Best of the Week
Most Popular
1.Canada Real Estate Bubble - Harry_Dent
2.UK House Prices ‘On Brink’ Of Massive 40% Collapse - GoldCore
3.Best Cash ISA for Soaring Inflation, Kent Reliance Illustrates the Great ISA Rip Off - Nadeem_Walayat
4.Understanding true money, Pound Sterling must make another historic low, Euro and Gold outlook! - Marc_Horn
5.5 Maps That Explain The Modern Middle East - GEORGE FRIEDMAN
6.Gold Back With A Vengeance As Bitcoin Bubble Bursts - OilPrice_Com
7.Gold Summer Doldrums - Zeal_LLC
8.Crude Oil Trade & Nasdaq QQQ Update - Plunger
9.Gold And Silver – Why No Rally? Lies, Lies, And More Lies - Michael_Noonan
10.UK Election 2017 Disaster, Fake BrExit Chaos, Forecasting Lessons for Next Time - Nadeem_Walayat
Last 7 days
Saving Illinois: Getting More Bang for Its Bucks - 24th Jul 17
3 Stocks Sectors That Will Win in The Fed’s Great Balance-Sheet Unwind - 24th Jul 17
Activist Investors Are Taking Over Wall Street, Procter and Gamble Might Never Remain the Same - 24th Jul 17
Stock Market Still on Track - 24th Jul 17
Last Chance For US Dollar To Rally - 24th Jul 17
UK House Prices Momentum Crash Warns of 2017 Bear Market - Video - 22nd Jul 17
Crude Oil, Gold, ETFs & more: Pro-grade Market Forecasts - 22nd Jul 17
Warning: The Fed Is Preparing to Crash the Financial System Again - 21st Jul 17
Gold / Silver Shorts Extreme - 21st Jul 17
GBP/USD Bearish Factors - 21st Jul 17
Gold Hedges Against Currency Devaluation and Cost Of Fuel, Food, Beer and Housing - 21st Jul 17
Is It Worth Investing in Palladium? - 21st Jul 17
UK House Prices Momentum Crash Threatens Mini Bear Market 2017 - 21st Jul 17
The Fed May Show Trump No Love - 20th Jul 17
The 3 Best Asset Classes To Brace Your Portfolio For The Next Financial Crisis - 20th Jul 17
Gold Stocks and Bonds - Preparing for THE Bottom - 20th Jul 17
Millennials Can Punt On Bitcoin, Own Safe Haven Gold For Long Term - 20th Jul 17
Trump Has Found A Loophole To Rewrite Trade Agreements Without Anyone’s Permission - 20th Jul 17
Basic Materials and Commodities Analysis and Trend Forecasts - 20th Jul 17
Bitcoin PullBack Is Over (For Now): Cryptocurrencies Gain Nearly A 50% In Last 48 Hours - 19th Jul 17
AAPL's 6% June slide - When Prices Are Falling, TWO Numbers Matter Most - 19th Jul 17
Discover Why A Major American Revolution Is Brewing - 19th Jul 17
iGaming – Stock Prices - 19th Jul 17
The Socionomic Theory of Finance By Robert Prechter - Book Review - 18th Jul 17
Ethereum Versus Bitcoin – Which Cryptocurrency Will Win The War? - 18th Jul 17
Accepting a Society of Government Tyranny - 18th Jul 17
Gold Cheaper Than Buying Greek Villas in 2012 - 18th Jul 17
Why & How to Hedge the Growing Risks of Holding Stocks - 18th Jul 17
Relocation: Everything You Need to do for a Smooth Transition Abroad - 17th Jul 17
A Former Lehman Brothers Trader: It’s Time To Buy Brick And Mortar Retailers - 17th Jul 17
Bank Of England Warns “Bigger Systemic Risk” Now Than 2008 - 17th Jul 17
Bitcoin Price “Deja Vu” Corrective Sequence - 17th Jul 17
Charting New Low in Speculation in Gold and Silver Markets - 17th Jul 17
Bitcoin Crash - Is This The End of Cryptocurrencies? - 17th Jul 17
The Fed's Inflation Nightmare Scenario - 17th Jul 17
Billionaire Investors Backing A Marijuana Boom In 2017 - 17th Jul 17
Perfect Storm - This Fourth Turning has Over a Decade of Continuous Storms to Come - 17th Jul 17
Gold and Silver Biggest Opportunity Since Late 2015, Last Chance at These Prices - 17th Jul 17
Stock Market More to Go - 17th Jul 17
Emerging Markets & Basic Materials Stocks Breaking Out Together - 16th Jul 17
Stock Market SPX Uptrending Again After Microscopic Correction - 15th Jul 17

Market Oracle FREE Newsletter

Crude Oil, Gold, ETFs & more: Pro-grade Market Forecasts

How Washington is Fooling You: Manipulated Employment Data

Economics / Market Manipulation Aug 04, 2008 - 02:34 PM GMT

By: Mike_Stathis

Economics Best Financial Markets Analysis ArticleShell Game - The government and related agencies are responsible for reporting the nation's economic data. Thus, they're in the driver's seat to manipulate this data, while dumping so much of it onto consumers that they can't possibly analyze what's really going on. Each day, “critical” economic numbers are released by one or more agencies connected to Washington . And consumers look to Wall Street and the media to make heads or tails of this data. Of course, Wall Street is always going to paint a rosier picture for its own benefit. Meanwhile, the mainstream media merely serves as a puppet for Wall Street.


