Best of the Week
Most Popular
1.Putin’s World: Why Russia’s Showdown with the West Will Worsen - John_Mauldin
2. Stocks Bull Market Grinds Bears into Dust, Is Santa Rally Sustainable? - Nadeem_Walayat
3. Gold and Silver 2015 Trend Forecasts, Prices to Go BOOM - Austin_Galt
4.Gold Price Golden Bottom? - Toby_Connor
5.Gold Price and Miners Soar on Huge Volume - P_Radomski_CFA
6.Stock Market and the Jaws of Life or Death? - Rambus_Chartology
7.Gold Price 2015 - EWI
8.Manipulated Stock Market Short Squeezes to Another All Time High - The China Syndrome - Nadeem_Walayat
9.Gold, Silver, Crude and S&P Ending Wedge Patterns - DeviantInvestor
10.Is the Gold And Silver Golden Rule Broken? - Michael_Noonan
Last 5 days
Ruble Takedown Exposes Cracks in Putin’s Defense - 20th Dec 14
Oil Drilling Our Way Into Oblivion - 20th Dec 14
Stocks Bull Market Resumes - 20th Dec 14
Gold And Silver Nothing Is Ever As It Seems And No Respite For PMs - 20th Dec 14
What Are Technical Indicators Saying About the Stock Market? - 20th Dec 14
Here’s How You Can Still Make 27% With Apple Even if You Buy Now - 20th Dec 14
Gold Stocks to Shine in 2015 - 19th Dec 14
Why Alibaba Stock Shares Are a Screaming Buy - 19th Dec 14
China, Dollar, Japan, Europe Burning Questions for 2015 - 19th Dec 14
U.S. Economy is in a Sweet Spot! - 19th Dec 14
US Dollar and the Gold Fairy Tale - 19th Dec 14
Show Me The Money (Flow)! Tracking Money-Flow Through Value Shifts In Stock Markets - 19th Dec 14
The Commodities Market Is Not Dying, It’s Just Hibernating - 19th Dec 14
The Price Of Gold And The Art Of War - 18th Dec 14
Euro Succumbs to ECB QE Expectations and FOMC - 18th Dec 14
John Williams: A Downhill Run for the U.S. Dollar in 2015 - 18th Dec 14
Outrage at Taliban Islamic Fundamentalists Massacre of 132 Pakistani School Children in the Name of God - 18th Dec 14
How Inflation Changes Retirement Benefit Choices - 17th Dec 14
The Real Reason It's Tough to Beat the Stock Market - 17th Dec 14
Russian Currency Crisis and Debt Defaults Could Create Contagion in West - 17th Dec 14
How to Profit From Russia's Stock Market Crash - 17th Dec 14
Russia Crisis - If You Put Your Money in the Bank Will You Get it Back? - 17th Dec 14
Crude Oil Price Crash, U.S. Employment and Economic Growth - 17th Dec 14
Opposing Forces At Play In Gold and Silver Precious Metals Complex - 17th Dec 14
Wall Street Will Always Find An Excuse For Not Raising U.S. Interest Rates - 17th Dec 14
Torture, Terror And Elite Schizophrenia In The UK - 16th Dec 14
Eurozone Conflict Will Bring a Major Stocks Buying Opportunity - 16th Dec 14
Viewing Russia From the Inside - 16th Dec 14
Gold and Silver Stocks Bottom - Are We There Yet? - 16th Dec 14
The Financial Industry Pigmen Win Again - 16th Dec 14
Crude Oil Price Epic Blowout - 16th Dec 14
Asian Stocks Markets: Sand In The Gears Of The Bull Market - 16th Dec 14
U.S. Dollar Trend Forecast 2015 - Video - 16th Dec 14
Silver Price Bottom? - 15th Dec 14
Gold Price Base Building Bullish Pattern - 15th Dec 14
Stock Market Probable Pop-n-Crash Today - 15th Dec 14
Stock Market Time for a Bounce - 15th Dec 14
Stock Market Euphoria: The Mother of All Ponzi Schemes - 15th Dec 14
Gold - The Weight of Time as Trend - 15th Dec 14
U.S. Dollar Collapse? USD Index Trend Forecast 2015 - 14th Dec 14
The Rushing Stocks Bear Market and How to Prepare - 14th Dec 14
Gold and Silver Dreaming of a White Christmas - 14th Dec 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Dramatic Stock Market Selloff

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

© 2005-2014 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

Free Report - Financial Markets 2014