Thread: Shadowstats Newletter: Nov 6th Election, Hurricane Sandy, Employment and Unemployment

Shadowstats is a subscription service. THe following was forwarded to me.

The owner of the site, John Williams, was with the Bureau of Labor Statistics in the 1980s. He does a great service by continuing to update key statistics for inflation, unemployment, and Gross National Product using the same methodology as established before the era of wholesale manipulation of government statistics.

Williams finds that unemployment, calculated as it was up through the 1980s and 1990s, is 22.9%.
During the Great Depression of the 1930s, unemployment reached 25%.
"Full" employment is defined, approximatley, as unemployment falling to 5%.

An independent source, the Center for Immigration Studies, reports that most of the jobs created since the 2008-09 economic recession have gone to immigrants. Anemic as job creation has been, Americans have benefitted very little.

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Shadow Government Statistics
John Williams

COMMENTARY NUMBER 479 (Excerpt)
Presidential Election, Hurricane Sandy, October Employment and Unemployment, September M3, Construction and PCE Deflator

November 2, 2012

Regardless of whether Barrack Hussein Obama or Willard Mitt Romney wins the election, the next presidential term most likely will see the onset of a domestic, hyperinflationary great depression. That is the ultimate domestic financial disaster that has been predicted here for a number of years, with an outside timing of 2014 (see Hyperinflation 2012 and links therein to preceding reports).

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October Jobs and Unemployment Numbers Were Not Credible, Artifacts of a Broken Reporting System and/or Direct Manipulation

With Consistent Seasonal Adjustments, October Jobs Gain Would Have Been About 117,000 Instead of 171,000

October Unemployment: 7.9% (U.3), 14.6% (U.6), 22.9% (ShadowStats.com)

M3 Annual Growth Picks Up Again
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PLEASE NOTE: With some contents of the still-pending Special Commentary shifted to today's missive, the special report has been rescheduled for release as soon as is practicable following the November 6th election results. The report will update fully the broad economic, systemic and inflation outlooks, in the context of the latest economic reporting, the available detail on fiscal-2012 operations of the federal government and the monetary activities of the Federal Reserve. Further publication detail will be posted in the schedule box on www.ShadowStats.com.

The next regular Commentary is scheduled for Thursday, November 8th, covering the release of the September U.S. trade balance.

Best wishes to all - John Williams

Opening Comments and Executive Summary. Despite some happier employment headlines, the U.S. economy is not in recovery. Where it is not illegal for an administration to manipulate its economic reporting, it is illegal for anyone outside of the preparing statistical Bureau (including the White House and the Fed) to have access to market-sensitive numbers before the New York financial markets close on the afternoon prior to the release. Four days before the release of the October labor data, on October 29th, Washington.Examiner.com published a story "Axelrod: Romney camp won't be saved by a bad jobs report." As to the Romney campaign being "bouyed [sic] by a bad jobs report," Obama campaign senior strategist David Axelrod was quoted as indicating, "I think they're going to be disappointed."

With the headline October 2012 unemployment rate holding below 8.0% and the headline jobs growth stronger than market expectations, in conjunction with upside revisions to August and September reporting, Mr. Axelrod's assessment was borne out, a lucky guess or otherwise. The headline numbers (or the general substance of the reporting results) usually are known a week or so in advance, and early release of data to officials in various administrations and at the Federal Reserve has been common in the past and as suggested in former Clinton Labor Secretary Robert Reich's autobiography.

With a downturn in October's online help-wanted advertising, weakening employment growth in the ISM's October purchasing managers manufacturing survey, and significant indications of slowing activity, not accelerating economic growth-to be discussed in the upcoming Special Commentary-the October labor data indeed were not credible. At best, the numbers were heavily flawed in consistency by the use of concurrent-seasonal factor-adjustments (see discussion in Commentary No. 473). None of the revised estimates to prior months unemployment, which are recalculated every month, are published. This is particularly misleading where publication of the latest September estimate is needed in order for consistent month-to-month comparisons between the October and September data. The BLS has the actual numbers, but it will not publish them. The same is true for all but the two-most recent months in the employment series, which allows for the shifting of previously-reported employment activity into the headline month, from earlier periods, without an accounting for same.

With lack of full transparency in the calculation processes, reporting for the establishment (payroll) survey and particularly the household (unemployment) survey is open to direct political manipulation.

Overstated Employment Gains. Also as noted in the October 5th Commentary No. 473, covering the September employment numbers, in the Concurrent Seasonal Factor Distortions section, "Unreported, seasonally-adjusted monthly payroll numbers still are showing a shift of first-half of the year jobs to the second-half of the year, with the peak upside reporting effect due for October 2012, the last employment report before the November election."

