Saturday, May 10, 2008

Finally Some Mainstream Reporters are Figuring Out the "Spin" from Government

It is encouraging to finally see the first reports coming out where people are not just taking the government numbers in spoon fed style and insisting everything is just dandy - although this AP reporter specializes in economics so obviously she is an outlier of high intelligence (as all those with economics backgrounds are) *cough*

Next week, we have our lovely government inflation statistics and I am now praying for these numbers to begin showing deflation, in the face of $125 oil and food prices off the chart, so we can show what a joke they have become. I am mulling creating a section of the blog just devoted to the putrid reports just so I don't have to repeat myself every 30 days when these same reports come out and I need to explain to the new readers why these are so darn wrong. Only when these reports so outrageously differ from reality will people finally acknowledge how the "fine tuning" over the years has created an entire tapestry of ... well... deceit. Sorry to say it. If you keep telling the sheep everything is ok, the sheep will continue for years believing it I suppose. [May 1: Is it an Official Recession? NY Post Says it Should Be] Remember, if the government agency that created Gross Domestic Product used the 4% inflation rate that another government agency creates - we would of had negative GDP. But instead they came up with their own number....2.6% inflation so *POOF* we have positive growth last quarter. Of course 4% is a hoax in itself, but 2.6% is a super hoax - but it makes the numbers work and keeps us out of recession... so its the "plug and play" number.

I seriously am at the point where I hope as more workers simply give up (and hence are no longer counted as unemployed) our unemployment rate drops to 3%, our inflation numbers start showing negative returns (indicating deflation) and our "retail" sales take off, indicating inflation booming which we can spin as "the consumer is back". And we can hear the political spin of "why is everyone feeling so insecure when the numbers clearly indicate the economy is booming". Only when it reaches that extreme, will anyone in power really be questioned on the constant modifications to data over the years, to make the numbers always look better than they should.
  • The unemployment rate drops. Productivity grows. The trade deficit shrinks. Sounds great, right? Not so fast. Some seemingly good economic numbers can be something of a mirage masking weaknesses in the national economy.
  • Let's take the unemployment rate, which dipped to 5 percent in April, from 5.1 percent in March. A closer look reveals that the decline in unemployment is not as good as it looks at first blush. The drop came as the number of people holding part-time jobs for economic reasons swelled to 5.2 million in April, up sharply from 4.4 million a year earlier.
  • The dip in the unemployment rate also occurred as employers cut jobs for the fourth month in a row, pushing up total losses beyond the quarter-million mark -- to 260,000. Wages barely grew and workers' hours were trimmed.

My take on the "unemployment" and "underemployment" rates are here [Apr 2: The Underemployment Rate is Rising] in which I outline the "reality". If the government were keeping statistics now as they used to the pure unemployment rate would be around 13% (great chart that shows this in that blog entry). And that does not count all the people who are underemployed - working part time because they cannot find full time work. Yet we are told 5% (and dropping for god sakes). Last our 2 centers of job creation are simply our government continuing to build jobs constantly (and who pays for that?) and the already obese healthcare system (and who pays for that?) This is the bain of a service economy when most sectors that produce goods that the rest of the world would like have been stripped from the country.

  • U.S. productivity -- an important ingredient to the country's long-term vitality -- grew solidly in the first three months of this year. That efficiency gain, however, came at the expense of workers. "Productivity gains were due primarily to declines in hours worked," the Labor Department's Bureau of Labor Statistics explained. Those hours fell at a 1.8 percent pace, the biggest drop in five years. Employers also shed workers in the first quarter. Thus, companies were able to produce more with fewer workers, and that boosted productivity, the amount an employee produces for every hour of work.
  • "American workers, you just got to love them," said Joel Naroff, president of Naroff Economic Advisers. "They just seem to produce more and more and more. That was the case in the first quarter of the year as fewer workers working fewer hours managed to produce more," he said.

I didn't write about this in the blog, because frankly I am just tired of the spin each time one of these economic reports comes out - I will agree though this is GREAT for corporations and Wall Street. Terrible for Main Street. It is essentially what the auto industry has been going through for over half a decade. Cut jobs, push the work from the cut jobs onto the remaining workers and boom "increasing productivity"... surely there was (and is) fat across corporate America and the first low hanging fruit are probably viable cuts, but when you do this for years on end - you cut into the bone. And a workforce that cannot complain or fight back because they know finding a new job without taking a steep cut is difficult, and there are plenty of unemployed out there waiting to take your place. But I digress, 7 people today are doing the work of 10 people four years ago - productivity is up - rejoice.

  • Let's take a closer look at the nation's trade deficit. It shrank to $58.2 billion in March as the United States' appetite for imports fell faster than foreign demand for U.S. exports. However, demand for foreign-made autos, furniture, toys, clothing and other goods also waned, underscoring the strains faced by U.S. consumers.
  • In the first quarter of this year, consumer spending increased at the slowest pace -- a mere 1 percent growth rate -- since the last recession in 2001. Consumer spending accounts for the single-biggest chunk of U.S. economic activity.
  • When exports and business' inventories are removed and imports are added in, economic activity actually contracted at a 0.4 percent pace in the first quarter.

Now in a healthy economy, I (and many) would rejoice in a dwindling trade deficit - meaning we are exporting more (and bringing in money) and importing less (and sending out less money). But we don't want to see this happening due to destruction of US consumer consumption. And that's what happened this time around, as we discussed here [May 9: March Trade Deficit Reflects 2 Bad Trends]

  • In another anomaly, consumer borrowing rose in March at the fastest clip in four months. It sounded like people were back in a buying groove, with credit card charges especially heavy. But building up the credit charge balances is another form of debt.
  • Economists said people don't have a choice because their paychecks aren't going as far and they can't tap into their homes, as they did during the housing boom, for ready sources of cash.

We discussed this almost verbatim in this entry [May 7: Roundup for the Day]

  • When you look closely, "you do see some dark economic clouds in the silver linings," said Mark Zandi, chief economist at Moody's "The darkness is much greater than any sunshine."

The spin will continue; the sheep will continue to be led astray. We'll keep reporting the reality, if for nothing else other than educational purposes. Hopefully more news organizations figure it out - it seems the press might be the only check on the spin-meisters. In a predominantly financially illiterate society, the press might be the best weapon we have (and if that is the case - pray for us...yikes)

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