Numerical Hat Tricks & Interventions: ‘Official’ government statistics vs. U.S. economic reality

The true state of the American economy in a post-2008 Financial Crisis world is not what it is depicted and sold as being by the U.S. Government and the sycophantic mainstream corporate financial press which remains mostly obedient to its dictations.  Credible statistics for such vital economic indicators as the “official” rates of unemployment, inflation and the gross domestic product (GDP) growth rate are vastly different from what is routinely reported by government entities including the Bureau of Labor Statistics (BLS), Bureau of Economic Analysis (BEA), U.S. Treasury and most certainly the U.S. Federal Reserve itself, which practically runs the economy via diktat monetary and fiscal policies with little to no oversight by any formal constitutional branch of the U.S. Government.

Proof of said divergences in data reporting can be found by critically observing the key differences in how said metrics had been measured in decades past by the government versus how they are being measured today, and why.  Confirmation can also be found by contrasting the differences in stories reported in said mainstream press itself; namely, reports relaying supposed economic strength – as judged by cooked metrics - alongside consistent reports openly discussing rising homelessness and crime in urban and even suburban areas, collapsing retail spending, and a reprising real estate correction – trends which traditionally indicate widespread and growing economic distress.

The reasons for such purposeful statistical misreporting include key political ones involving the need by the government for maintaining an image of the US economy as still the strongest on earth despite enduring the “worst economic crisis since the Great Depression”, as the financial press nonetheless oddly, willingly admits.  This ‘officially’ propped up image helps justify foreigners keeping US Treasury Bonds.  Reasons also include the government avoiding adjusting entitlement payments higher due to the real rate of inflation, considering already record-level U.S. debt.

America’s (‘Massaged’) Unemployment Diagnosis

The current “official” U.S. Unemployment Rate – meaning that which is revealed by the BLS (a division of the U.S. Department of Labor) – listed as 4.5% for the month of March 2017.  Said reported rate had ranged between 4.6% and 5.0% throughout 2016.  The March 2017 number was even touted as being “the lowest in [a] decade”, with the November 2016 figure of 4.6% having been praised as at a “nine-year low”, seemingly indicating that the U.S. economy is back on track after a brutal 2007-2009 Financial Crisis, which – again -- heaved many sustaining aftershocks for years.

The problem, and resulting controversy, with how the BLS tabulates monthly, seasonal and yearly unemployment figures is that the means of data collection involve a limited survey which skews the meaning of incentives for people seeking work.  The Current Population Survey conducted monthly by U.S. Census employees reaches out to only a limited number of households as a supposedly accurate, representative sample of tens of millions of Americans. Said survey uses opaquely random sampling methods while rendering household participants who are “not actively looking” for work as effectively out of the counted labor force.  Per Investopedia, “[t]his is a controversial issue, as many feel the unemployment rate excludes a large number of people who are out of the labor force, not because they do not want a job, but because they have simply given up looking [for work]”.

The BLS’s official unemployment figure – labeled the “U3” - is expectedly not the definitive metric for all economists, analysts and money managers, despite serving as the monthly news headline figure.  There is also the “U5” figure, which counts the U3 along with “discouraged workers” who have stopped looking for work because current economic conditions make them believe that viable work is simply unavailable.  The U5 also includes “loosely attached workers” who are capable & prefer to work, yet haven’t actively sought it in recent months (perhaps due to lowered self-esteem resulting from months of unemployment – again, not a concern for government economists).  There is also the “U6” unemployment figure, which includes the U5 along with part-time workers who prefer full-time labor yet cannot secure it due to more systemic or structural economic faults such as “underemployment”.

The March 2017 U5 figure listed at 5.4%, while the U6 came in at 8.9%, clearly nearly twice the “official”, headline-grabbing U3 number.

Lastly, a valuable independent economic research organization based in Northern California entitled Shadow Government Statistics (“ShadowStats”), calculates a separate, much wider metric entitled the “ShadowStats Alternate” unemployment estimate, which purposefully includes much longer term discouraged American workers who’ve been unemployed for over a year.  I.E. People tactically ignored by the BLS for said tabulations.  Per ShadowStats, their estimate relies upon means of government calculations which were abandoned – ostensibly for political reasons -- by the BLS in 1994.

Said ShadowStats Alternate unemployment figure registers at a staggering 23% - well in range for what America endured during The Great Depression (although the government and press ‘urge’ us not to go near that phrase again...).

Source:  http://www.shadowstats.com/alternate_data/unemployment-charts

America’s (‘Massaged’) Inflation Diagnosis

The U.S. Government will tout currently low inflation, with many mainstream commentators even warning of outright chronic deflation.  Yet, Americans feel the clearly rising burdens of paying rents and fuel, medical costs, insurance premiums, certain foods, medicinal drug prices and a myriad other consumer staples.

Similar to how determinant metrics for unemployment were changed by the BLS in 1994 as per changes in census measurements, the BLS performed methodological shifts in calculating and reporting consumer inflation, as displayed monthly by the Consumer-Price Index (CPI).  The resulting numbers have been consistently lowered, with the underlying reasons remaining perceptual and firmly political.

