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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (475)	2/23/2004 12:46:46 PM
From: Chispas	Read Replies (1) \| Respond to of 116555

"The Fed's superheroes...lies, fraud, and government 'adjustments': We often opine that the world is full of fraud. Today we begin with proof. Or rather, a few egregious examples - the first brought to you by the Bureau of Labor Statistics, explicated by the New York Post's John Crudele, courtesy of the great Mogambo Guru: "By now my readers should have a PHD (pretty high disdain) for Capitol Hill math," writes Crudele. "This one, though, is a cake taker. I'll translate: Included in the 112,000 new jobs in January were 76,000 jobs that supposedly exist because people who weren't hired in December couldn't be fired in January. Got that? They didn't get hired in December, or fired in January, so they showed up as new employees in January as a statistical fluke. So, really there were only an abysmally small 36,000 new jobs in January." In other words, the 76,000 jobs are a fraud. "Weak holiday hiring," wrote the Labor Department in its release, "...meant that there were fewer workers to lay off in January, resulting in seasonally adjusted employment gains for the month." The key words here are 'seasonally adjusted' - meaning that although holiday hiring was weak, government quants went ahead and added imaginary seasonal jobs to the total figures anyway. Yet...on Friday, the governors of the Federal Reserve, like so many comic book heroes, professed en masse their belief that real "job creation" is on the way. "It's just a matter of time," Fred 'let's-all-join-hands-and-buy-an-SUV' McTeer assuaged the huddled crowd of attendees at an economic education conference in Texas. "In all likelihood," Alan Greenspan (ranking former member of Time Magazine's Committee to Save the World) soothed a Chamber of Commerce group in Nebraska, "employment will begin to increase more quickly before long as output continues to expand." Ben 'Printing Press' Bernanke messaged reporters in Washington by "expressing" the view that "hiring will strengthen significantly this year..." Speaking in St. Louis, William Poole suggested that if the U.S. economy expands by 4 to 5 percent in 2004, as the preponderance of the world's talking heads seem to agree it will, then there will be "significant increases" in employment. Their post-huddle story in a nutshell: If U.S. GDP grows at the expected rate...jobs will appear. Will they, we wonder? Probably. In the U.S.? Not likely. India and China? That would be our guess. But leaving aside the politically juicy issue of "off-shoring" of jobs, let's consider the pedestal on which the faith of the Fed's super-heroes is resting: the growth in GDP figures themselves. Rather than relying on annualized GDP growth rates, "a more precise measure [of the strength of the recovery]," writes Richard Freeman in the Executive Intelligence Review (also by way of our friend the Guru), "would be to compare debt to the productive portion of GDP." The "productive portion" of the economy - manufacturing, agriculture, construction, mining, public utilities, and transportation sectors - produces the "actual wealth" from which debt, both personal and national - both being racked up at staggering rates - gets paid off. Yet according to U.S. Commerce Department data, the productive portion of GDP is now less than 30% of total GDP. Perhaps the real reason new-hires are failing to show 'in the numbers' as quickly as our friends at the Fed would like is masked by using a flawed (or at least easily manipulated) measure of 'U.S. growth.' Recent GDP reports, after all, measure countless paper transactions following an historic burst of government stimulus - rather than real economic activity. Hmmmn. Just a thought. To make the case a little more poignant, Freeman sheds light on another little 'adjustment' the government likes to make use of: "The Commerce Department reports the 'manufacturing sector of GDP' in dollar terms, not output terms; and it adjusts it by the notorious 'Quality Adjustment Factor,' which artificially overstates production." Thus, even the officially stated 30% of GDP that is supposed to be the 'productive portion' is just a statistical fluke. (If you want more proof, just ask Mish ! ) ------------------------------------------------------------------------------- dailyreckoning.com