william,
just thought you longs might want some more proof that you can't trust the government's self-serving bogus numbers. perhaps after reading this you might want to make some adjustments to your portfolio allocations.
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Labor Statistics Are Lying
interactive.wsj.com
By Lincoln Anderson, chief investment officer at LPL Financial Services in Boston.
But there is a little secret in the employment report that you should know about. The Labor Department said that payroll employment fell 114,000 in June. What it did not tell you is that this reported change includes a "bias adjustment factor" that adds about 160,000 jobs a month. This bias factor is basically picked out of thin air, and is supposed to capture employment in newly started firms that Labor misses in its survey. In other words, Labor doesn't know how many new hires occurred at new companies, so it assumes a number. In its June report, it continued to guess that it missed 155,000 new hires.
The problem is that when the economy slumps, so do new business start-ups. A good indicator of new business starts is the Conference Board's index of help-wanted advertising. This index has plummeted back to levels last seen at the end of the 1990 recession. Back then, the bias factor also fell to zero, instead of hanging at the same level as in the boom period of 1998.
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This is more than an interesting exercise in statistics. Over the past five months, after taking out the bias factor from the payroll measure of employment or using the household measure of employment, it's clear that we have experienced a bigger drop in employment than occurred over the first five months of the 1990 recession. The $64 question now is whether it reflects "good news" that companies are adjusting quickly and cutting costs or "bad news" that the economy is in a recession. I hope it is cost-cutting, but only time -- and cleaner statistics -- will tell. |
