Author Topic: Job surge a mirage By JOHN CRUDELE  (Read 428 times)

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Job surge a mirage By JOHN CRUDELE
« on: May 04, 2013, 09:56:22 AM »

Job surge a mirage


Last Updated: 3:46 AM, May 4, 2013

Posted: 11:48 PM, May 3, 2013

I’ve been telling you for years that this country’s employment numbers are rigged during the months of April, May and June — so when the Labor Department announced yesterday that the US created 165,000 jobs last month and the unemployment rate dropped to 7.5 percent from 7.6 percent in March, I had to take a closer look.

Sure enough, the report showed that about 50,000 of those new jobs — or 193,000 on a pre-adjusted basis — were based on government assumptions, not fact.

And I believe those assumptions are very outdated and false — and they produce, this time of year, overly optimistic results.

Here’s why: the assumptions are made on the belief that the US economy is acting normally.

But that just hasn’t been the case since the 2007-08 financial crises caused the Federal Reserve to drop interest rates down to unprecedented low levels.

This time of year, the assumptions include the outdated belief that companies hire workers in the spring and during Christmas and lay them off by the millions after the holiday season.

That just doesn’t happen on a wide scale anymore.

But that didn’t stop the Labor Department from assuming that US business hiring practices hadn’t changed — which is why we got the relatively robust 165,000 number.

Wall Street had expected 150,000 new jobs. This caused the markets to continue their rally. But consider this: The average monthly jobs gain in the first quarter was 206,000. That means the US economy seems to be cooling.

Which is what I have been saying. The payroll tax hike and lower government spending are the culprits.

In addition to the 165,000 new April jobs number being chockablock with phantom jobs, many of the actual new jobs are only temporary and part-time positions.

But don’t let me ruin the party. I will say that these misleading and outdated assumptions will continue for the next two months. Around 50,000 of these phantom jobs will be added in May and another 50,000 or so in June.

To put it in perspective, the number of jobs reported in April was barely enough to absorb people coming into the workforce for the first time, much less to give positions to those who are unemployed.

Twice that growth would begin to mean the economy is returning to health.

When statistics are being changed this much by assumptions, I figure the Labor Department should at least put a footnote in its report so people can understand what’s really going on.

Why should we care about accurate government statistics? For one thing, it affects how the Federal Reserve, Congress, the President and your boss behave.

The Fed could make an interest rate move that isn’t justified; Congress and the President might raise taxes prematurely, and whether or not you get a raise might depend on how confident your boss is.

And these numbers definitely affect your investments.

Wall Street, of course, is bubbling away right now.

Stock prices rise on good, bad and, as with yesterday, mediocre news.

But eventually Wall Street will snap out of its trance and start analyzing the economy more critically.

Play this stock market bubble only if you are feeling lucky. But be very, very careful, and pay close attention every day.

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