PLAYING THE NUMBERS:

Thinking About Magic

by Fred Cederholm
It would be nice to believe in "magic numbers" they tell us, but I am not that gullible.

I’ve been thinking about magic. Actually I’ve been thinking about our economy, numbers, unemployment, self-employment, energy, natural gas, housing, common sense, and the primrose path. I hope everyone had a great weekend. I watched the Super Bowl and the Green Bay victory as a diversion. Let me say, it was a questionable distraction at best. About four o’clock on Sunday, I already had assembled the factual components for this week’s column. I popped a bowl of corn and fixed myself a large milk and Dr. Pepper, and curled up to watch the game, the $3,000,000 commercials, and the half time show with my little black Scottish terrier, Mac II. It held my attention (mostly), but I still could not take my mind off of the information I had compiled. Mac II mostly slept, licked his paws, and stretched.

You see last week’s News stuff was filled with so many anomalies, and contradictions about our economic situation. Where do we actually find ourselves on the continuum of the so-called recovery? I tried to be objective, but I just couldn’t. How often I’ve said that there can be no recovery without jobs... I hold to that because employment is THE leading indicator in this regard. It happens early on in any normal recovery. Uncle $ugar has been capitalizing on this perception. In December we were told the unemployment rate dropped from 9.8% to 9.4%. This was NOT because of a surge in jobs created; it was because Uncle dropped 600,000 of the unemployed workers because it was felt they were no longer looking for work. When you have been out of work for pushing two years, it is hard to aggressively keep looking --- so you get dropped from the stats. This set the stage for an even bigger “tall tale” last week.

The Bureau of Labor Statistics informed US/ us that a net of 39,000 jobs were created in January (unlikely, but still believable). This brought the unemployment rate down to 9%. Huh??? Two months of “growth” had eliminated almost 20% of the unemployment/ underemployment? This was the fastest decline in the history of the US. What gives? It you divide the 9.4% by the 0.4% decline you get 23.5. Multiply the 39,000 new jobs by 23.5 and you get 916,500. So... this tells me (using their numbers) we only need to create 916,500 jobs and everybody in the US is working? I don’t TH*NK so. Another way of looking at this is to divide the 39,000 by the 0.4% and multiply by one hundred. That gives you 975,000,000 working people in our country. Again, I don’t TH*NK so. Our WHOLE population is a total of 310,775,000!!! What else did Uncle $ugar manipulate to get to the second month of growth?

If you read the fine print (make that the really fine print) you learn that we allegedly had a surge in self-employment in January. Self employment jumped from 23 MILLION to something like 26 MILLION. That would make the increase in self-employment the largest in US history. I will admit that January was a horrible month, weather wise; but did something like 3 MILLION unemployed set up snow removal businesses in January? Nice try Uncle... but no way!

We have also seen energy prices rise to the highest levels in a January in US history. Regular gas at my local Casey’s is now $3.179 a gallon. This rise is in line with other commodities increases being posted on-line. Whether this is due to the current Egyptian problems, or to the inflation being “fueled” by the QE2 (or what ever number of FED intervention program is at work). Last week, I saw several articles about how we need to fix our energy problems with the huge surplus of natural gas we have here on this continent. Natural gas was proposed for electricity generation and motor vehicles. Then... I read where natural gas delivery was being cut in Southern California, Arizona, New Mexico, and Texas. Which is it? We can’t have it both ways, can we?

I’ve read that the housing market has turned around or that the inventory of unsold homes is “closing the gap.” Again... a nice try. It is true that some properties are selling, but at how big a discounted price? As far as I know the laws of supply and demand that I learned in my college economics classes still apply. 2008 set a record for the number of foreclosures. 2009 broke that record. 2010 broke that record. The outlook for 2011 is to break that record. Nationwide 1 out of 46 homes has been foreclosed and is available for sale. That is over 2% of all homes in the US. Add to that “paid off” residences on the market, and add to that any new construction (there still is some of this as well) and you get a gargantuan number of properties on the market. Record discounts are further predicted for 2011. This may be great for buyers (with money) but the outlook is not so great for the sellers.

Uncle $ugar, Ben Bernanke, Timmy Geithner, and President Obama want the country to believe that we are in the midst of a (strong) recovery. Common sense and the numbers even they are putting forward tell us otherwise. It would be nice to believe in any positives they tell us, but I am not that gullible. Equity market indices are now up to at near 52 week highs. Yet, is this because the companies are doing so well? That people want to own them? Or, is it because interest rates have been manipulated downward to zero??? Is it that the QE2 continues to erode the value of the buck??? Or, is it that the government is buying clandestine amounts of stocks, just like it is buying the unsold US Treasury Securities every week? Uncle $ugar’s right hand has bought enough from his left hand already that the FED now “owns” more US debt than China!!! Is it all magic, or is it illusion?

I’m Fred Cederholm and I’ve been thinking. You should be thinking, too.


Copyright 2010 Questions, Inc. All rights reserved. Fred Cederholm is a CPA/CFE, a forensic accountant, and writer. He is a graduate of the University of Illinois (B.A., M.A. and M.A.S.). He can be reached at asklet@rochelle.net.



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This story was published on February 7, 2011.