Actual, not seasonally adjusted, initial unemployment claims totaled 319,349 last week, according to the Department of Labor tabulation of weekly data submitted to it by the 50 state employment departments. This number was virtually unchanged from the prior week total of 319,382. As always, the media reported only the seasonally manipulated numbers showing a decline of 5,000 claims to 359,000. And that left them scratching their heads because of a major revision of 5 years worth of seasonally adjusted crap data. Here’s how the DOL put it:

This week’s release reflects the annual revision to the weekly unemployment claims seasonal adjustment factors. The seasonal adjustment factors used for the UI Weekly Claims data from 2007 forward, along with the resulting seasonally adjusted values for initial claims and continuing claims, have been revised.

The good news is that the actual data is the actual data. It doesn’t change because of some ever changing seasonal hocus pocus factor that results in 5 years worth of data revisions that still do not accurately reflect reality.  I analyze only the actual data, which is the data that everyone should be focused on. The government reports it. The mainstream media and the economic punditry ignore it. It’s no wonder that their guesstimates have all the accuracy of a coin flip.

Because there are seasonal fluctuations that do vary widely based on underlying economic conditions, in order to determine whether this week’s number is good, bad or indifferent,  we need to compare like to like. That’s easy. Just compare this week’s number to the same week in prior years, comparing both the total, and the weekly change. Total claims during the week ended March 26, 2011 were up by 3,000 to 357,457. Total initial claims this year in the week ended March 24 were down 10.7% from that level.  The flat week to week change was this year, represents a not material improvement versus the 2011 data.

In the week ended March 27, 2010, initial claims fell by 449 to 408,204. This week’s report was not materially different than that change, and it represents a 21.8% decline from that total. Looking at the big picture, the trend rate of decline in first time claims has consistently been around 10% for the past 18 months. There’s no sign of any change in that rate, suggesting that the economy remains in a slow growth path, shedding far fewer jobs than during the 2008-2009 collapse.

Initial Unemployment Claims Chart - Click to enlarge

Continuing claims are on a similar downward plane, declining for the past 3 months at approximately a 10% rate.

Continuing Claims Chart - Click to enlarge

The problem here is that we have no way to know how much of that is due to people getting jobs and how much is due to people exhausting their benefits and falling through the social safety net. Many of these unfortunates resort to what I call “synthetic unemployment compensation,” aka government guaranteed student loans.

Growth of Federal Student Loans - Click to enlarge

This chart represents the growth of Federal student loans outstanding. After hovering around $10 billion in 2007, the amounts outstanding grew to around $175 billion at the end of 2010, tracking the growth of continuing unemployment claims. But as continuing claims began to decline in 2010, these loan programs continued to grow,  with another big spike in 2010 when the Federal government temporarily allowed extended unemployment benefits to expire.

Finally late in 2011 and early this year, with continuing claims and extended and emergency Federal unemployment claims in declining trends, Federal student borrowing programs again surged. This is a sign of the hidden unemployment problem among young adults, who turn back to school out of desperate need for funds of any kind. Unfortunately, many of these loans will only be partly repaid in 40 years when the government garnishes the borrowers’ social security benefits. For now, for many this funding represents a last desperate means of sustenance.

None of the data tells us how many jobs the economy is adding, but the real time withholding tax data, adjusted for inflation tells us, “Not many,”  in fact, none.

Withholding Tax Chart- Click to Enlarge

The 4 week moving average of the annual percentage change in withholding tax collections is virtually zero, suggesting that the economy hasn’t added any jobs since this time last year. It’s probably a good bet that the  March payrolls data to be released a week from Friday will disappoint.

The claims data suggests that the labor market has been a model of consistency. While that may raise suspicion in the “vast government conspiracy” wing of economic chatterers, if the government is fudging, it has been doing so for a long time with multiple data streams. That would involve manipulation across a multitude of government agencies involving scads of data managers, analysts, and other employees. It’s likely that somebody would have squealed if the data was being falsified on a large scale over time.

While the media wallows and flails in the clearly unreliable seasonally adjusted nonsense, I think the actual data tells a reasonably clear story that seems consistent with a wide range of data that I track, as well as simple empirical observation of the real world.  Things are marginally improved today. We can debate whether the forces driving that improvement are sustainable (they’re not), and we also know that a growing parallel universe is developing with increasing numbers of people who have fallen through the cracks. But the relative improvement, however slight, is real, and that’s all that matters to buyers of equities. As long as these trends hold their own, the stock market should do so as well.

