Unemployment Rate Drops To 8.6% or did it?

Employment Situation Improving?-Not

TheFinancialPhysician.com
 Today’s non-farm payroll report revealed that 120,000 jobs were created in November slightly less than the 125,000 most economists expected. The real headline in the report is that the unemployment rate declined to 8.6% from 9.0%.
The reduction in the jobless rate stemmed in large part from a decline in the size of the labor force. Some 315,000 people stopped looking for jobs last month, not exactly the sign of a healthy job market. The Administration surely will be touting this number as a sign that things are improving when they are not. As more and more people run out of unemployment insurance and become “discouraged” the jobless rate will continue to decline making it appear that the Administrations policies are working, just in time for an election year.
Labor Force Participation Rate:

Is Bank of America preparing for a Chapter 11?

Reuters- Bank of America has managed to step into the kimchee several times over the past couple of months, an achievement that only warms the hearts of crisis communications professionals. First came the abortive settlement of $10 billion or so in put-back claims by some large investors. The State of New York and anyone else paying attention intervened. Settlement is now mostly muerto in political terms, although the big investors are still paying the big lawyers to soldier on in hope of forcing a settlement on all parties. Only in New York are such things possible.

Then came the decision by Bank America CEO Brian Moynihan to impose a $5 per month fee on ATM transactions, this in response to the Dodd-Frank law which cuts about half of the profits for big banks in the electronic payments market. Consumers reacted in rage to the announcement, which arguably helped to catalyze the Occupy Wall Street movement. Truth is that the big bank’s cartel control in payments is under assault by more than Congress. Think technology, Apple and Google, and stay tuned for a future post on the payments revolution. Steve Jobs does get the last laugh on the big banks.

Most recently Bank America drew attention to itself by disclosing that it had moved all of the derivatives footings from its Merrill Lynch subsidiary to the lead bank, Bank of America N.A. Bloomberg ran the first story, reporting “BofA Said to Split Regulators Over Moving Merrill Derivatives to Bank Unit.” This report led to comments and reports claiming that the Fed, by allowing this move, had somehow impaired the national patrimony and violated Section 23A of the Federal Reserve Act. Section 23A is among the more bizarre parts of the Fed’s enabling law and governs transactions between banks and affiliates.

Bill Black of University of Kansas City told me that the Bank America move was not merely an administrative exercise. “Here, B of A was not the counterparty,” says Black. “The 23A issue is moving an exposure [from Merrill Lynch] that is in trouble to the insured institution, apparently at book value, from an uninsured affiliate. That should be an easy call: ‘No.’ The Fed cares about BHCs and is institutionally primed to say yes to this kind of deal, while the FDIC is institutionally primed to protect the FDIC insurance fund.”

While I am sympathetic to concerns about potential losses to the FDIC bank insurance fund, the fact is that FDIC can reject any contract between any party and a failed bank. Truth to tell, however, such changes in the counterparty for OTC derivatives exposures are not that surprising for people who follow the securities industry. Goldman Sachs, Morgan Stanley, et al have moved their swaps business “in the bank” long ago. As Bloomberg notes, 99% of all of JPMorgan’s swap book flows through the lead bank. And yes, the Merrill business was particularly exotic, but keeping it in Merrill running through the smaller, FDIC insured Merrill depositories would probably be more of a risk to the Bank America group.

So the real question is why now? Susan Webber of Aurora Advisers, in her Yves Smith nom de plume on Naked Capitalism, commented on the motives behind and timing of the change:

You can argue that this is just normal business, the other big banks have their derivatives operations largely in the depositary. But BofA has owned Merrill for over a year and a half, and didn’t undertake this move until it was downgraded. Goldman and Morgan Stanley remaining big players in this business and don’t have a large depositary. If this was all normal business, BofA would have done this a while ago, and not in response to market pressure, and they would have gotten the FDIC on board. The way this was done says something is amiss.

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What the new tax bill means for us

What the new tax bill means for you

CHICAGO (MarketWatch) — The new tax bill now on its way to President Obama for his signature will save every American from a number of tax hikes that would have begun Jan. 1 and will add more than a year of benefits for those who are long-term unemployed.

But there are plenty of other tax perks in the bill, most of which extend breaks already in place. Here’s a rundown:

Marginal tax rates

Federal income-tax rates, which were lowered under the Bush tax plans of 2001 and 2003 and scheduled to end Dec. 31, will remain in place through 2012. Had Congress and President Obama not reached a compromise on the tax bill, everyone’s taxes would have risen Jan. 1. That includes an extension of lowered capital-gains taxes for investors.

