The Labor Department also reported Friday that the headline unemployment fell to 4.7 percent. That rate does not include those who did not actively look for employment during the month or the underemployed who were working part-time for economic reasons. A more encompassing rate that includes those groups held steady at 9.7 percent....
The disappointing report immediately clouded the possibility of a Fed rate hike in June or July.
Adding the number of unemployed workers to the people not in the labor force, there are now over 102 million Americans who are either unemployment or no longer looking for work.
"Simply put, lower quality firms have been structurally increasing debt faster than earnings as interest rates have declined," Mish said....
at the bottom-most levels of junk, there is a bubble forming.
"We believe roughly 40% of all issuers are of the lowest quality, and roughly $1tn which will end up 'distressed debt' in this cycle," Mish wrote. "Much of the debt was bought to pick-up yield linearly, but the default risk is exponential."
So how did we get here? Mish believes there are three circumstances that have inflated the bubble:
- Central bank support allowed zombie companies to stay afloat, carrying over larger debt loads and then adding even more of it on top of unproductive firms.
- Low-yields in Treasuries forced pension funds and other investors with nominal return targets toward more speculative debt in order to meet those goals. "Investors were herded into lower-quality credit risk for a yield pick-up of a couple hundred basis points," Mish wrote.
- The heightened demand from these funds for high yields created ease of access for speculative-grade issuers to find a market for their debt. "The proportion of triple C rated issuers in its speculative grade universe (bonds and loans) reached a new record to start 2016; 1,356 out of 3,181 issuers or about 42% of the total," Mish said...
three short-term reasons for a coming increase in the number of firms unable to pay back their debt. They are:
- Decreasing profits: Mish notes that corporate profits fell 7.6% in the first quarter against the same period a year ago. In order to pay back loans, companies need to continue to make more, and with less cash coming in, there will be less to allocate to debt.
The core of the proposed labor law can be found in its disputed Article 2. Essentially, the passage stipulates that every labor negotiation be made in the framework of individual companies, whereas in the past these took place on a national or sector level. The crux of the problem is that this will dramatically weaken workers’ position. Valls and El Khomri have made it clear they are unwilling to negotiate on that point.
And yet a large majority of the population clearly opposes this law. The latest polls show 69-74 percent of voters are against it. So it’s obvious where the silent majority’s sympathies lie. The rise of widespread protests was even mirrored in the Socialist Party, where 40 deputies threatened to abstain from the vote.
The government, deprived of its majority, used a constitutional trick: article 49-3, designed to avoid parliamentary gridlock and allow the government to force passage of a bill. The move amounted to nothing less than a brazen misappropriation and a denial of democracy. Outside the government, you’d have to go to the political Right to find support for the text....
It is obvious that the principles of the El Khomri law are directly inspired by suggestions — some would call them demands — of the European Union. The law is arguably a strict application of the Lisbon Strategy, the “Broad guidelines for economic policies” and country-specific recommendations drawn up by the European Commission, which has for a long time prescribed budgetary Malthusianism and wage moderation
The EU, as well as the Eurogroup, imposes specific methods of governance and a rigid disciplinary framework on its members. As a result France, no longer able to devalue, can only restore competitiveness with less expensive wage policies. Governments in Spain, Portugal, Italy and Greece are headed in the same direction.
The movement is a call for greater sovereignty against measures that, more and more, appear dictated from the outside. Today, the target is a social issue; tomorrow, protests will no doubt take aim at monetary policy regime imposed by the euro.
France’s current social unrest, because of this inextricable context, has become a generalized challenge to the strict rules of eurozone and EU membership. In this way, it is reminiscent of public mobilization against the Treaty establishing a Constitution for Europe in 2005, which 55 percent of French voters rejected in a referendum. The current wave of social protest risks reshuffling the odds and swaying the 2017 presidential elections in much the same way