That does not change the fact that while fewer people are claiming unemployment benefits, many more have fallen off the rolls, and far fewer people have full time jobs today than 4 years ago.  That does not look likely to change any time soon based on the current data.

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Following the Crash of ’08, when the mainstream propaganda machine was desperately trying to “put a happy face” on the collapse of the U.S. economy, a ridiculous two-part economic myth was first spawned, and then regurgitated millions of times by media talking-heads: ordinary Americans were “saving money” and “de-leveraging” (or voluntarily paying down debt). Neither half of this myth has the slightest foundation in reality.

I’ve already dealt with the first half of this myth in greater detail previously – especially in a recent commentary. Simply, the only “saving” that is being done by Americans in any significant amount is by the fat-cats at the top, who have been handing themselves the fattest pay-raises in the history of humanity over the past decade – faster than the fat-cats can possibly spend it.

This is extremely unfortunate. Given that millions of Americans had/have permanently lost their jobs, while everyone else in the bottom-80% have seen their wages plummeting lower; the massive pay-raises the fat-cats have been handing themselves represent the only new (potential) consumer dollars being generated in this economy. Thus news that the fat-cats were hoarding their money at an increased rate was 100% negative for the U.S. economy.

The other half of this mainstream myth is equally absurd fiction. From the early 1990’s until the onset of the Crash of ’08, U.S. consumer credit more than tripled – from a mere $800 billion to a peak of $2.6 trillion. Note that all of this increased debt has been piled on by Americans during a period of time when their wages has been steadily declining in real dollars, meaning that none of this increased debt is sustainable over the long-term.

As the Crash of ’08 was revealed to be (in reality) a U.S. Greater Depression, the propaganda machine was desperate to propagate the lie that individual Americans had engaged in “significant de-leveraging” while the U.S. economy was spiraling downward. As the chart below reveals, after piling on nearly $2 trillion of consumer debt, the supposed “de-leveraging” amounted to a paltry $0.2 trillion – less than 10% of the entire debt-mountain they had accumulated.

More importantly there was virtually zero “de-leveraging” – i.e. voluntarily paying down debt – in the U.S. economy. Rather, what actually took place was a spike in various categories of debt-defaults, including auto loans, credit cards, and personal bankruptcies. Debt-defaults are the involuntary destruction of debts. And while true de-leveraging (voluntarily paying down debt) is virtuous, healthy behavior in an economy, there is nothing “healthy” about a spike in debt-defaults, bankruptcies, and (of course) foreclosures.

While there was virtually zero de-leveraging during the “official recession”, Americans have shown how fast they can pile debt back on – now that U.S. financial institutions once again foolishly loosen their credit standards. Witness for the prosecution is Bloomberg, who trumpeted with glee the news that Americans had just piled on more new consumer debt in November than in any month since immediately after 9/11 – a decade earlier.

Those familiar with the hysteria of the time will recall George Bush Jr. exhorting Americans to max-out their credit cards because “spending is Patriotic”. Back then, the U.S. economy had not yet been completely destroyed, millions more Americans were working, wages were much higher, and total consumer debt was nearly $1 trillion lower. In short, back in 2001 it was at least arguable that Americans might be able to repay all that new debt.

A decade later the picture is much simpler. All that the $20 billion in new debt which Americans piled on in November 2011 represents is $20 billion more in debt-defaults (and bankruptcies) over the next months/years, given that it is a unequivocal arithmetic that the U.S.’s debt-default spiral can only intensify in the years ahead.

The supposed “de-leveraging” which the mainstream media boasted of was nothing but propaganda mythology. However, the $100 billion in new consumer debt (alone) which Americans have piled on since the beginning of 2010 is very, very real. And all the new U.S. auto-loan defaults, credit-card defaults, student-loan defaults, personal bankruptcies, and foreclosures in the months ahead will be very, very real as well.

The TBAC estimate of borrowing for this week missed by $33 billion, a sign that once again, the experts have no clue how badly things are spiraling out of control. For the week, the Treasury dumped $51 billion in new supply on the market, $28 billion of which settled today. As a result, the pressure on the Treasury market which the mainstream is just beginning to notice, is rising. Who’d a thunk? Click here to download complete report in pdf format (Professional Edition Subscribers). Try the Professional Edition risk free for thirty days. If, within that time, you don’t find the information useful, I will give you a full refund. It’s that simple. Click here for more information.

