Seasonal Adjustments Are Disguising An Awful Labor Market
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Smoke and mirrors are the name of the game, particularly in an election year.
Of course, I'm talking about US economic data, particularly that of this morning's ridiculous slate of labor market data that signals record-shattering job growth, and a record-low unemployment rate. Both of these data points come with enough asterisks to sink a small ship, though. Under the hood, things are not as strong as they first may seem.
The nonfarm payroll data for January was the first HUGE beat of the season, coming in 117,000 jobs higher than the 216,000 expectation, making for an addition of 333,000 new payrolls last month. There is a big asterisk, though. For most of the last year, nonfarm payroll additions have been revised lower the month after their initial release. This is an intentional tactic (most likely) to skew the data higher when it is most likely to make news headlines, before quietly revising it lower the following period when it will be buried under the next headline data release. I'd expect the same tactic to be deployed here, with January being a dismal month in hindsight after it is revised next month:
Why? It has always been the case that in an election year, economic might is overestimated and revealed to be absolutely fraudulent when taking a peek under the surface—this dynamic of overestimation applies even moreso in the month of January. Take a look at January payroll changes, with and without the seasonal post-Christmas adjustment; the headline data of 333,000 new payrolls seems astounding, until you peel back the adjustment curtain to see an ugly 2.6 million jobs, temporary work for the Christmas season or not, were culled in one month:
Since last January on a non-seasonally adjusted basis, full-time workers rose by 374,000 while part-time workers rose by 585,000. Full-time positions are hard to come by at this stage in the cycle relative to previous growth, while part-time roles have made up the majority of the gains:
What's more, the amount of people holding 2 full-time jobs is still hovering at its highest level ever, of roughly 416,000 people:
Zooming out to include part-time roles, the amount of people holding 2 or more jobs is near its all-time high at 8.27 million people:
If these two charts don't elucidate just how strapped Americans are, I don't know what will. To top it all off, none of these new jobs that are fraudulently trumpeted in headline data to feign strength are going to native-born Americans, which is the majority of the working populace in this country:
Lest we forget to mention the granddaddy of all fudged numbers, GDP. The Atlanta Fed's GDPNow tool is used to give markets an estimate of where they believe this woefully inaccurate barometer for economic growth will be in the quarter to come. Estimates for Q1 jumped from 3% to 4.22% yesterday, an incredible rise in the expectations for economic might, led by a big spike in expectations for personal spending:
Taking a look under the hood though, you'll quickly notice that the economic engine (as measured by GDP so prioritizing spending) is kept purring by endless government spending that is quickly outpacing real economic growth. The Federal deficit sits at -6.46% of GDP and has been in secular decline since the early naughts, meaning that for every marginal unit of economic production, more marginal units of debt are required to sustain it, every single year. The favored "growth" metric of politicians is only a byproduct of corrosive spending that pillages your savings and leaves you destitute without you knowing:
The purpose of econometrics is to obscure reality such that the ruling class can rationalize their political ends and remain in power. In an election year, the obfuscation of reality and "adjustments" to the data are cranked up to 11 so that voters are more inclined to re-elect the incumbent thanks to a veneer of economic prosperity.
This can't last forever. Voters know that their dollars are worth increasingly less and their wages simply aren't keeping up, and markets will recalibrate to this reality in due course. The facade has to be maintained until November at the earliest, after which, all bets are off. Until then, strap in for more elaborate lying from the ruling class using statistics and mainstream media news chyrons.
Have an excellent weekend everybody, catch you on Monday!
Joe
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