Again, per ShadowStats, the CPI has been remolded since the early 1980s to purposefully understate the “official” rate of inflation, versus the actual consumer experiences:

CPI no longer measures the cost of maintaining a constant standard of living.  CPI no longer measures full inflation for out-of-pocket expenditures.  With the misused cover of academic theory, politicians forced significant underreporting of official inflation, to cut annual cost-of-living adjustments to Social Security, etc.

Use of the CPI to adjust retirement benefits, private income or to set investment goals impairs the ability of retirees, income earners and investors to stay ahead of inflation.  Understated inflation used in estimating inflation-adjusted growth has created the illusion of recovery in reported GDP.

Hence, these critical statistical figures are purposefully misstated for both domestic political reasons (I.E. entitlement expenditures and the U.S. federal budget deficit) as well as vital foreign considerations (I.E. international perception of the U.S. economy, trust in the U.S. Dollar as global reserve currency, continuing necessary reliance on a Petrodollar Standard, etc.).

Thus, when ShadowStats calculates formal inflation figures while relying upon the more data-inclusive yet shrewdly abandoned methods from past decades – methods which, again, incorporate vital consumer costs – they naturally arrive at much higher percentages:

Source:  http://www.shadowstats.com/alternate_data/inflation-charts

Source:  Ibid.

Questioning the official CPI figures has persisted for some time by contrarian and “heterodox” economists and hard money (I.E. gold standard) advocates, with even divisions of the U.S. Federal Reserve attesting to government metrics differing from household experiences.

U.S. GDP:  Overstated?

Although the U.S.GDP figure has been contested as a viable measure of a nation’s genuine economic development, sustainability and wellbeing, it is nonetheless relied upon as a core measure of economic strength.  That said, and as related to the above quantitative phenomena, questions also linger over the credibility of U.S. GDP growth rate figures.

We defer again to ShadowStats, which conveniently provides an “SGS-Alternate GDP” annual rate of growth.  This more transparent figure “… reflects the inflation-adjusted, or real, year-to-year GDP change, adjusted for distortions in government inflation usage and methodological changes that have resulted in a built-in upside bias to official reporting.”

Their estimated blue line for the SGS-Alternate below illustrates the multiple percentage point reduction from the official, BEA-issued U.S. GDP growth rate:

http://www.shadowstats.com/alternate_data/gross-domestic-product-charts

U.S. Equity Markets:  The “Invisible Hand” Made Increasingly Visible

Per 18th Century philosopher and accepted father of modern capitalism, Adam Smith, the marketplace is ultimately guided by an “invisible hand”.  I.E. An “unobservable market force” helps the supply and demand of goods and services in free markets “automatically” reach an equilibrium position for trade.  It sounds great in theory, until one studiously observes movement behavior in the indices of major U.S. stock and equity markets over the past few decades.

“There are no markets anymore, just interventions.” -  Chris Powell of GATA.org

After the October 1987 U.S. stock market crash, President Reagan assembled what later became known as “The Plunge Protection Team” (PPT) in order to prevent future fiscal crises by intervening directly in markets should there be panic selling.  This outfit included the U.S. Federal Reserve, Treasury and other critical entities tasked with carefully orchestrating interventions to provide ‘circuit breakers’ when mass frenzy threatens the financial system (which, on its own, questions the overall sustainability of said financial system).  Yet warranted concerns linger over the ‘graduated scale and scope’ of what this outfit, or its ancillaries among large banks, exchanges and increasingly, technologically complex high frequency trading tools, are committing, considering consistent, seemingly fortuitous reversals in direction for U.S. stock markets after aggressive corrections in recent years.

For many rote investors, traders, financial salespeople and certainly government bureaus tasked with reporting items like, well, the U.S. GDP, there is a collective shrugging of shoulders over the PPT’s proven or even potential actions, let alone the need for its existence in supposedly “free market” conditions.  If the PPT’s actions benefit them and the country’s economy overall, then what’s the point of referencing cerebral, ‘wonkish’ contradictions in economic theory?

Yet theory must, at some point, be reconciled with reality (especially if it’s an invalid theory...).  Meaning government interference in so-called “free markets”, as well as manipulating vital economic indicators such as unemployment, inflation and GDP numbers, eventually leads, ironically, to distortions in the economy which get increasingly harder to fix.  Vital, accurate asset price discovery becomes warped over time.  Contradictions between ‘free, open trade’ and said interventions (read: manipulations) result in the hoarding of commodities and other goods by those (I.E. foreign central, private and hybrid banks) who become aware of such ‘noble lies’ (to paraphrase Plato).

Ultimately, the very philosophical edifice underlying the economic and political system of a nation (the U.S. or U.K.) or system (“Market Fundamentalism”) is drawn into question, as are the capabilities of the so-called enlightened leadership backing them.  The same leadership which perennially preaches to the rest of the world to conform to its beliefs and practices.

