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Phony Jobs Numbers and a Rotten Economy

By November 5, 2022Commentary

Please read the linked post at Zero Hedge in its entirety.  It explains pretty clearly how to understand the jobs numbers reported by the Bureau of Labor Statistics.  While we might like to think there is some part of the federal bureaucracy unafflicted by the political bug, there likely isn’t and it appears that BLS is doing its part to keep Dems in power, although it won’t make any difference in the outcome at this point.  Look at the historical similar periods mentioned in the Zero Hedge post.  Those illusory job gains were reversed after the elections.  Funny how that works.  (ZH Post)

The monthly employment numbers are derived from two surveys–one of households asking about work and one of businesses asking about employees.   As I mentioned in yesterday’s climate science post, there is raw data and then there are the magic adjustments that are made to supposedly reveal truth.  The jobs reports are subjected to “seasonal” and other adjustments.  The problem with adjustments is they tend to lend themselves to subjective beliefs about what has to be done to raw data to reach truth.  The potential for mischief is obvious.

The two surveys are widely divergent at this point.  They can’t both be right.  I would put my money on the household one right now, as it is showing minimal job growth, which seems more consistent with a very slow economy and the extensive reports of large layoffs at tech companies in particular.   And why is the economy steering toward the shoals of recession?  Because inflation is equivalent to uncertainty and business and consumers don’t do well in periods of uncertainty.  And high inflation also means high interest rates, which are simply the price of money.  Those high interest rates change investment calculations.

But here is the real rotten part of the economy.  We have inflation because both the Trump and Biden administrations went on incredible spending binges which were not covered by accompanying increases in federal revenue.  When your deficit increases, you have to borrow more.  When you borrow more, there is a greater supply of federal debt with no similar increase in demand, which raises the price, i.e., interest rates.  And when you pump all that extra money into the economy you raise demand at a time when supply isn’t able to increase as fast, which also raises prices.  Then people need to get paid more to feel like they are keeping up with everything costing more, and their wage increases feed into ongoing price increases by the companies they work more.  God knows we aren’t seeing more productivity.  And because a lot of that federal spending goes to letting people freeload, they don’t feel a need to work so the labor market is distorted and it is harder to use higher wages to get more people back to work or to have competition for the same job that might restrain wage growth.

So not only is inflation not temporary, but until Congress stops deficit spending and in particular stops giving people free everything, our economy will be a mess, and if we can’t get our economy straightened out, we won’t generate more tax revenue that also would help rein in deficits.  The Federal Reserve is essentially powerless unless and until Congress stops the spending.  That is the real underlying economic problem.  And in 2023 we will see if Republicans have any more courage than did the Dems to stop the crazy spending.

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