TMFDeej (99.47)

The miracle of Birth / Death, how to magically turn -287,000 into -20,000

May 04, 2008 – Comments (6)

The government published several better than expected pieces of economic data last week that were celebrated by the media, the last of which was the April employment report.  It’s funny how we call a loss of 20,000 jobs in a single month good news, but given economists’ expectations for a loss of 75,000 to 80,000 I guess that it was.  Unfortunately, things aren’t quite as rosy as the government would like us to believe.  Once again the BS…er uh the BLS (Bureau of Labor Statistics) used the magical “birth / death” adjustment to make the jobs report look much better than it really was.  This month, the magical birth / death adjustment created 267,000 imaginary new jobs out of thin air.  If this “adjustment” had not been made to the official employment number the economy would have actually lost 287,000 jobs in April!!! 

I don’t know about you, but I personally find it very hard to believe given the current state of the economy and tight credit conditions that more companies were born than died, let alone that over a quarter of a million new jobs were created by these new phantom companies.  According to the birth / death adjustment, 45,000 new jobs were added in construction and 8,000 new jobs were added in the financial services industry in April.  What?  I highly doubt it.  I guess that the person who is in charge of making this adjustment hasn’t been watching the news much lately.

Add this questionable jobs number to the 0.4% increase in consumer spending, which was really only equivalent to a 0.1% increase after the fact that food and gas are so unbelievably expensive right now is factored out, and the 0.6% increase in Q1 GDP, which was really -0.4% once the bloated inventories and foreign trade are backed out, and the economy does not look nearly as pretty as all of the bulls out there were lead to believe last week.  It’s no skin off of my back, as someone who is fairly fully invested in the market and who rarely shorts stocks I welcome an irrational rally.  I’d think twice about jumping right back into consumer discretionary stocks, especially restaurants and specialty retailers though.  These are sectors that I have completely avoided.

Deej