Wayne Wile, Jobs: Quality means more than quantity

Political commentators seem unable to understand why Bernie Saunders and Donald Trump have managed to tap into such rage among average American voters. The talking heads just assume the headline economic numbers reported by Wall Street are real. The economy is fine and getting finer, right? Wrong, and Americans know it.

One of the great lies is in the monthly jobs report. It’s not that the headline numbers are made up. The problem is what the numbers don’t tell you…that the new jobs are mostly not good jobs. That is why household incomes are not growing, average families are slipping behind in their bills and people are getting frustrated and angry. It’s a problem of quality.

Since March 2011 — five years ago — the U.S. economy has added 12.4 million jobs. Here’s where two-thirds of them can be found:

  • 2.2 million in “leisure and hospitality,” including 1.8 million in “accommodation and food services”
  • 2.6 million in “education and health services,” including 2.1 million in “health care and social assistance”
  • 1.4 million in “retail trade,” including 300,000 in car dealerships and 260,000 in “food and beverage stores”
  • 1.3 million in ‘”administrative and waste services”

In the main, these are not good-paying jobs. To raise a family, you may need at least two of them, and many workers have more than one job. They are offsetting quality with quantity.

Where do the people taking these jobs come from? Often, from better paying jobs such as in manufacturing where the layoffs continue.

As shown in the chart below, in the past month 29,000 manufacturing jobs were lost. This was the single biggest monthly drop in the series going back to December 2009.

monthly change

As the predominance of red over green clearly shows, the manufacturing jobs lost in the Great Recession have not come back. And since the start of 2015, 24,000 manufacturing jobs have been lost compared to an increase of 365,000 food service workers. If Americans did not eat out every day, many of them wouldn’t be working either.

Last month, nearly every laid-off manufacturing worker seems to have found a job as a waiter. In March, workers in the “Food services and drinking places” category, waiters– bartenders and cooks– rose to a new record of 11,307,000 workers, an increase of 25,000 in the month, just about offsetting all the lost manufacturing jobs.

Here’s the chart:

Waiter

If I went from earning $25 an hour in manufacturing to a minimum wage job at the local diner, I would be voting for Trump too.

Chart Source: zerohedge.com

Wayne Wile; Q1 GDP Expectations Continue to Sink

Readers will be familiar with the GDPNow estimates published regularly by the Atlanta Federal Reserve. These estimates have been the most accurate out there, quarter after quarter. The latest forecast for Q1 GDP is just 0.4%, despite the most benign winter weather in decades.

You may remember that the “polar vortex” phenomenon was said to have been the reason for lower GDP in Q1 of 2014 and even 2015. This year, you can expect that the unseasonal warmer weather will be the excuse for poor growth because it has suppressed parka sales and home heating and utility revenues. You heard it here first.

This latest markdown in GDPNow estimates for Q1 reflects another set of weak economic reports. If you are keeping score at home, here are the reports the Fed says are responsible for taking down their forecast from just under 2% on March 15 to 0.4% today:

  • On March 21, existing home sales plunged a surprising 7.1%.
  • On March 23, new home sales showed a distinct lack of momentum.
  • On March 24, durable goods order fell 2.8%, much more than expected.
  • On March 28, a surprisingly weak household income report signalled weaker consumer sales on the way.
  • On April 4, factory orders fell 1.7% and capital goods orders surprised to the downside by 2.5%.
  • On April 5, the trade deficit unexpectedly widened.

The result of this run of terrible data is clearly evident in the chart below:

Evolution of Atlanta Fed

Wake up and smell the recession, people. This is no time to buy the S&Ps.

Wayne Wile, Business Sales and Inventories Predict a Big Flush

You may remember, dear reader, that I have called a bear market for equities. How am I doing so far? Well, the S&P 500 is up 13% from its February 11th intra-day low (1812). That sure doesn’t look good, does it? But I’m still convinced I’m right. I haven’t shorted the market yet, and won’t until the S&Ps break that February low. So this rally hasn’t hurt me, it’s just annoying to have to wait.

Maybe Wall Street still has inventory to unload, as David Stockman says.

The signs of an impending flush are now everywhere. The March 15 release of business sales for January, for example, showed another down month. The critical inventory-to-sales ratio for the entire economy is now at 1.40—–a ratio last recorded in May 2009.

Here’s the chart from Zero Hedge:

Business Inventories

Once upon a time, when I was a young lad, investors used to watch the real economy, not the latest Fed head jabbering on CNBC. One of the things we paid keen attention to was the inventory-to-sales ratio because we knew that’s where recessions came from, and recessions were not good for the stock market.

When sales slow down, inventories build up. The build in inventories actually continues to boost GDP because the supply chain hasn’t got the message yet. When they do, they stop producing as much, inventories fall faster than sales and the GDP falls, giving us an official recession…ALWAYS after the fact. Those who watch GDP, like most economists, totally miss the boat. They never call the recession before it starts because they follow their models and not the real economy. Only highly intelligent and educated people can be this stupid, as I am fond of saying.

