Lies, Damn Lies
dailyreckoning.com
Also go to the bottom of the link to read Kurt Richebächer's
letter with more punch.
EMPLOYMENT DISASTER
The Daily Reckoning
Bonn, Germany
Wednesday, September 24, 2003
"Economic optimism is widespread," begins an article in yesterday's Financial Times. "Merrill Lynch's global survey of fund managers, published last week, showed that 87 per cent of those polled expected the global economy to grow over the next 12 months with most in favor of 'much' stronger growth."
Unemployment is low. Inflation poses no obvious threat. The Fed is free to hold rates down "a considerable period" to make sure the economy gets underway. The U.S. government is ready to help, too - as long as someone will lend it the money - with a $500 billion deficit spending program.
"The growth rate is widely expected to reach 5%, annualized, in the third quarter," continues the FT.
You have read our scoffs before, dear reader. Every time the 'recovery' appears before us, we feel like yanking on his beard, for we are sure he is an imposter. Today, we pull down his pants and check for birthmarks.
To hear the popular press tell it, the nation's factories and malls are in full up-swing. GDP rose 3.1% in the 2nd quarter - twice as fast as expected.
"Consumer spending accelerated to its fastest pace since the fall; business investment grew at its fastest rate in 3 years and construction was stronger than thought," concluded the Wall Street Journal.
We have already pointed out that more than half the GDP growth of the 2nd quarter was the result of military spending. Without it, GDP would have grown scarcely more in the 2nd quarter than it in the first. We also mentioned the curious effect of crunched and tortured numbers on computer spending. Information technology, it turns out, "accounted for more than the overall increase in business fixed investment," writes Dr. Kurt Richebächer, snitching. "This investment component soared by $38.4 billion, or 12%, from $319.1 billion to $357.5 billion. This clearly looked like a new boom."
But it was a boom that no one heard...for it never happened. The real increase in spending on computers barely squeaked; it was only $6.3 billion. Still, using its quality-enhancement jets, government statisticians were able to blow the number up by more than 600%.
If you let the numbers take their natural shapes, you get a very different impression of the first quarter. GDP grew by a paltry 0.27%. "Even including the huge amount of defense spending, this is hardly better than the growth rates in the rest of the world," Richebächer concludes.
Pulling down the recovery's pants, we discover the disgusting truth. It is right there in the unemployment numbers. Not one of the 7 or 8 postwar recoveries failed to produce jobs, Dr. Richebächer tells us. But in the 20 months following the official end of the most recent recession, about 1 million jobs have been lost. In the 2nd quarter, 260,000 is the number given for jobs lost. Even this is a bit of a lie. It doesn't measure the number of people who've given up looking for work - a number said to be twice as large.
Plus, with his trousers down, we find an even bigger disappointment in Mr. Recovery. "The government adds every month some 30,000 - 50,000 imaginary workers to the job total," Richebächer tells us. "It is based on the assumption that in an economic recovery, people start their own businesses...Once a year, the statisticians reconcile their assumption with reality by a revision. When they did this in May of this year, 400,000 new jobs that have been reported earlier simply vanished. Such revisions, of course, take place outside the monthly reported job losses. Together, we presume, these statistical casuistries have reduced the reported job losses in the past two years by well over 100,000 per month." |
