On more than one occasion I have cautioned investors to view the economic “headline numbers” with a jaundiced eye under such circumstances. But since we have a chance to reflect on the big picture in today’s Penny Sleuth, I want to take a look at the numbers behind the numbers. Because once you see what’s really there, I think you’ll find there is no reassurance of an economic recovery.

When a person (who qualifies for unemployment) loses his (or her, but it’s a pain to keep using two pronouns) job, his application for benefits is recorded under the weekly initial jobless claims.

If he is still out of work after a week (and who isn’t these days?), then when he collects benefits on week two, he is placed in the continuing claims category. In most recent years, the continuing claims benefit continued for 26 weeks.

I guess the supposition is that if you haven’t found a new job in half a year, you weren’t really looking anyway. The government isn’t going to put up with you being so “lazy”… so you would collect no more money.

But ever since the world collapse that has brought so many government benefits out of the woodwork (and just as many people to collect them), pressure has been applied to extend these benefits under emergency measures to continue supporting those who remain out of work longer term. Handily enough, they are called extended benefits and emergency benefits.

Now here’s the kicker: Even though we have been witnessing steady declines in the headline numbers of the new and continuing claims for unemployed, the emergency benefits portion of unemployment has been rising FASTER than the other two headline numbers have been falling.

Last June, the number of continuing claims topped out at 6.9 million. Since then, they have retraced by 30% to just above 4.5 million. Under the extended benefits plan, we have a somewhat better showing, where the numbers have fallen from 520,000 to 260,000. So that’s basically cut in half. Unfortunately, as mentioned above, the number of people who are now living on EMERGENCY benefits has ballooned. From last June, when there were 2.6 million on the emergency rolls, the number has MORE THAN DOUBLED to 5.6 million. It’s also worthy of note that this is the highest number to date.

In other words, this figure is actively growing and, even worse, showing no signs of abating.

When the numbers are released, the drop in unemployment is simply an accounting quirk, whereby aid recipients are moved from the headline numbers to the emergency category. And you can tell from the figures I’ve given you that the fall in the continuing claims category is actually exceeded by the number of enrollees on the emergency rolls.

The grand total of non-working citizens has jumped 30% in the last nine months, from 8 million to 10.2 million. When we look at the Non-Farm Payroll numbers next month, they will purport to tell us how many jobs have been created. Last month it was a huge positive surprise. But it is awfully hard to believe we are creating jobs while the unemployment figures are swelling beyond belief.

I think it must be kind of like all the money given to the banks to lend to us “little people,” which never seems to reach us. Here are jobs, created for the “everyman,” but meanwhile, he sits unemployed each week, bringing him closer to the end of his benefits — and the end of his rope.

What does this mean as we look forward?

Simply this… if we do not have another leg of recessionary activity ahead, I do not know how it will be averted. Common economic theory maintains that monetary stimulation is the only means whereby an economy can be revived.

The United States has massively stimulated its economy. So has Europe. So has China.

Government spending is a real and present danger. And while many of the governments have halted various stimulus programs and are already hinting at removing excess liquidity, perhaps later this year or early in the next, at this point in time I cannot see how. Be wary about the economic numbers you’re fed.

Until next time,
Bill Jenkins

February 10, 2010

Bill Jenkins

Bill Jenkins, founder and managing editor of Master FX Options Trader, knows the Forex currency markets inside and out. After 20 years and a string of losses following other people's crack advice, Bill created his own system for cashing in on tiny currency fluctuations between the British pound and the U.S. dollar. Now you have a chance to benefit from his “lifetime” of hard-earned experience. As Agora Financial's resident currency specialist, Bill’s advice has led readers to gains of 33% in a week... 70% in four days... and 100% practically overnight. And we've broadened the service to include the euro, yen and other currencies in these volatile trading markets. When Bill is not helping people enjoy big wins with simple currency plays, he's a church minister and owns his own contracting business.

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