Fudge is a type of Western confectionery, which is usually soft, sweet, and rich. Unfortunately, the fudge the “Don’t Worry, Be Happy” crowd is serving up from the platter the U.S. government has given them this week in regards to the economy tastes real bad.
First, we learned earlier this week that the economy grew just 0.025 percent in the first quarter giving us an annualized rate of just 0.1% (versus 3.6% historical rate). The fudge used by the government in this regard was the fact that the U.S. Commerce Department “reduced” the inflation rate it uses in making its GDP calculation from 1.6 percent to 1.3 percent. If they didn’t do that the report would have shown the economy actually contracted in the first quarter. How do you think that news would’ve played out?
Today, our government tells us 288,000 jobs were added in April and the unemployment rate fell to 6.3%. Cries of whoopee were heard throughout the financial media from the usual “Talking Heads” but key factors that make this look like just another serving of bad fudge are largely ignored.
What bad fudge you ask?
First, let’s begin with a widely known fact that the “whoopee” crowd would sooner not want to be known. Each April, May and June, the Labor Department assumes that a very large number of new jobs are created by small companies that may not really exist. This is called the “Current Employment Survey’s Birth/Death Model”. Last April, the Department added 236,000 jobs to its count without knowing they were real. We learned later much of this was indeed unreal.
I’ve been writing about the great work John Crudele of the NY Post has been doing about the “fudging’ of monthly job surveys.
Zerohedge.com had several postings today that went a long was to highly question the legitimacy of the Whoopee’s!
Oh did I mention what was once an important factor called wages showed stagnation with average hourly earnings up nil, hours worked had no increase and lower wage industries make up half the annual jobs gains (hard to buy new cars, homes and appliances on these incomes)? But why should such former key factors to real growth be even considered when “Goldilocks” is the talk of the town?
I received this email from an extremely popular market commentator who you see multiple times every week on a national financial network (and one of only two people I turn the sound on to hear on that network):
“This market defies logic, but think we are in the very late innings of the game…
And when the game ends, it is not going to be easy to get out of the parking lot.
Amen brother!