The stock market may be in heaven over the thought of more printed money coming from the Fed.
Goldman Sachs just estimated that it will be as much as $2 trillion — an increase of about 250 percent in our 2008 money supply. That’s a big increase and that has made the Street very happy — smiles all around and the market is up very nicely.
But let’s take a look at some real economic news that came out recently that no one on the Street seemed to care about.
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Buried in the jobs report for September was a minor adjustment to past job reports. The September jobs report wasn’t good, showing a loss of 95,000 jobs, which the Street took as great news since they think that will scare the Fed into printing even more money even faster — what could be better?
But it was the adjustment that was most important. The Bureau of Labor Statistics (BLS) said they expected to adjust downward the amount of jobs created in 2010 by 366,000. That’s a lot of jobs. In fact, since the BLS has reported that we have only created 613,000 jobs so far this year that adjustment just wiped out more than half the number of jobs created this year.
Why the big adjustment? It’s an adjustment for the birth/death rate of businesses. The BLS surveys businesses to get their jobs data but they can’t get accurate data from new businesses or failing businesses so they make an estimate on how many jobs those businesses created based on trends from the last five years.
Of course, the growth rate for jobs over the last five years has been pretty different from the last two years. So, no surprise that after the BLS reviews unemployment insurance records toward the end of this year, its estimates have been adjusted downward. In fact, last year the BLS adjusted the number of jobs created downward by 902,000.
When there are so few jobs being created, these are big adjustments. The adjustments in 2009 and 2010 were the biggest since the data began being gathered in 1979. We could complain about the statistical methods being used by the BLS (figures never lie, but liars always figure), but what’s more interesting is that the stock market didn’t even seem to notice or care that we had just wiped out half the jobs created in this country.
However, they cared a whole lot when those jobs were reported as created each month during the past year and studied the figures for every bit of good news they could find to show that the economy was doing better than expected and boost the market. But, when those jobs were reported to have been a fake, the Street didn’t mind a bit.
The Street seemed to go out of their way to consciously ignore that data. Maybe they thought it was more good news and would encourage the Fed to print money, but nobody said that. They just ignored the adjustment. It’s also not just a one month issue — it’s very telling about the poor state of the economy.
We have essentially created almost no jobs this year. In fact, ADP, the private payroll-processing company, says we have only created 51,000 jobs.
The government’s job adjustment is too big to put a good spin on it, so the Street just ignores it. Why the bias? In a word — cheerleading.
It’s the same mentality that says printing money is good — look only at a short-term good side and don’t care about any long term bad side. It follows a simple cheerleading mantra: If you don’t have anything good to say, don’t say anything at all.
About the Author: Robert Wiedemer
Robert Wiedemer is president of the Foresight Group, a macroeconomic forecasting firm that customizes its forecasts for specific businesses and investment funds. He is a regular contributor to Financial Intelligence Report, the flagship investment newsletter of Newsmax Media. Click Here
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