Unemployment is up, and so are prices for necessities:
The Labor Department said first-time applications for unemployment benefits rose 35,000 from the week before. It was the highest level since October and above what economists had predicted.
“It was a disappointing number,” said Kim Caughey Forrest, an analyst at Fort Pitt Capital.
The Labor Department also reported that wholesale prices in December rose by the largest amount in nearly a year, as a result of higher energy and food costs.
So are Wall Street profits and bonuses:
JP Morgan’s investment bankers are to receive an average payout of $369,651 (£233,000) after the bank set aside almost $10bn to cover basic pay and bonuses.
The figures were released after JPMorgan Chase kicked off the US banking reporting season by reporting a 47% jump in profits for the last quarter of 2010.
Coincidence? You tell me.
Of course it’s no coincidence that the average investment banker’s bonus is 9 times the median family income. But once again it is cashing out paper profits not real economic growth. Their bonuses are real; the figures about bank profits are paper value.
Energy prices are up because Iran is the rotating president of OPEC this cycle and will not call an emergency meeting to lower prices by increasing production. Shades of 1973. Food costs are higher because it is winter and because the demand doesn’t go away when the economy gets bad. Guess what. Neither of these will show up in the CPI number because it excludes cyclical or volatile prices like food and energy. But energy prices will show up in later cycles as they get passed on through businesses to consumers. Neither of those are related to banker bonuses.
New unemployment claims are affected by seasonal business layoffs after Christmas. For statistical purposes, the trend is more important than seasonal volatility; this bump up will likely not show up in a change in the posted monthly unemployment rate unless it goes beyond a seasonal correction in a statistically significant amount.
Banks are like other predators. They don’t intend to consume their prey to extinction. They just do what they have always done blind to the consequences. No doubt some of those profits came from short-selling Irish and Portuguese debt.