The jobs report that came out last Friday sent shockwaves throughout the economy. Economists had estimated that the economy would lose another further 7.5 million jobs in May, yet the BLS reported that the economy had actually added 2.5 million jobs. That’s the biggest miss in history, and had many people scratching their heads, trying to figure out what happened. President Trump was overjoyed, clearly pleased by numbers that seem to indicate a V-shaped recovery. But can these numbers really be trusted?
A Dive Into the Data
It’s important to remember that the BLS numbers aren’t an actual counting of the number of jobs that have been created. In a country as large as ours, there’s no way to collect that type of data in just one month. Remember that the census only takes place every ten years.
Employment data is based on surveys that are submitted to businesses around the country over a period of one week. Those businesses are supposed to be a representative cross-section of the country, and the results from those surveys are then extrapolated to come up with data for the entire nation.
Here’s What’s Happening
The survey for last month’s employment data took place between May 10 and May 16. Remember that most of the country was still under lockdown, and in particular larger states such as California, New York, and Illinois that employ significant numbers of people. Are we really supposed to believe that the country actually added millions of jobs at a time when the economy was still in a deep lockdown?
One reason for the disbelief is that the data from the BLS survey is at odds with data from payroll processor ADP, whose employment report for May showed the economy losing another 2.76 million jobs. That already was a lower number than the 8.75 million payroll losses that economists had expected. But because ADP’s data comes directly from businesses, in this case nearly 400,000 businesses who use ADP to process their payrolls, it’s considered by many to be a more accurate look at employment than BLS. Thus the discrepancy between the two is an indicator that BLS’ latest report can’t be trusted.
Add to that the fact that BLS admitted to major errors in its last two employment reports that significantly understated the unemployment rate, and anything BLS puts out right now has to be taken with a grain of salt. Some are even speculating that BLS is under pressure to put a rosy face on the economy and the employment situation in order to keep President Trump from losing face.
Can We Trust the Government’s Data?
One example of the problems with the BLS jobs report is the fact that it made methodological changes to its so-called birth-death model at the same time. This had the effect of adding hundreds of thousands of jobs, just because of a statistical quirk. Then there’s the fact that dentist offices were supposed to have added over 240,000 jobs in May, despite the fact that there are only 200,000 dentist practices in the country, many have been shuttered, and even those that have reopened recently can’t perform popular services such as tooth cleanings. And those are just a few examples of the kinds of discrepancies within the BLS’ data.
Many on Wall Street couldn’t believe how at odds the BLS survey was with everything else we have seen so far this year, which is why going forward every piece of economic data the government produces will have to be gone through with a fine-toothed comb.
Is the US Going the Way of Banana Republics?
Faulty or outright false economic data is a hallmark of regimes that are in decline but don’t want anyone to know it. Anyone looking at China knows not to trust any data that comes out of China, such as the coronavirus data that was clearly incorrect, or figures on GDP that show amazing economic growth year after year after year, despite all sorts of other evidence to the contrary.
We see faulty data from countries facing massive amounts of inflation, such as Argentina, Zimbabwe, and others, whose governments publish inflation data that shows inflation far lower than it actually is. And the Soviet Union is a classic example of false data, with many fellow travelers in the West actually believing Soviet assurances that its economic production was on par with the West, when in reality it was nothing more than a paper tiger.
Juicing Wall Street and Stock Markets
President Trump believes that his reelection chances hinge upon the health of the economy, and in particular the health of stock markets. The higher stock markets get, the fatter 401(k)s become, and the more people find jobs, the better his chances in November. So there’s every incentive for the BLS to monkey around with statistical methods, survey sampling, etc. to provide the rosiest numbers possible.
Wall Street rejoiced at the BLS report, which isn’t entirely surprising, as it’s looking for any signs of an economic recovery. And since stock markets have been rising even in the midst of an economy in recession (thanks to the Federal Reserve’s money creation), the jobs report only added fuel to the fire.
What to Look For
Investors who really want to understand what’s going on with the economy need to realize that they have to look critically at any data coming from the government right now. With intense pressure to present an optimistic look at what’s going on within the country, cooking the books is more likely now than ever. When it comes to data on unemployment, inflation, GDP, etc., don’t just trust everything you see.
In reality, the fact that this data is now at risk of being politicized is more reason than ever for investors to cash out of stock markets while they still can. Better to take whatever gains you’ve made right now and keep your assets safe than to trust that there will be a V-shaped recovery and be left disappointed as the economy falls further into recession.
Those who haven’t already made the move to protect their retirement savings by investing in gold may want to start thinking about doing that today. Gold helps protect investor assets against the risk of recession, inflation, and other financial and economic turmoil. And with a gold IRA, investors can even roll over assets from existing retirement accounts into a gold investment, allowing the same tax advantages as a standard IRA account while offering all the benefits gold offers. So what are you waiting for? Take the first step toward making your gold investment today.