With payroll reporting, the Bureau of Labor Statistics (BLS) publishes only the current and two-prior months on a consistent basis. All numbers published today (November 2nd) for the period of July 2012 and before have not been revised in official reporting, although they were revised in the context of the highly-volatile concurrent-seasonal-factor-adjustment process in order to calculate the new monthly numbers for August, September and October of 2012. The latest reporting simply is not consistent with published past history.

As part of that process, some of those distorted aggregate seasonal-factor-adjustments are hinted at in the latest detail, in terms of the difference in the year-to-year growth in the unadjusted and adjusted series, which generally should be extremely close to each other. Using the year-to-year growth published for the seasonally-unadjusted series as an alternative year-to-year measure for the seasonally-adjusted series, monthly jobs growth would have been reported at 117,000 in October, instead of the headline 171,000.

Hard-number aggregate differentials can be calculated using BLS data, where the official reporting is fixed and not subject to anything other than annual revisions. On that basis, August 2012, which now will be unrevised, going forward, showed an official monthly jobs gain of a revised 192,000, but that gain actually revised to 168,000 on a consistent basis. The frozen official jobs gain of 181,000 for July 2012, really revised to 164,000. One might wonder where those now lost (but not published) gains went, given the constantly changing seasonal factors that can shift prior activity into the latest period.

Understated Unemployment Rates and Overstated Unemployment Improvement.

Similar hard calculations are not possible with the unemployment rate, because the BLS does not publish any prior-period revisions or data than enable consistent seasonal-factor calculation by outside entities. Assuming there is commonality to the seasonal adjustments in the household and establishment surveys-a dangerous assumption-the patterns of overstatement with the payrolls would suggest a pattern of understatement with the recent headline unemployment rates and overstatement of recent headline month-to-month unemployment-rate improvements.

Main Street U.S.A. Is Sensitive to Real-World Economic Activity. As was seen in something of a similar circumstance, when the first President Bush was up for re-election, economic data that were too good simply lacked credibility with the public, and the president was viewed as being out of touch with economic reality. Economic reality, today, also is much worse than suggested by the headline data, with the effect that actual pocketbook issues still should play-out negatively against the incumbents, perhaps much more severely than currently is indicated in the polling numbers hyped by the popular media.

The balance of this section touches upon potential impact of the upcoming election on the dollar and gold, explores possible economic impact of Hurricane Sandy, and provides a summary of more-normal analysis of current economic reporting. The preliminary estimate of October M3 growth is covered in the Hyperinflation Watch section.

U.S. Presidential Election. On Tuesday, November 6th, voters will select the President of the United States who will serve for the term extending from January 2013 to January 2017. Regardless of whether Barrack Hussein Obama or Willard Mitt Romney wins the election, the next presidential term most likely will see the onset of a domestic, hyperinflationary great depression. That is the ultimate domestic financial disaster that has been predicted here for a number of years, with an outside timing of 2014 (see Hyperinflation 2012 and links therein to preceding reports).

While the longer-range outlook should not be affected much by the election results, the impact of a very-short-lived shift in global confidence in the U.S. dollar is a possibility.

In recent days, London bookmaker Ladbrokes has shown odds shifting increasingly in favor of Obama, who has been that bookie's long-term, odds-on favorite. As of this writing, November 2nd, the odds were 1-4 for Obama (meaning a winning bet of $4 would generate a profit of $1), versus 3-1 for Romney (a winning bet of $1 would generate a profit of $3).

Domestic polling-always of questionable quality-shows a close race.

Pocketbook issues that historically have dominated voter preferences-such as voting out incumbents when real income is contracting-strongly favor Romney.

If I were placing a bet on the election, I would take the odds on Romney.

The long-term solvency issues of the United States remain the primary threat to domestic financial, economic and political stability and to the relative global valuation of the U.S. dollar. The dollar's vulnerability to this issue has been seen consistently with ongoing failed federal budget negotiations and ever-expanding quantitative easing by the Federal Reserve.

The current U.S. government has demonstrated a political inability and lack of desire and to bring the federal government's fiscal problems under control, to address long-term U.S. sovereign solvency issues. Accordingly, a new President-particularly if he had control of both the U.S. Senate and U.S. House of Representatives-likely would be allowed a grace period by the global markets to act meaningfully in this area. Otherwise the circumstances should fall back to an ever-deteriorating position, as usual.

With an Obama win, look for higher taxes-that already are in place-with a resulting much-weaker economy, much-increased government spending and a rapidly-expanding federal deficit. These are factors that, on balance, should result in sharp deterioration of the foreign-exchange value of the U.S. dollar and correspondingly lead to higher gold prices.

With a Romney win, look for relatively lower taxes, with a minimally less-negative economy and somewhat slower expansion of the federal budget deficit, than with Obama. In response, near-term market perceptions could some provide short-lived support for the dollar and detraction from gold.

The market effects here, however, should be transient, particularly if there is divided control of Congress. Bringing a roughly $5-trillion GAAP-based deficit (GAAP here means generally accepted accounting principles) under control would be extremely painful for the nation, but that is absolutely necessary, if the United States as we know it is to survive.

