployment rate would have to fall to 5% or lower for that to happen, and it is not expected to do so anytime soon.

    And speaking of the president, rumors are swirling in Washington that Obama is seriously considering new sanctions against Israel, our strongest ally in the Middle East. The Obama administration is opposed to Israel’s decision to build new homes in East Jerusalem, and that this construction“undermines the peace process.” Now, apparently, they are considering sanctions against Israel. That is preposterous!

    Finally, our recent live webinar with Wellesley Investment Advisors is now available for viewing on our website. Wellesley invests exclusively in convertible bonds and is the only convertible manager we recommend. Whether you are knowledgeable about convertible bonds or not, I highly recommend that you watch this presentation.

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  • Labor Force Participation Lowest in 36 Years - Why?

    Last Friday’s unemployment report for August was significantly weaker than expected. While the headline unemployment rate dipped back to 6.1% (same as it was for June), the number of new jobs created last month was substantially below expectations and marked the lowest number of the year.

    Until last Friday’s disappointing jobs report, most economists assumed that job growth would continue at a pace of more than 200,000 new jobs per month. But today we’ll look at five facts which suggest that such an assumption was likely misplaced.

    Our main topic today focuses on the labor force participation rate – the percentage of Americans working or looking for work – which is now at a 36-year low. People are leaving the workforce in record numbers, and it’s not all because Baby Boomers are retiring. Over half of those leaving the workforce have simply given up on finding a job.

    The question is whether this is a “cyclical” phenomenon that will improve when the economy gets stronger, or whether it’s a “structural” problem that will be with us for years. That’s what we’ll explore as we go along today.

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  • The US Economy – The Good, The Bad & The Ugly

    As is true more often than not, there are mixed signals in the economy. There are indeed some “green shoots” emerging that suggest the economy is finally gaining some momentum. Yet there are also continued troubling signs that, while not warning of an impending recession, suggest we could be stuck in a structural period of continued below-trend growth.

    Today, we’ll look into the latest economic indicators – good, bad and in between – and see if we can make any sense of where we are. My view is that the economy is most likely to remain in sub-par growth (i.e. – below 3%) for at least the rest of this year and maybe longer. Yet as we’ll see below, some others feel that the economy is nearing “breakout velocity.” We’ll see, but I am not so optimistic. Let’s hope I’m wrong.

    A new report finds that President Obama’s economy is the worst in over 80 years. You can read this story at the first link in SPECIAL ARTICLES below.

    Let’s start with the latest good economic news.

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  • Why Male Workers Are Disappearing in America

    Last month’s unemployment rate plunged from 7% in November all the way to 6.7% in December, which was lower than any of the pre-report estimates. That should be a great thing, right? Wrong! The unemployment rate fell because more Americans gave up looking for work and dropped out of the labor force entirely.

    Even worse, new jobs created in December were a fraction of what they were in recent months at only 74,000 versus over 200,000+ in the last several months. Even the Obama administration could not avoid admitting that the latest unemployment report was grim when you look into the internals. That’s pretty bad!

    The plunge in new jobs to only 74,000 in December is worrisome enough, but if you dig deeper into the data, you find something even more disturbing. Only 71.8% of working-age men have a job or are looking for work. That’s a huge decline from 80% in 1970! The question is, why are so many men disappearing from the workforce? That’s what we’ll talk about today.

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  • Will 39% Hike in Minimum Wage Tank The Economy?

    President Obama called for a whopping 39% increase in the minimum wage from $7.25 to $10.10 per hour last Thursday. There is already a bill working its way through in the Senate to do the same thing. If this legislation passes, the minimum wage will be increased 95 cents each year for the next three years starting this year, to bring it to $10.10 by 2015.

    Many argue that this will be a huge job killer and could thrust the economy back into a recession. However, some of the critics I’ve read don’t consider that the 39% increase in the minimum wage will be phased in over three years. Supporters of the wage hike argue that the seemingly huge increase merely restores the purchasing power for the low-paid workers in America. We’ll look into both arguments today.

