The Dismal Science Really Is
by ilene - July 3rd, 2010 2:10 pm
The Dismal Science Really Is
Courtesy of John Mauldin at Thoughts from the Frontline
Some Really Dismal Numbers
Unemployment Went Down?
Earnings Take a Hit
Money Supply Concerns
A Central Banker’s Nightmare
Why Don’t You Reform Yourselves?
There’s a reason economics is called the dismal science, and weeks like this just give it further meaning. In economics, there is what you see and what you don’t. This week we are going to examine the headline data we all see and then take a look for what most observers do not see. Then we’ll try to think about what it all really means. With employment, housing, and the ISM numbers, there is a lot to cover. And this letter will print out longer than usual, as there are a lot of charts. Warning: remove sharp objects from the vicinity and pour yourself your favorite adult beverage. This does not make for fun reading.
Some Really Dismal Numbers
The unemployment numbers this morning were just bad, even though the spin doctors were out in force. Of course we knew that because of census workers being laid off the number would be negative, and it was, down 125,000. But the "bright spot" we were told about was that private payrolls came in at 83,000 new jobs. Let’s look at what you did not see or hear.
First, last month’s dismal (there’s that word again) private job-creation number was revised down from 41,000 to 33,000. So in two months, total private job creation is 116,000 jobs. We need 125,000 jobs per month just to keep up with population growth.
But it is worse than that. The headline number we look at is from the Establishment Survey. That means they call up existing businesses they know about and ask them how many people are working for them, etc. One of the first things I do when the employment numbers come out is look at the birth/death assessment on the BLS (Bureau of Labor Statistics) web site.
For new readers, the birth/death assessment has nothing to do with people dying, but rather is the BLS’s attempt to estimate the number of new businesses that have been created or have "died" within the last month, and they use these numbers to adjust the employment total. They use historical, seasonal numbers to create a model from which they make these estimates. There is nothing conspiratorial about the…