“Willing suspension of disbelief” is defined as a willingness to suspend one’s critical faculties and believe the unbelievable; sacrifice of realism and logic for the sake of enjoyment. First off, I want to state upfront that there’s nothing enjoyable about the monthly non-farm payroll report unless you enjoy being subjected to brain damage.
Each month the Government asks us to suspend our critical faculties and accept the headline-reported number of new jobs created by the economy as well as the unemployment rate. Once again the Government did not disappoint, as it headline-flashed the alleged creation of 211,000 jobs and an unemployment rate of 4.4%.
Unfortunately, for the mindless masses who consume fast-food style news from mainstream news sources, once the headline numbers are absorbed and the “experts” reaffirm them with their idiotic psycho-babble, the numbers as reported miraculously become The Numbers.
To say that the latest non-farm payroll report stretches the ability to suspend one’s disbelief is an understatement. The Government wants us to believe that 211,000 new jobs were created in April – “seasonally adjusted,” of course. A cursory glance reveals that 162,000 working age civilians decided to just leave the labor force, which explains the alleged decline in the unemployment rate. Either those folks who walked away were bequeathed with Social Security disability, took out a big student loan and enrolled for an online degree program at one of the many online universities or, most likely, their jobless benefits expired and they simply gave up looking for a job that pays more than minimum wage (Note: the latter explanation is supported by the recent spike up in auto loan, credit card and mortgage delinquency rates).
As for the 211k alleged jobs created…The Government appears to have generated those jobs via its “create-a-job” program otherwise known as the “birth/death model.” The birth/death model assumes that every month new businesses are created and terminated. New businesses hire employees and terminated businesses fire employees. You can read more about it here: birth/death modelling technique. The b/d sausage grinder for April produced 255,000 new jobs, before seasonal adjustments (note: most people assume the 255k jobs were the actual number of jobs added into the headline count, but the 255k is run through the “seasonally adjusted” total jobs blender and folded into the final number).
On the surface, the Government wants us suspend our disbelief and buy into the assumption that significantly more new businesses were started in April than were shuttered. Unfortunately, according to the Census Bureau’s own numbers, new business creation is at a 40-year low. In other words, the number of jobs that can be accounted for in the 211k headline number by the b/d model were never really created. In fact, judging from the estimated 8,640 retail stores to be closed in 2017, added to the 10 retail chains that have already closed down this year, it’s more likely that more jobs were lost by deaths than were created by start-ups. Yet, here’s the Government’s b/d estimate for retailing:
As you can see, the Government credits the retail industry with creating 5,000 new jobs in April from new business start-ups. But look at the leisure/hospitality category. It shows 84,000 jobs created by that sector. Again, suspension of disbelief is impossible when you consider that the restaurant industry alone is shedding jobs on a “net” basis, as private data sources show that restaurant sales have declined in 11 of the last 12 months (LINK). In fact, the restaurant industry is experiencing its worst period of sales since 2009. I could go through each line item and annihilate the report, but for the sake of time I would urge the Government to take a closer look at its assumptions underlying the b/d model job creation calculus.
John Williams of Shadow Government Statistics has been presenting the Conference Board Help Wanted Online Index (HWOL). This is the online transformation of a data series that measures help-wanted advertising going back to 1919. This series has accurately correlated with every economic recessionary period in the post-WW1 era. The graph presented by Williams in his latest newsletter shows that the HWOL index peaked in mid-2010 and has been declining ever since – both total HWOL ads and new HWOL ads. Rate of year over year growth for the metric went negative in 2016, suggesting that the economy has not only not produced jobs since the beginning of 2016 but has in fact lost jobs. The rate of decline in HWOL advertising currently is contracting at a 20% year over year rate. The last time it was contracting at this rate was in 2008.
Without question, it can be shown even with cursory analysis that the Government’s monthly non-farm payroll is fraudulent, serving no purpose than other than for political propaganda. Looked at another way, if the true unemployment rate was truly 4.4%, not only would the Fed be raising interest rates at a rapid pace, but it would also be shrinking its balance sheet in order to remove the threat of an accelerating rate of inflation stimulated by an acute labor shortage (4.4% is well below the economically defined long-run 5% natural rate of unemployment).