Friday, May 6, 2011

Magic numbers are as effective as magic money printed by uncle BURNanke

Today, the Labor Department reported that nonfarm payrolls (jobs) increased in April for an eighth consecutive monthly gain. Today's chart provides some perspective on the US job market. Note how the number of jobs steadily increased from 1961 to 2001 (top chart). During the last economic recovery (i.e. the end of 2001 to the end of 2007), job growth was unable to get back up to its long-term trend (first time since 1961). More recently, nonfarm payrolls have pulled away from its 40-year trend (1961-2001) by a record percentage (bottom chart). In fact, the current number of US jobs was first reached in early 2000.
The reality is that most of the mysterious jobs reported today are Birth and Death model estimates and only exist in the realm or fantasy. Not only that, another flaw in the Birth and Death model is that the model does not seem to understand that a the birth of a new business produces a much lower quality job than the death of an established business. Additionally, most birth company jobs are part time - often they are contracted through Kelly Temporary Services or similar firms. The reality is that the model has almost no basis in samples or fact to claim their 175,000 jobs...but I am quite sure that BURNanke will once again use this factoid to market the concept that the 600 billion QE program that has to date destoyed over $1 trillon in new money was actually successful in creating investment in the job space. BURNanke statements to that effect are about as convincing as supply and demand being the drivers of Oil, Cotten, Sugar, Coffee, Copper and Silver.

Speaking of magic numbers:
...the problem has always been the reliability of the reports, since their version of history often undergoes dramatic rewrites long after the fact. In this particular case a 7.6% year-over-year gain becomes a 0.9% year-over-year gain, and a 0.8% year-over-year growth was admittedly actually a 2.4% contraction -- all done quietly and without media scrutiny. In short, retail sales were not as good as previously purported -- for all the reasons previously described -- and hardly anyone noticed. - from Charles Hugh Smith from Of Two Minds
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