Many Americans simply assume that the government and politicians lie when they are talking about things like cutting taxes, or eliminating waste. But somehow, we tend to believe official government reports about things like economic “growth” or unemployment rates, or even cost-of-living increases.
The truth, sadly, is that the government is lying about these things too.
Take jobs and unemployment. Right after the election, the Obama administration’s Bureau of Labor Statistics proudly trumpeted that the economy had added 151,000 new jobs in October. President Obama, about to head off to India, land, where many American jobs have moved for good, made it sound like maybe the American economy had finally turned a corner. The news led to a jump in the stock market and everyone breathed a sigh of relief, because finally, we had a number that was greater than the 100,000 new jobs that we have been repeatedly told are needed “just to keep pace with the new workers who join the labor force every month.”
Only the number is a fraud. It turns out that this job number is a fictional construct created by BLS statisticians who are using outdated estimates for the number of new small businesses supposedly created every month, and also outdated estimates for the number of small businesses that go bankrupt every month. The reality is that in this deep recession, few new businesses are being started. No surprise there. It takes capital to start a business, and banks aren’t lending these days, especially to risky new start-ups. The reality too is that existing small businesses are folding at a high rate. The pace of bankruptcies of small companies is down from the record 2009 level, but is still extremely high by historical standards.
The real story on employment is told by the BLS’s household survey, which is taken every month and looks at 60,000 randomly selected households. That survey shows that far from the US economy adding jobs, 330,000 jobs were lost in October.
Lying about unemployment has been going on for a long time. It started to get bad back in 1981, when the new Reagan White House got the BLS to change the methodology for calculating the figure. If we used the earlier methodology from 1980 to calculate today’s unemployment rate, which would mean including all those who have taken part-time jobs while looking for full-time work, and those who have given up trying to look because no jobs are available (those currently considered to be “out of the labor force), unemployment today would be 22.5%! That’s more than double the official 9.6% rate.
But it gets worse.
With very little real economic good news to talk about, the government and the Federal Reserve have liked to cite the stock market, which has now returned to pre-economic crisis levels. That should make us feel good, right?
Except that unmentioned is that insiders–the executives of America’s companies, who have to report any trading in their companies’ stock to the Securities & Exchange Commission — have been selling their holdings at a record pace this year, and especially in the last few months. Bloomberg reports that in October, insiders sold an all-time record of $662 million in shares of their own companies, while buying only $1.6 million of stocks in their companies. That’s a sell:buy ratio of 423:1
Among the largest companies, executives were unloading their company shares at a ratio of 3177:1.
You have to ask: what do these insiders know about the future direction of their businesses, and of our economy, that we don’t know? My guess is they are all dutifully telling analysts and investors that things are just great, but you’ve gotta wonder: Why are they all getting out now?
Today’s Wall Street Journal notes that after pulling their money out of equities, and staying on the sidelines for over two years, small investors are finally starting to invest in the stock market again. The article’s headline, though, is: “‘Dumb Money’ Tests Bullish View of Stocks.” The article goes on to state that with what Wall Street experts mockingly refer to as the “dumb money” coming into the market, it “argues for caution.” The small investor, the article notes, is a “lagging indicator, reacting to past performance rather than predicting future gains.”
The other thing that they don’t talk about is that some 70 percent of the trading on Wall Street these days is now automated trading, with big investment banks like JP MorganChase and Goldman Sachs using big mainframe computers to buy and sell stocks, holding them literally for seconds or less. Take a look some time at a day’s trading graph. You will see almost every day a straight vertical line as millions of shares are bought or sold simultaneously at the opening of markets at 9:30 am Eastern Time, followed almost always by a reversal of direction as those whose computers made a collective, instant buy or sell decision take their profits and run. This is a new phenomenon, and hardly one that offers any predictive insights, or that bodes well for those who see the markets as an “efficient” way to allocate capital.
Moving to the cost of getting by, the Consumer Price Index, of CPI, has also been fatally tampered with because so many things are linked to it that end up costing companies or governments money. When the CPI goes up, workers naturally want their pay to go up accordingly, so their families can stay afloat. Social Security checks to the elderly and disabled, and to widows and orphaned children, are also raised when the CPI increases. Not surprisingly, back in the early 1980s, the Reagan administration, acting on the advice of a “blue-ribbon commission” on Social Security “reform” headed by future Federal Reserve Chairman and Ayn Rand acolyte Alan Greenspan, changed the way the CPI is calculated, making it much less reflective of reality–and much slower to rise. If you listen to the reports each month, you’ll often hear it noted that the figure doesn’t include energy costs, housing costs, or food costs, which the reporters blithely explain are “volatile”. Well yeah, but they are also a huge part of our all to real cost of living.
So we hear that inflation is “not a problem,” running officially at about 1.1% right now. That is comforting, but it isn’t an accurate reflection of what is happening in the supermarket or at the gas station. If we were to use the methodology that the was used prior to 1981, the CPI rate of increase right now would be coming in about about 8%. My guess is that, if you are one of those lucky four-in-five American workers who still has a real job, you have not gotten a raise anywhere near 8% this year or last. Am I right?
The other thing that is not getting much ink these days is what is happening to employment at the state and local level. Until the beginning of last summer, most states , local governments and school districts were managing to hold their own, thanks to federal government stimulus funding that allowed them to compensate for lower sales, income and property tax revenues. But now that federal money is all gone, and the recessionary shit is hitting the budget fan.
The result is that public jobs are being shed at a prodigious rate–but one which will only grow.
In the three months of May, June and July, 102,000 public jobs were lost at the state and local level–the highest rate of such layoffs since the 1981-82 recession. In September alone, 159,000 state and local jobs were lost. A total of 125,000 public school teachers have lost their jobs over the last two years, even as the number of students in public school has grown.
These are real jobs lost, not statistical estimates by analysts at the BLS (maybe they should start referring to the BLS as the BS).
A lot of this information can be found at an excellent website called Shadow Stats. It’s a site that should be visited daily by the hacks who write on business and economics for the corporate media, but if they are visiting it out of personal curiosity, they are sure not including its data when they slavishly report without comment the self-serving garbage coming out of official Washington.
With the tax-cuts-for-the-rich, budget-cuts-for-the-poor Republicans now about to take over the House of Representatives, and with gutless and shell-shocked Democrats in the Senate and the clueless Obama in the White House, we can expect even more dissembling from government statisticians, while unemployment continues to destroy any chance of an economic recovery, and average Americans who are still working find their paychecks buying less and less of what they need to get by.
Numbers don’t lie, but the people who compile them do.
DAVE LINDORFF is a Philadelphia-based journalist and columnist. His latest book is “The Case for Impeachment” (St. Martin’s Press, 2006 and now available in paperback). He can be reached at firstname.lastname@example.org