The main problem is that by the time this data has been reported it's already been manipulated. And when Wall Street gets a hold of it they make matters worse, tugging and pulling on the meaning of the numbers as a way to create market volatility. And this generates a lot of trading commissions.

The media does its part as well, interviewing analysts, fund managers and pundits to analyze the data. Analysts gain more banking business for companies they tout, while the firm's market makers and hedge funds take the short side as the dumb money rushes in. Fund managers pump up their number one holdings through praises of “great buying opportunities.” Yet the SEC never investigates whether these funds dump the stock shortly thereafter. And corporations continue to advertise on radio and television networks that maintain a policy of remaining bullish indefinitely. Together, they all feast upon the money created from this propaganda bonanza. Unfortunately, much of this money comes from individual investors who have been fooled by the “experts.” Always keep in mind the manner by which broadcasting networks make money. Then look at who they are interviewing and you will see their agenda.

Discouraged by the Economy

A few decades ago Washington economists came up with a new designation known as the “discouraged worker.” Such a person is thought to have “thrown in the towel” after several unsuccessful months searching for work. What happened to these discouraged workers? Why aren't they counted? More important, what is it about the economy that has caused these “discouraged workers” to be unable to obtain a new job after an extended period?

Knowing the number of discouraged workers is vital to understanding trends in the overall competitive landscape of the U.S. economy. Yet, these individuals are simply dropped from the list as if they no longer exist. Why was there no such thing as a “discouraged worker” fifty years ago? Back then, Americans who were willing to work found stable jobs so there was no need to hide the truth because the economy was much better. It was fueled on a health balance of production and consumption, savings and investment. As a result, America was the world's largest creditor and leading importer of goods. Today we see dramatic differences. Ever since the 1980s, America has been in decline. Real median wages have barely moved, America is the world's leading debtor, and foreign nations have bought critical U.S. assets using their trade surpluses combined with the weak dollar.

If things really haven't improved for most Americans why don't they realize it? Washington encourages consumers to spend on credit which has helped many live beyond their means. As well, the inexpensive labor of illegal aliens has also helped soften the blow. Finally, the prevalence of two-income households has been a significant component masking declining living standards. If you were to remove these three elements – consumer credit, illegal aliens, and two-income households – most Americans would feel an immediate collapse in living standards. In contrast, these elements didn't exist in the 1950s – America 's booming period. Think about the price we are paying for:

Consumer credit – exploitation by the financial industry and now a huge taxpayer bailout

Illegal aliens – increased crime, exhaustion of educational, heath care and other facilities paid for by tax dollars

Two-income households – breakdown of the family unit resulting in a huge divorce rate and teens that are very troubled

The Big Surveys

The two sources of employment data – the Household Survey and the Establishment Survey (payroll survey) - come from the Bureau of Labor Statistics from the Department of Labor, released on the first Friday of each month covering the previous month. This data serves as a primary driving force of market volatility. In particular, the Establishment Survey is considered the most insightful and accurate by financial institutions. But each has significant differences in the way the data is collected, analyzed and reported. For instance, the Establishment Survey makes no distinctions between part-time and full time employment. Thus, if an individual has two part-time jobs, the Household Survey considers records the data as one employed person. In contrast, the Establishment Survey records it as two jobs. In addition, the Establishment Survey does not count self-employed jobs. With so many key differences between the two surveys, without a clear explanation and interpretation of the data, the real employment picture is easily confused.

What's the Underemployment Rate?

Similar to all other economic indicators, employment data has been altered by the government and its affiliated economic organizations for over three decades. I argue that this has occurred to distort the realities of America 's not-so “great” economic picture. For instance, when the Labor Department measures unemployment data, it only counts those who have searched for jobs within the past four weeks. Previously under President Lyndon Johnson this cut off was six weeks but was lowered to make the numbers look better. As well, the government makes no distinctions between part-time workers who want full-time work but cannot find it; they're considered “employed” which is assumed to mean fully employed.

Courtesy of shadowstats.com

A much better measure of employment is to look at the underemployment rate , which is always much higher. While this data is available, you'll never hear about it from Washington because it demonstrates America 's declining job quality and competitiveness. Consider what would happen to consumer confidence if the real data was reported. Government employment figures also count workers employed in what are known as “non-standard jobs” with no distinctions. Typically, these jobs include temp workers, independent contractors, part-time workers and the self-employed. The main problem with counting these individuals as “employed” is that non-standard jobs rarely include critical employee benefits such as healthcare or retirement plans . And because America 's labor force depends upon a large percentage of employee benefits for total compensation (up to 42 percent of the median wage earners total compensation), a proper analysis of employment trends must consider non-standard employment data. However, this data is not included. Non-standard jobs are also much less secure than traditional jobs. Therefore they don't provide the assurance and benefits of a stable career, making it difficult for these workers to plan for the future. Consequently, the rapid growth of the non-standard employment labor market over the past two decades has added to the growing job insecurity within the traditional workplace.

