More Realistic Unemployment

The Bureau of Labor Statistics (BLS) just recently reported a national unemployment rate are just over 5% for the month of September. Relying completely on this percentage of unemployment is risky in the sense that a lot of information about the country's unemployment and current economic direction is left out. The official and national unemployment rate is known at us U-3 rate. The U-3 rate is composed of the total unemployed divided by the civilian labor force. This rate has just been reduced down to its pre-recession, 2008, rate. This is great, but does not depict everything. The U-6 rate has just been reported at 9.7% for September. This a more broad definition of unemployment and includes the unemployed, the underemployed, and the discouraged workers. Compared to pre- 2008 recession where the U-6 rate was 8.8%. Clearly the US unemployment rate has not fully recovered but has made positive strides in the recent past in getting back to pre-recession rates.
This article also touches on the decreasing labor participation rate in the US. The participation rate has fallen since the recession, most believe largely due to the baby boomers. The baby boomers are getting older and starting to retire which has lead to a reduction in the labor force participation. With the decrease in labor, it is predicted that the average hourly wage will increase from the $25.79  wages in September.

http://www.cnbc.com/2016/10/07/unemployment-rate-shows-at-5-but-more-realistic-rate-is-higher.html

Is technology taking away our jobs?

The Economist investigates how the "advance of deep learning and other artificial intelligence" could be affecting the job market by replacing not only low wage, manual labor jobs, but also some of those in medicine. The example is provided about Enlitic, a start up applying deep learning to medicine, that can be used to examine and analyze x-rays, and CT scans to "expense expert radiology advice". They say one of the biggest factors determining the risk of a job is whether or not the activities performed are routine. 
There is a chart on the site indicating the probability of certain jobs and the likelihood of them being technologically replaced. Of which, the highest are telemarketers (99%), technical writers (89%), Real-estate agents (86%), Commercial pilots (55%), and even economists at 44%! The jobs that seem to be least at risk are athletic trainers, chemical engineers, dentists and recreational therapists. 
What does this mean for the job market?
It has been analyzed that "rather than destroying jobs, automation redefines them, and in ways that reduce costs and boost demand... Computers thus reallocate rather than displace jobs, requiring workers to learn new skills." This means more that new jobs are likely to be created that are unpredictable to us now, that require different training, education and forms of human capital than are already in use. Although the rise of technology may begin to eliminate more of the "Pizza Hut clerk" as they have in Japan, this will require a higher skilled work force, and hopefully in the long run lead to greater productivity of human capital, and higher standards of living. 

 It was also a part of The Economist snapchat news story today (Sat, Oct 8)
http://www.economist.com/news/special-report/21700758-will-smarter-machines-cause-mass-unemployment-automation-and-anxiety
 

Hurricane Matthew may hit gasoline prices in ways you wouldn't guess

Hurricane Matthew is affecting not only the supply but the demand of gas as well. Many gas stations in Southeastern Florida are turning customers away because they are out of fuel. The average price per gallon is up 4.3 cents from last week and it rose another 2 cents in the past three days. This price increase is partly due to consumers filling up before the storm affects their area and to regional distributors stocking up. As drivers stay off the roads in the coming days and weeks, the demand for gas is likely to decrease which should help offset the higher price.

The damage of Hurricane Matthew is only expected to hit eastern Florida and coastal parts of Georgia and South Carolina. However, they are "already seeing gasoline cargoes being redirected for the East Coast - both to avoid the storm, and to fill the supply loss after." It will be interesting to see the total effects on the supply and demand of gasoline after the end of Hurricane Matthew.




http://www.cnbc.com/2016/10/05/gas-prices-hurricane-matthew-could-impact-gasoline.html

1st debate: What Wall Street is saying

“It appears neither candidate moved the needle very much during the debate. Both candidates kept to their script on economic policy. Clinton continued to emphasize policies that would increase spending on infrastructure and other programs offset by higher taxes on businesses and wealthy individuals while Trump’s main message was lower taxes and better trade deals.” Said LEWIS ALEXANDER, chief U.S. economist, NOMURA.

PAUL HICKEY, co-founder, BESPOKE INVESTMENT GROUP also said that, “The two candidates are proposing two very different approaches. Clinton’s is a combination of left wing appeasement (via tax hikes on the highest income earners) mixed with relatively responsible fiscal policy and moderate foreign policy. We would note 'responsible' in that sentence isn’t meant as an endorsement; we believe the economy would benefit from certain kinds of deficits, especially those used to fund infrastructure. Trump proposes large tax cuts and a much wider deficit, along with ‘hardball’ approaches to foreign policy with respect to trade, currency policy, and mutual defense.”