Unemployment benefits

Long-term unemployment benefits get extended for 13 months.

Estate tax

Among Obama’s concessions to Republicans is a 35% tax levied on an inheritance of $5 million or more. If no estate provision had been passed, wealthy families would have been hit with a 55% tax on an inheritance of $1 million or more beginning Jan. 1, according to the Tax Institute at H&R Block. House Democrats originally balked at the provision, seeking a higher tax on the wealthiest estates.

Social Security tax holiday

The so-called payroll tax holiday stays put too, meaning employees who pay 6.2% in Social Security taxes out of each paycheck will pay just 4.2% for the next year on wages up to $106,800.

Making Work Pay

The “Making Work Pay,” which was part of the 2009 Recovery Act, is set to expire Dec. 31 and will not be renewed. The credit was worth $400 to taxpayers making $75,000 or less ($800 to couples earning under $150,000).

Alternative minimum tax

The alternative minimum tax patch continues into 2011 and the exemptions increase slightly, according to Bankrate.com. For married joint filers, the 2011 threshold is at $74,450; it’s $48,450 for single or head of household taxpayers and $37,225 for married taxpayers filing separate returns.

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Metro Ethernet over Copper Price Quote

China Sold More Treasurys, but Market Rallies On

China Sold More Treasurys, but Market Rallies On


Demand for U.S. government debt is so strong lately that not even an apparent slowdown in China’s appetite for it can stop the rally in bonds.


The price of the 10-year Treasury note leaped on Monday, pushing its yield, which moves in the opposite direction of price, to 2.579%, the lowest since March 2009. This came despite a Treasury Department report suggesting China was a net seller of U.S. debt in June for the second month in a row.


Not long ago, such a report might have caused a selloff in Treasury bonds. China has since 2008 been the world’s biggest foreign holder of Treasurys—and still is, holding $843.7 billion in U.S. government debt as of June, according to Treasury data.


But China’s holdings fell by $24 billion in June and $32.5 billion in May, according to the latest Treasury International Capital data. They are down $96.2 billion since peaking last July.


Short-term shifts in these monthly numbers are volatile and can be misleading. Analysts say China and other big foreign buyers are likely routing some Treasury purchases through the U.K. and Hong Kong, which would distort the TIC data. U.K. Treasury holdings have nearly quadrupled in the past year, perhaps partly for this reason.

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Payrolls drop by 125K, jobless rate falls

Payrolls drop by 125K as many census jobs end; unemployment rate falls to 9.5 percent


WASHINGTON (AP) — A wave of census layoffs cut the nation’s payrolls in June for the first time in six months, while private employers added a modest number of jobs. The unemployment rate fell to 9.5 percent, its lowest level in almost a year.



Employers cut 125,000 jobs last month, the most since October, the Labor Department said Friday. The loss was driven by the end of 225,000 temporary census jobs. Businesses added a net total of 83,000 workers, an improvement from May. But that’s also below March and April totals.



The unemployment rate dropped to the lowest level since July 2009. But it fell because 652,000 people gave up on their job searches and left the labor force. People who are no longer looking for work aren’t counted as unemployed.



The report indicates that businesses are still slow to hire amid a weak economic recovery. Analysts expected private payrolls to rise by about 110,000, according to Thomson Reuters.



The nation still has 7.9 million fewer private payroll jobs than it did when the recession began. It takes about 100,000 new jobs a month to keep up with population growth. The economy needs to create jobs at least twice that pace to quickly bring down the jobless rate.



All told, 14.6 million people were looking for work in June. Counting those who have given up their job searches and those who are working part time but would prefer full-time work, the underemployment rate edged down to 16.5 percent from 16.6 percent in May.



Manufacturers, the leisure and hospitality industries, temporary staffing agencies, and education and health services providers all added jobs. Retailers, construction firms and the financial service providers cut payrolls.



Private employers added only 33,000 jobs in May, the department said, below an earlier estimate of 41,000. April private-sector payrolls were revised up to show a total gain of 241,000 jobs, higher than the earlier estimate of 218,000.



The Census Bureau added more than 400,000 workers in May to assist with the 2010 employment count, but most of those jobs lasted only six to eight weeks.



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