In addition, employment data does not indicate how long workers have been with a particular employer. But this information is also a very important component towards understanding the financial security of workers. Because so many consumer costs are now annuitized in the form of financing agreements, contracts or mandatory fees (mortgages, auto loans, auto and health insurance, mobile phone contracts, cable, credit card payments, etc.), consumers are becoming increasingly dependent upon having a steady and reliable source of income to meet these committed future expenses. Yet, the average American worker has never seen a greater amount of job insecurity.

Even before the last recession (now in dispute as of 2004, See Part 2), estimates show that over 25 percent of America 's workforce was engaged in non-standard employment. There's little doubt that this percentage is significantly higher today due to the competitive effects of the free trade. Therefore, employment numbers, as reported by the government provide a false picture because they don't account for diminishing wages and total compensation.

The Birth/Death Fudge Factor

The BLS also uses a birth/death model which is thought to account for new jobs created by small businesses and jobs lost by companies facing problems – something typically not reported in the Establishment Survey. The problem with this adjustment is that it is based on past performance and contributes more to employment growth when the economy is contracting, while contributing less when it is expanding. As a result, the employment picture will look much better when Washington needs it most – during a recession. Perhaps this is why it has taken so long for mortgage, banking, and construction jobs to decline despite the fact that many of these jobs were lost in late 2007. This model has added an estimated 3 million jobs since 2006. I find it interesting that the model received significant changes during the Internet meltdown. Even more interesting, the BLS hides the assumptions of this model from the public eye.

When Illusion Meets Reality

Washington continuously comes up with new definitions and assumptions to fit its grand illusion of economic growth. But the real data speaks for itself. If you look at the real inflation rate, real employment data, wage growth, the debt and trade deficit levels, and the weakness of the dollar, it's clear that the illusion is being unmasked right before your very eyes.

In reality the current unemployment rate is likely to be above 8%, while the underemployed rate is much higher – perhaps 25%. As America slips deeper into economic reality, you aren't going to see a peak unemployment rate of 33% as we did during the Great Depression, just like we aren't going to see the banks close their doors. But that does not mean the effects won't be equally devastating. Rather than 33% unemployment, we are likely to see 12% unemployment in the coming years, and 40 or even 50% underemployment. But Washington will hide the data as much as it can by introducing new tricks and playing new games. And while the FDIC insures bank accounts up to $100,000, the real question won't be whether you'll be able to withdrawal your money, but what it will buy.

America's Financial Apocalypse: How to profit from the Next Great Depression . Condensed edition: http://www.amazon.com/Americas-Financial-Apocalypse-Depression-Condensed

By Mike Stathis
http://www.apexvc.com

Copyright © 2008. All Rights Reserved. Mike Stathis.

Mike Stathis is the Managing Principal of Apex Venture Advisors , a business and investment intelligence firm serving the needs of venture firms, corporations and hedge funds on a variety of projects. Mike's work in the private markets includes valuation analysis, deal structuring, and business strategy. In the public markets he has assisted hedge funds with investment strategy, valuation analysis, market forecasting, risk management, and distressed securities analysis. Prior to Apex Advisors, Mike worked at UBS and Bear Stearns, focusing on asset management and merchant banking.

The accuracy of his predictions and insights detailed in the 2006 release of America's Financial Apocalypse and Cashing in on the Real Estate Bubble have positioned him as one of America's most insightful and creative financial minds. These books serve as proof that he remains well ahead of the curve, as he continues to position his clients with a unique competitive advantage. His first book, The Startup Company Bible for Entrepreneurs has become required reading for high-tech entrepreneurs, and is used in several business schools as a required text for completion of the MBA program.

Restrictions Against Reproduction: No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of the copyright owner and the Publisher. These articles and commentaries cannot be reposted or used in any publications for which there is any revenue generated directly or indirectly. These articles cannot be used to enhance the viewer appeal of any website, including any ad revenue on the website, other than those sites for which specific written permission has been granted. Any such violations are unlawful and violators will be prosecuted in accordance with these laws.

Requests to the Publisher for permission or further information should be sent to info@apexva.com

Books Published
America's Financial Apocalypse: How to Profit from the Next Great Depression . Condensed Ed. Copyright © 2007.
Cashing in on the Real Estate Bubble . Copyright © 2006.
America's Financial Apocalypse: How to Profit from the Next Great Depression . Copyright © 2006.
The Startup Company Bible for Entrepreneurs: The Complete Guide to Building Successful Companies and Raising Venture Capital . Copyright © 2004 and 2005.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Mike Stathis Archive

© 2005-2017 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife