Is the Economy "Out of the Woods?"

Can We Trust The New Jobs Report That Has Led to Rosy Forecasts?

On Sunday, October 6, the Public Editor of the New York Times pointed to all the discrepancies and conflicts in the violence figures coming out of Iraq. He called for more nuanced reporting and increased public skepticism. He noted that the perception of progress there has been bolstered by the release of questionable statistics.

What's true of reporting from Iraq is also true about the job figures that the government releases monthly gaging the health of the U.S. economy. Can they be trusted? And what about the reporting on them? This is an especially timely issue as Fox News gets ready to launch its own heavily-hyped new Business Channel.

For weeks, we have heard all these warnings about the financial crisis sharpening and a possible recession. Reality intruded after a big subprime relief rally sent stocks soaring. Wall Street was quickly back in swamp, and it looked like the Federal Reserve Bank would have to cut interest rates again to further bail out the markets.

But then, on Friday, the Bush Labor Department announced a new jobs report and much of the coverage turned upbeat.

The report offered preliminary data claiming that the economy added l00,000 jobs in September. Suddenly, lower job figures from July and August were also magically revised upwards.

Wall Street went crazy. The S & P went up and the headlines went positive.

Here are two examples of the spin: The New York Times: "JOB GROWTH LOOKS ROSIER, EASING RECESSION FEARS." The Wall Street Journal, "US ECONOMY DOWN, NOT OUT."

The new numbers accounted for the turn around? Bear in mind, back in the 90s, in the Clinton years, 200,000 new jobs was what was expected on a monthly basis to assure economic growth. That was the gold standard. Now that number has been cut in half and is suddenly being treated as Great Leap Forward. How did the job numbers turn around? Or have they?

Reports the Journal, "much of the revision was caused by recalibrating seasonal fluctuations in government employment, including teaching."

Mmmmm..."recalibrations of seasonal fluctuations! I 'd love to let Stephen Colbert loose on that phrase. Look more closely, and you will see these recalibrations: deal with GOVERNMENT EMPLOYMENT, not jobs in the private sector. There were 71,000 jobs "recalibrated" in local education.

Yet establishment economists are saying these jobs are not what the economy really needs. The Journal quotes Nigel Gault, chief economist at Global Insight to the effect that "private sector jobs are the underlying driver of the economy."

Yes they are, but these are not them. The biggest jump here is in government jobs. NBC News reported on yet more job cuts in Flint Michigan Saturday and that manufacturing jobs are at their lowest point since l950.

Presumably you would think the disappearance of these jobs would be upsetting to the wise men of Wall Street. In fact, they are but their concerns are being buried in stories that fuel the perception that the corner is being turned.

Example: way down in the 19th paragraph of the Journal article, The Vice Chairman of the Federal Reserve Bank Donald Kohn says he expected that the nations "economic performance would be better." He says, "You should view these forecasts even more skeptically than usual."

But the business press, like the market that loves any excuse for a good rally, is not that skeptical. They tend to like positive numbers and downplay negative ones often without analyzing them.

Back at the NY Times, you had to jump from page one in the Business section with its "Job Growth Looks Rosier" headline to page 8. There, at the very bottom of the last page, next to the corporate bond data -- a place most readers don't venture -- are these quotes;

"I don't think we're totally out of the woods yet," said Jan Hatzius, Chief United States economist for Goldman Sachs. "There are some real problems at the foundations of the economy. If nothing really bad happens, we can muddle through and unwind some of these problems over a lengthy period of time. And if something bad happens, we go into a recession."

So there it is that depressing "R word" again but pushed all the way down in the story. In journalism, we used to call this 'burying the lead.'

Clearly the recession threat hasn't gone away. Not at all! As for "bad things" to fear, that surely includes the expected jump in oil prices and more unemployment.The actual rise reported in unemployment was minimized in most of the press accounts. (On Sunday, London's Observer reported: "Tens of thousands of New York bankers are braced for a crippling round of job cuts as the aftershocks of the credit-market collapse reverberate the length and breadth of Wall Street.")

Says Ethan Harris, the chief United States Economist at Lehman Brothers, "We're likely to go through an extended period of slow economic growth, We're likely to to see a further drop in the job market, a further rise in the unemployment rate, and, ultimately the fed will come back again and cut interest rates."

So there you have it, expectations of more bad news and hopes for another intervention by the Fed. These experts quoted in the stories actually contradict the upbeat tone of the stories and their headlines. Next month's Jobs report will have to factor in the l00,000 plus jobs lost in finance and housing which have already occurred but are not yet reflected in the statistics.

In other words, these report, like the coverage that say the surge is working in Iraq are selective and inflated. They are aimed more influencing perceptions than providing truth.

My questions: how do they get away with this? Why does the market buy it? Why does the press do it? And what are they leaving out?

Businessman and financial analyst Eric Janszen says our economy is increasingly showing the features of a Banana Republic with low-paid government and service jobs for all. He writes on his website iTulip.com that the private goods producing sector so vital to a sound economy is shrinking:

Construction firms cut 14,000 jobs in September, Factories slashed 18,000. Retailers got rid of just over 5,000 jobs. Financial services companies eliminated 14,000 slots.

However, gains in education and health services, professional services, leisure and hospitality, and in government work more than offset those losses, leading to a net gain in new jobs in September.

Jobs in government now parallel jobs in the good producing sector, he reports, as the dollar is being depreciated.

"The magic of a depreciating currency is working," he writes. "Foreign investors are buying UBRA (United Banana Republic of America) stocks and other assets at fire sale prices. Tourism is up as visitors from Asia, Europe, Canada and all other countries whose currencies have appreciated ... visit the US for a cheap UBRA vacation, driving leisure and hospitality jobs within the service sector where most of the job growth occurred.

And wages? They are not rising as fast as prices. His conclusion:

"Suppression of wage increases has been the centerpiece of monetary and government policy to manage inflation in the Production/Consumption Economy since 1980. Given the difficulty in acquiring legitimate measures of actual inflation rates in the US economy, there is no way of telling whether these wage increases translate into increased purchasing power. Given the rise of oil and other commodity prices, it seems doubtful. In fact, it looks like the UBRA is going full-bore banana republic, including wage and price inflation to maintain employment going into an election year."

So there you have it: politically influenced numbers, another reason not to trust the mainstream media and search out more thoughtful analysis elsewhere.

As the old saying holds, "Figures lie and liars figure."

News Dissector Danny Schechter edits Mediachannel.org. He directed the film IN DEBT WE TRUST (Indebtwetrust.com) Comments to [e-mail]

Comments

[drblack]

It is amazing to me that so many working class people voted for Bush. It was obvious he would screw them.
The Bush family is more elite than the vast majority of Americans. Talking like a dumb Texan(I am not insulting the many fine Texans )and saying jesus alot doesn't mean you give a damn about people.
Frank Zappa said it best ,that American's had better pay attention to politics and that the real power is the few thousand individuals that own all the raw materials.
Of course you can't trust statistics without a detailed account of how they were gathered and an understanding of the scientific method.
Using these I have found little relation between economic reality of most American's and the Feds statistics.
What could you expect from a guy whose grandfather Prentice sold over 50% of the steel that the Nazis used in WW2 , was accused and convicted of treason and somehow wiggled out of execution. Not to mention the failures and irresponsibility of GW Bush before he was the Gov of Texas.

[dadw5boys]

100,000 Miniumn Wage Jobs does not replace 100,000 Middle Income Jobs.

[DemandSide]

You're right, we should be very suspicious of economic numbers coming out of this administration. And did you notice the president and his CEA chief were already in makeup and in front of the cameras when the "recalibrated" numbers came out? Pretty prescient for Lazear, particularly for someone who said the housing problem had bottomed out in July (National Economic Club presentation, August 11).

I was suspicious a couple of years ago about why the employment numbers were, as you say, about half of the Clinton years, yet the unemployment rate stayed relatively stable. Looking closely, the number of people in the labor force, the denominator in the unemployment rate, was mysteriously going down as a proportion of the working age population. You can seen the chart at http://[e-mail]

It is baffling how the entirety of the Wall Street herd accepts these numbers at face value (and maybe scary to think what might happen if they lost trust in them).

That said, Isn't it possible that it is not the pathetic job growth numbers that are perking up the stock market, but simply demand from investors fleeing real estate and so-called "alternative" investment vehicles. They have relatively few choices -- stocks, currency and commodities.

[dadw5boys]

Under Clinton the UnEmployment Rates were reported as ACTUAL Unemployment Rate. The true numbers.
Under Bush the Unemployment Reate is reported as SEASONAL AVERAGE.
That means they can adjust the numbers as they want too. Do you think the Foreclosure Rates would be so high if people really had descent paying jobs.
Records show so far each report the Bush Adminstartion has released has been fudged between 1% or 2% on Unemployment and up to 4 % on the Economic Data.

[dadw5boys]

I fear the U.S. Economy has maxed out.
It won't be long before Bush has what he wants and the dollar will go into free fall.

[Raster]

"And if something bad happens, we go into a recession."? Can you say "black hole depression"?

[Raster]

The rhetorical is most accurately answered with another rhetorical: Is the Pope Islamic?