Business sales as reported on March 15 were down by 5.1% from their July 2014 peak. Declines of this magnitude have occurred only twice since 1992 and both times they signalled a recession.

Here is the chart of total business sales for all levels of the economy. Is this hard to understand?

FRED

The shaded areas mark recessions.

If you haven’t sold your stocks yet, the gods of the markets are giving you another chance, just an eyelash below the all-time highs. Accept the gift, dear reader, accept the gift.

Wayne Wile, No Recession? Explain this.

The US Fed and all the conventional economists say the chance of a US recession is in single digits. Then why is foreign trade imploding?

Newly-released data shows Chinese exports fell 25.4 percent during the month of February compared to a year ago while Chinese imports fell 13.8 percent compared to a year ago.  For Chinese exports, that was the worst decline that we have seen since 2009 while Chinese imports have now fallen for 16 months in a row on a year-over-year basis. 

China accounts for more global trade than any other nation (including the United States), so this is a major red flag.  Anyone saying the global economy is in “good shape” is clearly not paying attention.

China Exports

What does this have to do with a US recession, you might ask? The US is China’s largest export market. Exports to the US fell 23.1% year-over-year in February compared to -9.9% in January. Does this tell you something about the health of the US consumer? I think so. Anyone here own Walmart?

I don’t know how anyone can dismiss the importance of these numbers.  As you can see above, this is not just a one month aberration.  Chinese trade numbers have been declining for months and that decline appears to be accelerating. Donald Trump will tell you that China is manipulating its currency to increase its exports and take American jobs. Really? They don’t seem to be doing a very good job of it.

Wayne Wile’s Art Collection (Part 1)

Wayne Wile became an art lover and collector at an early age. “It was fascinating to me that none of us sees the world in the same way. This was immediately clear to me in my dealings with clients and business associates. For me, it was natural to explore differences in perception and that drew me to art, not only for its beauty but also because it exposes the differences in how we see the world around us.”

Some of his earliest acquisitions as a collector were the works of Nova Scotian John Cook, born in 1918 in Halifax, and John Kinnear of London, Ontario, born in England in 1920.

In the late 1990s, he encountered Gallery Arcturus in Toronto, which began a long association and collaboration. Gallery Arcturus was established in 1994 by The Foundation for the Study of Objective Art, a Canadian federally-registered charitable organization, to provide members of the public with an opportunity to view and study works by contemporary North American artists free of charge and without commercial motives.

The Gallery has acquired an extensive permanent art collection for display and study, including drawings, paintings, collages, photographs and sculptures made by notable North American artists including Deborah Harris, its curator artist-in-residence, the photographer Simeon Posen, the Inuit art sculptor Floyd Kuptana and a members of the School of Reductionism in Grass Valley, California, including Della Haywood, Heather Valencia, Robert Trice, Kelly Rivera and the renowned artist, teacher, writer, and founder of the School of Reductionism, E.J. Gold. The permanent art collection has continued to grow every year and now totals 227 works of art.

In 1997, The Foundation for the Study of Objective Art purchased a 10,000 square foot heritage building located at 80 Gerrard Street East in downtown Toronto and renovated it to serve as the permanent location for the Gallery and its administrative offices. The Gallery Arcturus building was immortalized by the famous Canadian Group of Seven artist Lawren Harris in a painting from 1912 titled “Houses, Gerrard Street, Toronto”, now a part of the McMichael Canadian Art Collection.

Through Arcturus, Wayne Wile encountered the work of Della Heywood and became one of her most avid collectors. Born in Vancouver, B.C. in 1953, Della’s primary interest from early childhood was art. In the 1960s, she studied visual and performing arts with David Orcutt, founder of the experimental Intermedia Group, whose Balinese puppetry first explored the show worlds that later beckoned her.

Working with Tony Onley, a well-known and respected Canadian artist, she visited his landscapes as they were in nature and witnessed their transformation into abstract paintings in his studio. Ever since, landscapes have been an important part of her repertoire.

Wayne Wile - Companions II
Della Heywood ‘Companions II’ Acrylic on Canvas 24inX48in (Wile Collection)

Della attended Vancouver’s Emily Carr School of Art and Capilano College where she studied lithography, metal etching, linocuts, serigraphy, drawing, sculpture and carving, in addition to painting. In her development as an artist, Della was much influenced by the Impressionists and Post-Impressionists, whose love of light, intensity of color and immediacy of gesture taught her to be unafraid.

As Wayne notes, “it’s easy to see Della’s mastery of technique, her ability to draw. But what captured me was her vision which is bold and original, as well as the spectacular intensity and effectiveness of her palette.”