Initial warning signs of market weakness earlier in the week began to be confirmed on Friday, and they could lead to a protracted and devastating decline when just about everyone in the mainstream expects otherwise. Click here to download complete report in pdf format (Professional Edition Subscribers). Try the Professional Edition risk free for thirty days. If, within that time, you don’t find the information useful, I will give you a full refund. It’s that simple. Click here for more information.

Publication Note: I will be traveling on Monday. The Precious Metals report, Fed report, and Market Update will not be published Monday. Regular publication will resume on Tuesday. See you then!

I like Obie, but he has drunk the Kool Aid. We are doomed. He’s listening to the advice of those very same world renowned egonomists who never saw the current mess coming. How could those who never saw it coming in the first place, and didn’t recognize it after it had already begun have any clue how to get us out of this mess? It makes no sense. But Obie is obviously listening to them. So we are doomed.

Doomed, I say.

What’s my advice? After all, I was one of those non-economist types–called bears– and we are multitude–who did see this coming. People like Bill Outada Poole, Big Dick Cheney and others say that nobody saw this coming. Well, the government bigshots and mainstream egonomists didn’t see it because they were the problem. It was their system. Greenspan built it and he was their maestro. Those of us malcontents on the outside looking in–we saw it and we screamed and yelled and ranted and raved, but nobody on the inside wanted to hear it. They were having too much fun sucking on the teat of the Ponzi scheme they had created.

But that’s for another time. The question is what I think “they” should do now.

Nothing. Because contrary to their conventional wisdom, doing nothing is actually much more likely to help the situation than following the advice of those who caused the problem.

That’s right, nothing. Oh, we definitely should have a little trickle up economics–some programs to allow the unemployed to subsist. We need to spend a lot less money on guns and more on butter for sure. And I guess we’ll have to raise the age for Social Security to 70, and roll back government fat cat pensions.

As for bailing out the bankers and brokers and corporate CEOs and all the friends of the politicians, I say let ‘em fail. Too late, I know. Bailing out the rich bankers and brokers will not save the system, it only puts the US taxpayer, instead of the investors who assumed the risk in the first place, in the position of bagholder of last resort. Why should we be the victims just to bail out the irresponsible self aggrandizing bankers, financiers, and economists, the thieving corporate CEOs and CFOs, and the lazy, irresponsible, and crooked investment managers who caused this mess? These spending programs are burdening US from now till kingdom come with a problem that those people caused. Yet we are bailing THEM out. WHY? Because they have the power. We don’t.

Take for instance Senator Scummer thanking Citibank today for throwing its support behind the bankruptcy proposal to allow judges to force mortgages to be crammed down. What the hell does Citicorp have to do with the legislative process? Why should the Congress need that company’s support to pass any legislation? Why are OUR representatives THANKING THE CRIMINALS? Whatever happened to government of the people? The extent to which the corporations have taken over this government is shocking. The politicians don’t even pretend any more. They thank their corporate bosses publicly for giving the OK to legislation.

It’s an outrage.

OK, just another outrage. After a while you get numb to it. That’s how they get you to play the game and turn over the fruits of your labor. They slowly and surely wear you down and numb you to the pain. Orwell wrote the manual 60 some years ago. Did he suspect, did he know, that he was predicting the future of the United States of America?

They’ve already done this business of borrow and bail twice and the result is as obvious as the finger up your nose. Just look at what happened to the markets the previous two times where the federales engaged in massive public borrowing over a short period of time, last May and last October. The outcome will be no different this time.

The borrowing for “The Stimpack” as currently envisioned will crush the stock market and destroy whatever is left of confidence world wide. It will cause an even greater crisis by potentially destroying the world’s perception of the creditworthiness of the US Gummit itself. We will ultimately be at the mercy of our creditors, and they at ours.

Unless they scale this Stimpack thing down to next to nothing, or by some other miracle they don’t try to raise the money, we are doomed. I think our best hope is that when they begin to implement this monster and things start to go over the cliff they will, like Wily Coyote, somehow grab a branch, pull themselves back up, reverse course, and stop all the damn borrowing.

As so many bears have pointed out, we cannot cure the disease by giving the patient more of the same poison that caused it in the first place.

Furthermore, substituting the US Gummit in the sick bed of the financial system as the dying patient of last resort is the height of folly and irresponsibility. We will now all pay the price, doomed to a pitiful, sickly existence for generations to come.

If Shakespeare lived today, he would not have suggested that they should “kill all the lawyers” because he would have had economists as his foils instead.

Polonius’s advice would still hold, however.

Neither borrower nor lender be.

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