[Henry]

I once listened to Daniel Patrick Moynihan (D-NY) talk to the past head of the CIA, one Bill Gates. The topic of discussion was that the CIA had presented to the U.S.Congress that communist East Germany (DDR) had per capita gdp equivalent to the USA! But after the fall of the wall, it became quite clear that East Germany was a veritable 3rd world country with gdp per capita at a pittance of the USA. Moynihan querried Gates about this anomoly and the response of Gates was this: Well...we knew there was this difference, but what we were interested in was the year to year change, so it really was not a failure of CIA information, there was but a nuance of the analysis that was not appreciated by others than the cognoscenti!!

Information would best to be objective. It does appear that information, in this country, can be delivered. And of course, good information makes good soldiers. And we all know about good soldiers.

[WorkingClass]

I am a working class person. I make less than 20k. I don't have any money. I'm strong enough to work, my rent is paid and there is food in my refrigerator. I'm doing fine as long as the paychecks keep coming. If they stop I'm fucked. Right away, boom, the first missing paycheck and I'm out of the boat and in the water. I am no different than millions of working Americans.

The people I work with are not interested in politics. They really don't care how many Arabs their government kills. They know that prices are going up fast. At the grocery and at the pump. But so far so good. By working more hours and spending less money they continue their lives, feed their kids and make their truck payment. Most of them don't vote.

The working class does not know what the unemployment rate or the inflation rate is, much less whether the numbers are honest or not. As long as they are working they are (mostly) politically neutral. That will change overnight when they loose their jobs. A worker without work is an unstable person. They will quickly realize that they have been screwed. They will be angry. They will take direct action. A sharp rise in real unemployment will drastically change the political ecology of this country.

When the sleeping giant wakes, he/she will be pissed and hungry. No leadership exists in our political institutions for workers. Their leaders will be outsiders. Populist leaders will emerge from the ranks and will storm the gates of power. American workers will get a new New Deal or America will get a New Republic.

SOLIDARITY

[usna73]

I am so glad to hear from a real "worker" on these pages. You confirm what I thought I knew, despite my elevated resume and status. Not surprisingly I agree and support you. I just want you to know that I'll be fighting on your side when the day comes. It's the right thing to do.

[WorkingClass]

You made my day.

[eddiestardust]

Working class,

I do hear you and understand.

However, you are lucky enough to be working...there are a lot of us that used to be able to work but can't because our jobs have been outsourced overseas and we are now too old
(I'm 50 but don't look it) according to the employers to work or provide meaningful profit.

This is how life really is...our jobs are sucked right out from under us by Corporate plumbers who care not for anyone else accept their unmitigated greed...while our country wastes away.

And you are darn right about inflation, last week I bought six cans of Campbell's Soup and it cost me more than $8.00 and these were the regular sized cans of soup! I remember when they used to cost 33 cents per can!

And they keep telling us inflation is not bad!

These people are nuts, certifiable loony tunes and it's time to throw them in jail!

[Oldchef]

I know just what you guys are talking about. At 58 the restaurant where I was Executive Chef for years was sold. Although I had 35 years experience in hotel chains, clubs and independent restaurants, I was unable to get a job making what I was used to, and finally took a job in a local diner to put food in the fridge and pay the rent. By 62 my knees were shot and I took early Social Security. Since 2002 I had been telling people that while the stock market was doing well and corporate income was rising, working people weren't doing worth a damn, real spending power was going down for most of us. I couuldn't see how all these so-called economists could say the economy was doing great. The real measure of the economy should be how the workers themselves are doing. If they're not making enough to buy the products of the economy, much less keep up with monthly expenses, the real economy is shit.

Food, transportation expenses and housing have all increased enormously under this administration, and let's not even mention health care costs. I'm a cancer survivor and can't get coverage.

This administration has consciously and callously set out to screw the working class to enrich their corporate pals . They've fed us shit and told us it was candy.

We need a president who will stand up for working people, and who understands the importance of having a manufacturing base in this country and not depend on cheap ( and often unsatisfactory) imports.

[dadw5boys]

I wornder when they outsourced manufacturing jobs did you think that was ok?
But now it is your job that is outsourced is it not ok?

[Raster]

In times like those supposed, the pissed and hungry but most of all scared-as-hell will very likely get a New Not-a-Republic-at-all. Such times as those bring forth despots. Look for an awesome amount of civil strife among contending groups previously unimagined.

[WorkingClass]

Agreed. Mine is an optimistic view.

[Zhonni]

The truth is, well, the truth is being ignored. I don't believe the hype.

It has been said that the new 14,000 level is not the 14,000 of old where the USD was far stronger than it is now.

It has also been said that if the market capitalization were converted to Euros the market would basically be flat, since the sub-prime saga.

I quite frankly think the media is in the same position on the economy as they were during the runnup to the Iraq war. "Oh we can't be to critical here, we are supposed to put the best spin on the economy, lest we are tagged unpatriotic."

IT IS THE MEDIA'S JOB TO STATE THE FACTS NOT PUT A POSIVE SPIN ON THINGS LIKE THE ECONOMY.

