Cooking the Books on Jobs
The official Bureau of Labor Statistics (BLS) jobs report ranks right up there with the Fed prime rate and the U.S deficit as tools government officials can use to attract favorable publicity. If you happen to be the President of the United States, and the monthly jobs report is positive, stand in front of the press in the Rose Garden, take the credit, and smile for the cameras. If the report is negative, blame your predecessor, and tell the American people we all have work to do.
In his very last State of the Union address, President Obama bragged that the United States was in the middle of the country’s longest period of private-sector job creation ever. “More than 14 million new jobs; the strongest two years of job growth since the 1990s; an unemployment rate cut in half.”
But CNN Money journalist Heather Long skillfully debunks the President’s analysis by showing how he deliberately misstated the number of months he actually served in office just to make his point about being a sterling jobs provider. If one starts the clock at February 2010 instead of at January 2009, then yes, Obama’s record winds up on a par with that of Ronald Reagan, and just behind that of Bill Clinton.
But the reason Obama’s jobs report massagers used the former date is (they argue) it took time for the administration’s policies to kick in for the country. So the race didn’t actually start until the Obama team caught its breath.
If that doesn’t persuade you the monthly jobs report is a sensitive topic, here’s another narrative for you. Two years before Obama’s re-election, the Census Bureau had caught an employee falsifying information that was entered into the unemployment report. Julius Buckmon told John Crudele of the New York Post he was instructed by superiors at the Census Bureau to make up information if he found it necessary to do so.
The Labor Department uses the services of the Census Bureau for its surveys in six regions across the nation. But the Labor Department is a difficult taskmaster. It requires census workers to reach nine out of ten households across the country, and to report the results of the employment status of each one. According to the New York Post’s Crudele, when it was left with a gap, “[Census workers in] Philadelphia filled that gap with fake interviews.” This is some of the work, then, that goes into devising a presentable and improved monthly account of the number of non-farm workers employed in America.
But according to a Deutsche Bank AG research team led by Dominic Konstam, it’s not questionable job growth that’s inhibiting the nation; it’s sluggish productivity, and if it persists businesses will fail to boost capital spending. Here’s what the Deutsche Bank report has to say about recent productivity growth in the U.S.:
“Heading into the second quarter of 2016, quarter-on-quarter productivity growth, a measure of the change in output per hour worked, has averaged just 0.7 percent over the past four readings, well shy of its long-run average of 2.2 percent.”
This result is truly disappointing. The only way corporate America can improve output is either to increase the number of hours worked, or produce more goods and services for every hour worked. But without a clear increase in demand, corporate America will have no incentive to invest in increased productivity.
So the monthly jobs reports “indicator” turns out to be misleading at best. As individual investors concerned about retirement, it’s best to stop relying on the tired old ideas of business cycles. Don’t persuade yourself it’s wise to wait for a better jobs report, a better stock market, or improved bond yields. It also points out that sometimes your gut feeling about how things are going can be your strongest ally.
So again the question: Can you protect your retirement funds from unanticipated setbacks, and from the long haul of lagging productivity and economic decline? Depends on what assets you hold. Unlike market-dependent investments, gold thrives when bond yields and dividends decline, and when jobs reports turn bleak, because while statistics, analysts and even investors can be manipulated, tangible assets can’t.