            JAMES ATHEY, investment manager, ABERDEEN ASSET MANAGEMENT said, “What we’re seeing in markets this morning is a small, collective sigh of relief because most commentators, and the few polls that have been released, suggest that Clinton won the debate. Equities have undone much of yesterday’s weakness and key Trump indicators such as the Mexican peso and Canadian dollar have rallied. This supports the notion once again that Trump is seen as protectionist and anti-globalization." He also added:  “The reality is that these (market) moves are all fairly insignificant. Polls on voting intentions still show that the race is essentially neck and neck. It will be these polls which truly have the power to drive a genuine re-pricing (of financial assets). For now, we expect markets to remain choppy and directionless as sentiment ebbs and flows in the current vacuum of meaningful new economic and monetary policy information.”

http://www.usatoday.com/story/money/markets/2016/09/27/wall-street-debate-reaction/91160860/

Matthew may rank as one of the costliest US storms

In just the state of Florida the federal flood insurance program has added up 480 million dollars in damage in only Pensacola beach, Key west, and northern Miami. It is said that they will not know the total amount of damage done until a few months from now. The storm has covered the whole Atlantic coast of Florida with 120 mph winds and an astonishing amount of rain(only a category 3). Before Hurricane Matthew hit the U.S. the storm had already taken 280 lives from Haiti, and roared through Cuba and the Bahamas causing a mass amount of damage.

The last hurricane that was a category 3 that tramped over Florida was hurricane Wilma in 2005 which caused an estimated amount of 21 billion dollars in damage. Hurricane Matthew is estimated to cause way more damage the Wilma.


Check out the Tableau charts on the site they are cool and have tons of info but only work on the site.

http://www.cnbc.com/2016/10/07/matthew-may-rank-in-terms-of-costliest-us-storms.html

Hurricane Matthew Heads for Bahamas, Florida

As we wait to see the path hurricane Matthew takes over the next couple days, one may wonder about the externalities of such a storm hitting the US. Some potential hit points are, the Carolinas, Georgia,  and Florida. The storm has already hit the Bahamas, killing 11 people.

Ignore the fact that Floridians have been told to move inland 100 miles, completely depleting the workforce along the cost, stifling production; Let's look at the storms effects on a company like American Airlines Group Inc. American has halted all flights that arrive in Miami, Fort Lauderdale, and West Palm Beach on Thursday. They expect to have "limited departures from these airports, drastically decreasing the supply of flights out of Florida. This will drive up flight prices across the board (Maybe not at Southwest, which does whatever it wants with prices).

Flights in Georgia and the Carolinas are also being pushed back. The fear here is of the risky nature of flying around storms like Matthew. If the storm hits, and ravages these airports, the supply of American's capital, in this case planes and other equipment) have will be decreased. Workers could potentially see an increase in wages, and companies can expect a decrease in overall productivity following the storm.

Ideally, everyone would like to see the storm veer off, leaving the States alone all together. Hurricanes aren't good for anybody.
Link to Article
from the WSJ

Oil and gas drillers have a test coming up that will decide bankruptcy for some

    Oil companies looking to borrow are expected to see their chances of borrowing decrease by around 16%, according to Jeff Nichols (leader of the firms energy finance practice group) this is because borrowers are seeing their reserves remain flat, and are trying to be more realistic with their expectations. With oil companies not being able to borrow, and some not being able to remain solvent with the oil price downturn, we are going to see some more oil companies file for bankruptcy. Already more than 100 energy companies have filed for bankruptcy, and we are going to see more go bankrupt if lenders cut their debt line too deep.

    People are expecting many oil drillers to be able to negotiate a deal with their lenders, or will be able to sell of their assets in order to not file for bankruptcy, but 13% believe they will not have the funding to keep their business on the right path, which will force them to shut down.

   With these bankruptcy's we're going to see a lot of jobs lost in the oil and gas industry, because these businesses will be shutting down. Since businesses will be shutting down we will most likely see the unemployment rate increase in this industry. My two questions for this article are oil and gas companies unable to borrow because interest rates are so low? And does OPEC's increase in production have any significance on these oil companies closing?



Link: http://www.msn.com/en-us/money/inside-the-ticker/oil-and-gas-drillers-have-a-test-coming-up-that-will-decide-bankruptcy-for-some/ar-BBwYP5i

Illinois suspends $30 billion in Wells Fargo's Investment Activity

Illinois state Treasurer suspended $30 billion of Wells Fargo's in state investment activity on October 3rd. A recent federal consent order found that their employees created around 2 million online accounts, credit cards, deposits and debit cards without their customers' knowledge. The employees charged fees and even damaged credit ratings to raise the interest rates on loans.

The state of Illinois hopes to set an example to other financial institutions that corrupt behavior will not be tolerated. Others have been taking action against Wells Fargo including California regulators and the government who fined the company $185 million.  

This is not Wells Fargo's first instance of unscrupulous practice. The company paid $175 million in a law suit to settle allegations of racial discrimination against 3,000 mortgage borrows in 2012.

It will be interesting to see the effect of this scandal on consumers and other banks. Customers of Wells Fargo might consider switching to other banks and lose potential business from borrowers. This also negativity impacts their current investors since their stock price has fallen. Lastly, Wells Fargo has discouraged investments from future brokerage firms and state portfolios. The state treasurer in California has already announced last week that Wells Fargo would not be included in their $75 billion portfolio.