Liars figure and figures lie, an expression that can definitely be applied to our imaginary government official who was asked: “What does 2+2 equal?” His response: “What do you need it to be?”
Just when you think you can put this highly overused phrase to bed, it pops its ugly head up again.
Let’s start with housing.
Normally, in the past, a sale was a sale.
Someone sold, someone bought, a mortgage was obtained, money changed hands, a deed was recorded, and people moved in.
Hence, a new home sale.
But alas, that was not sufficient enough to dissuade you and I from knowing that new home sales were in fact going down the drain.
So, when it was expedient to hike new home sales, and give the media and ultimately the general public a sense of confidence that housing was moving in the right direction, a new metric for sales was developed. A new home sale became a dollar down.
“Please Mr. Builder; we’re interested in a new house. Here’s a dollar, can you hold the house for a while?”
No deed, no mortgage, just the potential sale now counting as a new home sale. Enron, anyone?
Then, along came the birth/death phenomenon. Theoretically, new businesses are both created and closed every month.
The net change is an important number, but calculating the number of new jobs created in any given month has always been difficult and very time consuming. So, The Bureau of Labor Statistics (BLS) thought maybe they could make things easier, and also juice the numbers.
Once again, a “what do you need it to be” moment. Example: We lose 50,000 jobs; the BLS simply attaches a +150,000 birth/death, and voilá, an increase of 150,000 new jobs.
It’s a miracle! With the wave of a wand, lost jobs are now created jobs.
Why wait for years to make these adjustments when they can be done every month, especially in an election year.
Now, let’s examine the drop in unemployment from 9% to 8.6%. Headline news! Stunning! Moving in the right direction!
Unfortunately, another numbers charade.
Once people have dropped out of the job search and removed from the unemployment roles, it reduces the base, and therefore reduces the percentage of unemployment. Example: 100 job seekers, ten counted as unemployed = 10% unemployment. 98 job seekers, eight counted as unemployed, two not counted or not even counted as job seekers = 8.1% unemployment.
Along with his 40-years of dedication in the financial services industry, Bill is the President and CEO of GPSforLife, has recently authored a highly successful book entitled 44th: A Presidential Conspiracy, publishes his dynamic monthly financial newsletter MacroProfit, and faithfully continues his third decade on the radio with It’s All About Money, which can be heard weekdays on Money Radio in Phoenix and in podcast form on his website (and on smartphone apps) published at billtatro.com weekdays at 5pm Eastern. Bill can be reached via email at email@example.com and on Twitter @tatroshow.
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