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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Henry Niman who wrote (32034)	5/9/2005 7:30:21 AM
From: orkrious	Respond to of 110194

Plugged Numbers by Lee Adler, Monday May 09 2005 wallstreetexaminer.com I asked a couple of WSE Editors to give me their reflections on the adjustments and manipulations the BLS applied to the employment data it released last week. Here are their reactions: Walter Jacobs: The employment number is a stab in the dark at counting how many people are working, where they might be employed and what they are earning. A substantial portion of the number is a plug from the "birth-death" estimate and the result of a five week instead of a four week month. Also, payroll growth of an average 250,000 per month or so is needed just to keep up with new entrants into the labor force. The numbers have been so bad for so long that an average month is bullhorned into a winner. From a global standpoint, as I have often pointed out, the numbers are meaningless. There is no international standard for unemployment numbers as there is for other macroeconomic statistics. The "alternative" calculation of unemployment, [which includes discouraged workers and those minimully employed] is currently at 8.7%, is a lot closer to Germany's than boom time America. However, let's assume that the numbers are correct and that people are working in increasing number for larger pay envelopes. The current cyclical bull market in stocks is largely predicated on a gap up in earnings from historically large margins on labor. If labor is getting tight then it will eat into those margins and profit growth will stall or reverse (labor is almost 70% of costs). There is little to get excited about here. Wage growth still lags inflation and the number only serves to frighten the bond market. That, in turn, raises the carrying cost on America's current favorite asset, its homes. Charles Mackay: The "birth-death" plug number, to the best of my knowledge is a new addition to the traditional way of estimating employment -- another type of plug number which is already used to estimate growth in the labor market for businesses too small to be surveyed. I am not sure if the "birth-death" number has statistical validity, being it has not been around long enough for the BLS to scientifically verify if the number is correct. The BLS has decided to shoot first and answer questions about its methods later. Meanwhile we are left to guess just how strong - or perhaps even weak - the employment picture is. The 'strong' April employment growth hasn't shown up in the money supply, chain store retail sales, or anywhere else I can see. Unless newly employed workers have suddenly decided to keep their earnings as cash at home, one or more of the recently released economic statistics are way off. I suspect it is the employment report that is most off. A strong official April retail sales figure, in excess of the rate of inflation, may change my mind. We'll get a look on total retail sales this Thursday, May 12. Right now the Wall Street consensus is for a 0.6% gain. I would be very surprised if that number is hit, but it could if the employment report was really correct.