The latest jobs numbers were released today, and the financial media is making much of the drop in the unemployment rate โ now 5.8% according to the Bureau of Labor Statistics. Obviously, the economy must be getting better, just like Janet Yellen and Barack Obama have been telling us, right? Not so fast. The results from Tuesdayโs elections tell a different story, as exit polls showed that the vast majority of voters were primarily concerned about the economy.ย Main Street Americans are waking up to the fact that this recovery is a hoax.
Even major news outlets like the LA Times are reporting on the new phenomenon of โsecular stagnationโ. ย ZeroHedge summarized how bogus the latest jobs numbers are,ย pointing out that most of the jobs gained are low-end service sector positions, while high-quality full-time work is dropping. Most alarmingly, it looks like there may soon be more waiters and bartenders in America than manufacturing workers:
A new article in the New York Postย explainsย the warnings ofย Paul Singer, head of Elliott Management Corp., who toldย his hedge fund clients that most of the official economic data shouldn’t be trusted:
- Fake growth: The US economy is growing moderately. Thatโs pretty much certain โ but itโs not growing as fast as the government would have you believe. The Commerce Department recently pegged third-quarter growth at a 3.5 percent annual rate โ but earlier this week, some real numbers came out. Our exports declined in the third quarter and construction spending was weak. So that 3.5 percent guess will probably be revised down to a 2.9 percent annual rate on those numbers alone. But Singer is probably also referring to the artificially low inflation number that Commerce uses in its GDP calculations. If inflation were measured correctly, GDP growth for all years might be 30 percent lower than reported.
- Fake money: Singer is referring to the $4 trillion in dough the Federal Reserve printed under quantitative easing that has resulted in millions of regular folks not getting much interest income and, therefore, theyโre cutting back spending. Thatโs why the economy is weak.
- Fake jobs: The Labor Department adds hundreds of thousands of jobs a year to its count for positions it thinks, but canโt prove, are being created by new companies. This practice, which has gone on for decades, needs to be investigated. On Friday, Labor is expected to report job growth of 230,000 for October. That figure will be boosted by another heaping serving of job guesstimates.
- Fake financial stability: The artificially low interest rates are not only propping up banks and Wall Street profits but also making the US governmentโs financial position look better than reality. If Washington had to pay market rates for the money it borrows, the US budget deficit and debt levels โ already excessive โ would be worse.
- Fake inflation numbers: Commerce doesnโt only play tricks with the inflation number used to calculate the GDP. It also tamps down the consumer price index โ and cheats Social Security recipients and others โ through academically approved methods like geometric weighting and hedonics.โ
Peter Schiff writes about the elections and false recovery in his latest commentary:
The sharp rebuke to the Obama administration delivered by the mid-term elections should not be construed as an endorsement of the GOP, which remains as unpopular as ever. Rather, as has been the case in the last few election cycles, voter revolts have hinged on continued dissatisfaction with the strength of the economy and the diminishing financial prospects of ordinary citizens. Given the apparent improvements in the economy, this fact continues to baffle the media which have concluded that Democrats simply failed to effectively communicate the successes that the Administration has achieved. Fortune Magazine offered a more complex conclusion that we have a good economy, but itโs just not the kind that benefits the middle class. I believe the truth is far simpler: Voters are dissatisfied with the economy because it is bad and getting worse. Although this unpleasant reality can be masked by economic doublespeak and government accounting gimmicks, the truth comes out in the ballot box.
According to voter exit polls conducted by CNN, 78% said they are worried about the economy, with 69% saying that, in their view, economic conditions are not good. 65% responded that the country is on the wrong track vs. only 31% who believed that it is headed in the right direction. Why should this be so if, as we have been told repeatedly, the economy is accelerating after five straight years of economic growth? After all, during the post war years, we have experienced recession on average, every seven years, and it has been almost that much time since our last recession. Unemployment has fallen all the way back down to pre-recession levels, the stock market is soaring to record heights regularly, the dollar is surging, the deficit is down by more than half in the last four years (to just a half a trillion) energy prices are falling, and the real estate market has had a great run over the last four years. So whatโs with the doom and gloom? Shouldnโt we be satisfied?
I have been saying for years that the โrecoveryโ is largely an illusion created by the effects of zero percent interest rates, quantitative easing, and deficit spending. The asset bubbles that have been created as a result of these policies have primarily benefited the owners of stocks, bonds, and real estate (the rich), while simultaneously deterring the savings and capital investment that is needed to actually create good paying jobs and increased purchasing power for Johnny and Sally Sixpack. So as the Dow churns higher, and the cheerleaders on CNBC try to outshine one another on their economic enthusiasm, the mood on Main Street continues to sour.โ
Peter Schiff is an American investment broker, author and financial commentator. Heย is CEO and chief global strategist of Euro Pacific Capital Inc., a broker-dealer based in Westport, Connecticut.