The budget-balancing task will not be easy, contrary to what has been popularized in the campaign, and I still view it as a political impossibility. The system was pushed beyond the point of no return, in the wake of the 2008 financial panic and near-collapse of the financial system.

Phony budget surpluses (non-GAAP), as generated during the Clinton Administration might be attainable, but the global markets are looking for truly balanced fiscal circumstances (see Hyperinflation 2012).

Neither Obama nor Romney, as president, has much if any chance of stabilizing the economy or fiscal conditions in the short-term, and of preventing a hyperinflationary collapse of the U.S. currency. Where Mr.
Obama, upon entering office in 2009, had the chance to change the future of U.S. fiscal conditions dramatically, he did so, but in the wrong direction.

Mr. Romney has promised to take immediate actions to balance the budget, to restore fiscal normalcy. Any President, new or re-elected, deserves the benefit of the doubt-irrespective of truly intractable deficit difficulties that largely were ignored during the presidential race.

The issues here need to be discussed openly, net of political hype. For purposes of disclosure, I am an old-line conservative Republican, with a libertarian bent, and do the best I can to keep my comments free of politics. Fault for the extreme financial and economic problems besetting the United States lies on both sides of the aisle, and neither major political party has shown the political will to address the underlying fundamental issues beyond political window dressing. This has been discussed in Hyperinflation 2012 and will be reviewed extensively in the post-election Special Commentary.

As background, the following comments were offered in the ShadowStats.com Commentary of November 14, 2008, following Mr. Obama's election win: Obama Faces Same Fiscal Limitations as Bush. The Obama Administration will face the same fiscal constraints that the Bush Administration has faced but largely ignored. Presumably, if Bush could ignore the fiscal constraints, then so could Obama. As the U.S. government's effective long-term bankruptcy gains broader recognition, however, Uncle Sam increasingly will have difficulty selling its debt to anyone other than the Federal Reserve (see the Hyperinflation Special Report of April 8, 2008. Shy of what new debt can be foisted on a gullible public or severely pressured U.S. trading partners, there should be zero new funds available to pay for new government programs, expanded programs or fiscal stimulus.

Nonetheless, the political miscreants in Washington will continue to spend money they do not have and that they have no prospects of ever raising, at least until the financial markets start to say "no more." With the economy in a structural contraction, promised further fiscal stimulus will have increasingly short-lived positive impact on the economy, but increasingly dire consequences for the U.S. fiscal condition and the U.S. dollar.

Views expressed by President-Elect Obama have been heavily suggestive of a rapid push by his Administration for a more-expansive, more-controlling, more-intrusive and more-expensive central government. As a rule of thumb, forced redistributions of income and wealth, greater government control of production and commerce, and more-intrusive government programs such as nationalized health insurance tend to lead to a less productive and less competitive society. Such programs limit economic growth and-at the extreme-ultimately condemn business activity to perpetual bottom-bouncing.

Such programs not only would exacerbate the current structural downturn in the U.S. economy, but also would accelerate the timing on the eventual hyperinflation, given the deficit financing needs of same.

Hurricane Sandy. A renewed downturn in economic activity was in the numbers before the Hurricane Sandy turned into Super-Storm Sandy and hit the Eastern Seaboard. Nonetheless, the storm likely will take the blame for much of any near-term weakness in the economy. Indeed, economic impact will be spread across at least several quarters, with the negative effects up front.

The storm's unprecedented scope and the resulting extraordinary disruption to normal business activity in areas from Virginia to Massachusetts, with severe disruptions particularly to normal business activity in the New York metropolitan area, indeed will have dampened fourth-quarter 2012 business activity and should have noticeable impact on the current quarter's GDP.

The GDP does not take a hit due to property destruction, but it does get a reported boost from reconstruction activity, which will be evident in the quarters ahead.

November employment and unemployment reporting should reflect transient mixed impact.

Looking at the scope of the damage, insured losses likely will run well above early estimates. Separately, an early assessment by the A.M. Best Co., the primary and largest rating agency for insurance companies, sees the property casual insurance industry likely being able to handle losses reasonably well, due partially to reserves that have been built up during a year with no major catastrophe loss.

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Monthly Unemployment Update

November 2, 2012


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Dear Subscriber,

The Bureau of Labor Statistics released the official Unemployment Rate numbers today. Based on "Seasonally Adjusted" data it was 7.9% for the month of October up from 7.8% in September. The unadjusted rate was 7.5% down from 7.6%.

The broader U-6 unemployment rate (that includes discouraged workers and those working part-time because they can't find full-time work) fell from 14.2% to 13.9%.

October's preliminary employment numbers are up at 134.792 million... above June's levels. Up until now June held the record for post 2008 levels at 134.057 million with the real peak in June of 2007 at 138.779 million.

So Seasonally adjusted unemployment is up while actual employment is also up.