Another Look at Bernanke's Employment Recovery in Chart Form

Reader Tim Wallace took note of Bernanke's testimony on jobs (see Bernanke's Semi-Annual Tap-Dance of Distortions, Half-truths, Lies, and Hypocrisy to U.S. Congress) and sent me the following chart.

April Employment vs. April Employment in Previous Years



click on chart for sharper image

Tim writes ...

Hello Mish

Bernanke was touting the direction of employment using the familiar "7.5%" numbers and pointing to all the improvement. While granting that more people are working now than in 2010, we recognize that more people are working part time and less people are working overall than in 2008.

This got me wondering how long it took to recover to pre-recession employment numbers in the past.

Up until the recession of 1982, All drops in employment from one year to the next had fully recovered to new employment highs within 2-3 calendar years. In the recessions around 1982, 1991 and 2001, job recovery took about three calendar years.

In our current malaise, we have been at this 5 years and employment is still 2.2 million people below the employment number in April 2008. Moreover, part-time employment is up about 2 million workers. Thus, full-time employment is 4 million below the 2008 number, 5 years ago.

Tim

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

France Private Sector Implosion Continues

Here's some news that caught my eye earlier today when I was on the road: The Markit Flash France PMI® shows French private sector output continues to fall at marked rate in May.

Key points:

• Flash France Composite Output Index unchanged at 44.3
• Flash France Services Activity Index unchanged at 44.3
• Flash France Manufacturing PMI rises to 45.5 (44.4 in April), 9-month high
• Flash France Manufacturing Output Index up to 44.3 (44.1 in April), 9-month high

Summary:

The downturn in French private sector output continued in May. Unmoved from April’s reading, the Markit Flash France Composite Output Index, based on around 85% of normal monthly survey replies, posted 44.3. Although remaining above the levels registered in Q1, the latest reading was indicative of a marked rate of contraction in overall activity.

Comment:

Jack Kennedy, Senior Economist at Markit and author of the Flash France PMI®, said:
“May’s unchanged PMI reading points to ongoing struggles for the French private sector economy. Activity has continued to fall at a marked pace in Q2 so far, suggesting that another drop in GDP could well be on the cards following the recent confirmation that France was in recession during the previous two quarters. PMI data highlight continued pressure on employment and operating margins, as the difficult business climate facing French companies persists.”

Mish Comments

Scores below 50 designate contraction, and scores in the 44-range designate substantial contraction, so those 9-month highs just go to show how awful conditions are.

With French president  Francois Hollande at the helm of France, and the nannycrats in Brussels in control elsewhere, don't expect conditions to get much better any time soon.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Another Warning Call for Depositors! Bank of Spain Says Spanish Banks Need €10bn More Loan Loss Provisions; Mish Asks €10bn or €100bn?

Here's an optimistic headline on the Financial Times that could easily be off by a factor of 10 or more: Spain’s banks need €10bn more provisions.

Spanish banks will need to put aside extra provisions of up to €10bn to cover loans that borrowers will struggle to repay, according to an internal estimate by the Bank of Spain.

According to recent data, Spanish banks rolled over more than €200bn of loans before they expired – often because corporate borrowers would be unable to repay their debt on time and in full. The €10bn estimate is the first official assessment of the likely impact of the central bank’s new approach towards these refinanced loans.

The Bank of Spain believes that the risks emanating from this practice, known as “extend and pretend”, have not been fully covered and is pressing all banks to reclassify their refinanced loans according to tighter standards by the end of September. The new regime will make it harder for banks to treat refinanced loans as if they were performing normally, in turn forcing lenders to take additional provisions.

“Our banks will need more provisions,” a senior official at the Bank of Spain told the Financial Times. “The provisions will affect their results, but the question is by how much. We cannot know for sure but we think the impact will be between €5bn and €10bn [in provisions] across the system.”

€10bn or €100bn?

Banks rolled over €200bn of loans because they could not pay debt on time, pretending the loans were current, and the Bank of Spain estimates the risk at a mere €10bn.

Who do they think they are they fooling?

Will 70% of those loans be paid back? 50%? 20%? I don't know but I strongly suggest it sure will not be 95%.

Given the perpetual over-optimism on Spanish bank losses, I estimate there is a 0% chance the losses on this disclosure will be as little as €10bn.

That said, I do not know what the existing loan loss provisions are, but if they are high enough (extremely doubtful), then there is some chance the losses will be on the order of €30bn or so (on the general principle things are typically 300% worse than the optimistic scenario).

This does not factor in losses on Spanish government bonds when Spain eventually seeks a massive bailout. Realistically, Spanish banks are insolvent.

Another Warning Call!

By the way, this is yet another warning call "If you have money in Spanish banks, move it somewhere else immediately!"

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com