The little man is the one that gets burned because the news media want to bury his information in the last page, information the rich and insiders on Wall Street already know.

[Novista]

"My questions: how do they get away with this? Why does the market buy it? Why does the press do it? And what are they leaving out?"

Because they can. They need more suckers in the ponzi scheme. They're bought easily. The truth.

Remember "the smartest guys in the room"? No one had a bad word for Enron until the smoke dissipated and the mirrors were seen as broken. Even SEC approved the bizarre accounting practices of the Arthur Andersen firm. (O doesn't it give you a warm fuzzy feeling to know a former executive now heads the GAO?)

The Fed stopped reporting the M3 last year, a warning flag.

The housing bubble sagged last year. few pundits noticed. USG, number one manufacturer of drywall products, cut 1,100 jobs last year, more to come. Home Depot also. -- two among many.

Half the mortgage firms in the U.S. are out of business. Construction jobs down by 20,000 in September, 12 of the past 13 months have seen layoffs.

IBM, HP, Microsoft, all keen to get more H1Bs yet more outsourcing and offshoring occurs.

There is the small matter of "you may be unemployed and unemployble (whether age or overqualified) and not actively looking for work" you don't get counted.

The lurk they used to use in Australia, and maybe still do, was random phone sampling. "Hello, are you employed?" 'Yes.' "Goodbye." (click) "Hello, are you employed? No? (rats) "Is anyone in the household employed? Ah, yes ... Good. Thank you. Goodbye."
The tremors in the housing market months ago but the MSM was silent. Then, the emphasis was on ~the sub-prime market~ when the virus had spread.

Then that comedian said, "The sub-prime situation is contained."

Imagine that a shopkeeper in U.K. would have a problem because of tightened credit due indirectly to global banking holding a lot of toxic waste?

Some pension funds tied into these 'creative investment vehicles'. Mortgages sold downstream, leveraged fantastically. Banks not trusting other banks, who knows who owns what and how bad is it.

[eddiestardust]

It's like this cartoon from the Reagan years...
This guy in a tie is interviewing a homeless man inside a large cardboard box. The interviewer says "Good, another housing start"!
:(

[darker]

Bush lays a BIG FART into the fast of Americans daily. "Rosy" is his cynical revenge that a huge number of US Citizens reject his policies, corruption and lies.

Bush wanted revenge and now it's his. He dumped aside the Baker committee report, remember?
And he stalls, stalls, stalls for time to drag out the Iraq disaster.

Too bad USTroops and maimed and killed in his FOR-PROFIT IRAQ INVASION to enrich Big Oil, corrupt contractors, out of control corrupt war-profits industries.

[SamThornton]

As most people who have taken even a cursory look at what the "Unemployment Rate" actually represents realize, the published number is a fiction.

The BLS actually has several measures of unemployment, most underpinned by surveys that might most charitably be described as suspect.

The measure released as the "Unemployment Rate" is not actually a measure of unemployment, but a measure of those "actively seeking employment" as measured by surveys of those who have applied for employment assistance at state employment offices. The sample size of the surveys in most states does not meet the sample size required for scientific measures. Moreover, the same respondents are used in multiple samples, an invalid method of extracting meaningful data from supposedly random samples.

In short, it's strictly a political shell game, designed to convey whatever message the politicians who control the process wish to convey.

[marko77]

Most people know or can sense that America is finished as an economic power. It's all been given away for the benefit of the very, very few. Welcome to the "Flat Earth" - nothing like graduating from college and bagging groceries.

[mrcontinental]

Everyone knows that the books are cooked but they do not seem to care or simply deny what they see with their own eyes. They embrace the illusion and willing suspend their disbelief.

[realitytrumpsbull]

I think we've seen more than just a little bit
of economic propaganda, and I don't trust their
numbers, period. Especially in light of the
fact that we now have one of the hedge fund
mortgage usury guys, John Edwards, running
for high office, I think the whole thing is more
than just a little shaky.

Here's an excerpt from WaPo about Edwards...

"Edwards Says He Didn't Know About Subprime Push

By Alec MacGillis and John Solomon
Washington Post Staff Writers
Friday, May 11, 2007; Page A06

The hedge fund that employed John Edwards markedly expanded its subprime lending business while he worked there, becoming a major player in the high-risk mortgage sector Edwards has pilloried in his presidential campaign..."

I think a lot of the 'news' that we're reading
these days about the Murkin Con Me amounts
to some creative writing, and Bernanke
standing there with his thumb on the 'zero' button, adding digits as fast as the computer will take em. Of course, 'honest politician'
is one of the most famous oxymorons in the
world...we're just morons for accepting what
they say as anywhere near being honest...

[eddiestardust]

I still believe there are a few out there, there may even be a few in Congress...but that doesn't matter because they are Cowards.