    Before we get to that controversial topic, let’s take a look at last Friday’s surprising unemployment report, last Thursday’s better than expected GDP report and the continued slide in consumer confidence.

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  • The U.S. Can’t Default On Its Debt… Right?

    The Treasury Secretary has warned that his agency will exhaust the “extraordinary measures” it has used to fund the government on October 17. On the Sunday talk shows, he warned of “catastrophic consequences” if Congress doesn’t raise the statutory debt ceiling by then. So, over the next nine days, you’ll be hearing ominous forecasts of what will happen if the US defaults on its nearly $17 trillion national debt, or even some of it. Sound familiar?

    Late last week, President Obama warned that he would not negotiate on the debt ceiling until Congress passes a “clean” continuing resolution to get the government funded and fully open again. Most Republicans are hanging onto their demand that the Obamacare mandate for individuals be delayed a year. If both sides hold out, increasing the debt ceiling could be tough.

    Somehow, these debt ceiling fights seem to get resolved at the very last minute, but the uncertainty can be brutal for the markets. In 2011, stocks lost around 19% of their value as this game of chicken played out. Some expect the current debt ceiling fight will be even more harrowing since Obama doesn’t have to worry about re-election.

    We’ll talk about all of this and more as we go along. Let’s begin by looking at the latest economic reports, or lack thereof, as was the case with last Friday’s unemployment report that was furloughed by the Obama administration, supposedly due to the government shutdown.

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  • America is Turning Into a "Part-Time Nation"

    Part-time work accounted for a whopping 77% of the jobs the US economy created from January through July, according to household survey data from the Bureau of Labor Statistics. Last year during the same time period, part-time jobs were only 53% of the total versus 47% full-time jobs. This trend toward part-time, low paying jobs is accelerating rapidly.

    A rising number of companies are citing healthcare reform as the reason for the growing part-time workforce. As a result, the US labor pool is rapidly restructuring toward “29-ers” – employees working just under the 30-hour full-time threshold. This meteoric increase in part-time versus full-time new jobs has been happening since 2009.

    Next, we look at the latest clues as to when the Fed will start to “taper” its monthly bond and mortgage purchases. The minutes from the Fed’s July 30-31 policy meeting indicated that a growing number of FOMC members are leaning toward reducing purchases before year-end. But we still don’t know when Bernanke & Co. will pull the trigger.

    Finally, in my blog last Thursday, I wrote about a new study which found that, in at least 35 US states, a person on welfare can get more cash benefits than a person working 40 hours a week at the minimum wage. In some states, a whole lot more than the minimum wage. Today, we explore this dangerous trend and why we have a record number of Americans on welfare.

    But first let’s take a quick look at the latest economic reports and what’s ahead this week.

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  • Are Americans Optimistic or Pessimistic About the Future?

    Today's letter will move fast as we touch on several pressing issues of the day, with lots of charts and graphs. We begin with some new polls which indicate that most Americans are pessimistic about the future, even though consumer confidence is up this year. Another major poll finds that only 29.4% of Americans feel the country is headed in the right direction, while 61.4% believe we are on the "wrong track" longer-term.

    From there, we take an in-depth look at last Friday's unemployment report. While the headline unemployment rate unexpectedly fell to 7.4%, there was a lot of troubling data in the report that the mainstream media simply ignored. Not only were new jobs less than expected, they were dominated by low paying and part-time jobs.

    Next, we take a closer look at last Wednesday's 2Q GDP report, which came in a little higher than expected (1.7% vs. the consensus of 1.1%). The media gushed over this number and assured us that the recovery is gaining momentum. But how can you get excited over a report showing growth is still less than 2%? This is still the weakest economic recovery in most of our lifetimes, despite what the media says.

    Last but not least, Congress has figured out that ObamaCare is going to be a "train wreck," this according to one lawmaker who helped write the massive healthcare law. As a result, Congress is trying to find a way to exempt itself from ObamaCare - surprise, surprise! That will be very difficult, so President Obama appears ready to give members of Congress subsidies up to 75-80% to buy health insurance on the exchanges, even though they make $174,000 a year, plus benefits and lifetime pensions. This is outrageous!

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