Friday, April 5, 2013

Bad Employment Numbers are a Shock?

For some time now we've had a mainstream financial media that touted an "economic recovery" and a stock market that had been hitting new all time highs without any real evidence that the underlying economic fundamentals supported the claim. Just two weeks ago the discussion was centered around when the Fed would stop its $85 billion per month quantitative easing program now that things were going so well.

Turns out, they're not.

You may recall that just one month ago I posted "Welcome to the New Recession" where I had pointed out that fourth quarter GDP was initially reported at -.1% then revised to +.1%. Since then it was revised one last time to .36%. All three essentially point to zero growth in the last quarter of 2012. In addition, I pointed out in February that the consumer was "knocked out" and not spending alarming Walmart who watches its sales almost in real time.  Lastly I reposted and excellent article on 20 Signs the Economy is Headed for Trouble.

And as my readers know, even that likely overstates the growth since real inflation is higher than the government's stated inflation rate. You can see here that when using the Fed's 1990's method of calculating inflation, it was closer to 6%, which means the fourth quarter would have been recessionary and would likely have shown a 4% decline in the fourth quarter using the old inflation calculation!

So today, when the BLS report came out and reported a meager 88k jobs created last month, the talking heads on CNBC and the market was shocked, SHOCKED! by the poor numbers. As I write this the Dow is down 77 (but off its lows) while gold is up $27. Reality seems to be finally seeping into the market. My readers, however, should not be surprised at all given repeated warnings the economy was slowing down and like re-entering a recession.

Incidentally the 88k jobs created was almost equal to the number of workers who went on Social Security Disability last month. Can the economy be recovering if the number of people finding jobs and paying taxes is equal to the number going out on long term disability?

But the worst, most devastating number was the 663,000 workers who dropped out of the labor force. This means for every worker who found a job there were 7.5 workers who gave up looking for a job out of despair.

Now that truly is a shock.

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