Conclusion

The false reasoning over the government’s shifting of methodology over key economic metrics involved the seeking of ‘information-age efficiencies’ that were assumed to accompany the dawning of the Internet Age back in the mid-1990s.  Yet these ‘efficiencies’ resulted in the hollowing out of the US work force over the past two decades.  They also contributed to the reversal of rising wages, both factors of which are directly killing off the middle class that had been built up over the prior five decades.  Indeed, for the sake of critical transparency, this is partly where the value of history matters to economics and finance, which are fields in dire need of interdisciplinary salvaging from excessive, shaky mathematical assumptions regarding human behavior.

Subsequently, we have supposedly been in a “Recovery” since 2009, yet the Federal Reserve hasn’t been able to substantively raise interest rates to match what a traditional recovery has warranted in the past.  Instead, there have merely been micro-adjustments higher – ultimately to give short shrift to defending the increasingly risky US dollar – while Negative Interest Rate Policy (“NIRP”) is now even being considered, as it had been with futility in Japan and Europe - to try and resolve chronic lack of demand.  Much of these systemic dysfunctions can be owed to poor data reporting – or outright omitting – over decades.

# # # #

Pye Ian, Newsbud Senior Analyst & Commentator, is an independent economic and geopolitical researcher as well as a strategic planning and business development advisor.  His articles and analyses on international affairs, economic trends and cultural topics have been published in various mainstream and alternative press sources. Mr. Ian’s wider intellectual interests are reflected in his writings on the convergence of foreign affairs, political philosophy, history, global finance and energy policy. He has undergraduate degrees in economics and political science from the University of California and a Master’s degree in finance from Cambridge University. In addition to English, Mr. Ian has proficiency in Farsi.

 

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Comments

  1. This was an informative and much-needed addition to the Newsbud team. Thank you.

    Also, perhaps you could address the IMF’s SDR transition to the new world reserve currency and the domestic fiscal implications it might have in the US as it relates to your analysis above.

    https://philosophyofmetrics.com/e-publications/

  2. victor friese says:

    I AM VERY GLAD NEWSBUD HAS A REAL ECONOMIST ON BOARD!!!!!!! After Paul Craig Roberts turned out to be an Alex Jones style fraud, we were in dire need of a person such as Mr. Ian.

    Oye, could you:

    1) Cover the student loan debacle. How many are defaulted? I graduated with high marks from a supposedly good state school but have not paid anything on my loans in almost a decade. I am considered disabled though, so my experience may not be representative of the whole. And no, I still cannot bankrupt my loans. Please cover student loan bankruptcy too.

    2) Please cover the economic sabotage of places like Latin America, Africa, Greece (what happenend to that report Spiro traveled to Greece for?), and the middle east. Maybe you could work with Sorenson on finding where the military “lost” that 8 trillion dollars.

    3) Please cover what the BRICS really is and why it is linked to the IMF and why every country on earth has a private central bank and who owns these private central banks.

  3. victor friese says:

    That should be Pye, not “Oye”.

  4. victor friese says:

    Oh, and he worked for J.P. Morgan, and Lazard (my above comments is being moderated for some reason).

    http://www.paulcraigroberts.org/pages/about-paul-craig-roberts/

    “Business

    Dr. Roberts was president of the Inlet Beach Water Company, president of Economic & Communication Services, advisor to J.P. Morgan asset management, advisor to Tiedemann-Goodnow, advisor to Lazard Freres Asset Management, and a member of corporate and financial boards.”

    Oh, and he keeps pushing the good Putin nonsense which is thoroughly debunked in this article.

    This was originally linked above. “Clinton Versus Trump And The Co-Option Of The Liberty Movement”

    It is the market site that has that article. I am not repeating the link due to moderation worries.

  5. victor friese says:

    MY COMMENT HAS BEEN AWAITING FOR MODERATION FOR 6 DAYS NOW! PLEASE POST IT ALREADY! IT HAS NO EVIL LINKS IN IT!!!!!

    • Victor, our site automatically suspends comments that have multiple links. End of it. Also, this is a good time to bring up another point (warning): Too many annoying, not constructive comments, and your tone have been annoying not only Newsbud but several members. Here is our suggestion: Our web admin will contact you, and provide you with full refund. We certainly appreciate your kindness and generous contribution, but you are not, and do not act, fit to be Newsbud Community Member. And we are extremely focused/busy/driven here at Newsbud to allow whining/constantly complaining/offensive pests over here. Please find a different home. Best, Sibel Edmonds

      • VoiceOfArabi says:

        Hello Sibel, Newsbud team, and members of this great site.

        I am worried about the post directly above!.. I don’t necessarily agree with the content, style or frequency that Victor contributes in, however, i always imagined Newsbud to be a “safe zone” for our thoughts and ideas, and if we have to start “censoring” ourselves for the fear of finding “different” home, then you will see members reducing in alarming numbers.

        Whatever happened to:
        “I Disapprove of What You Say, But I Will Defend to the Death Your Right to Say It”

        • victor friese says:

          VoA, in this case I think you are being a bit over dramatic. I think perhaps I have been complaining more than I realized ( to continue my list 4) I complained about the thing where philip and peter keep refering to Trump as though he uses his own brain to make decisions and is not simply a puppet… but that one I should make, but it is another one in the pile. And there were some others I just remembered and forgot which were more pointless…)

          I am still not sure what is meant by offensive posts though. I haven’t been trying to offend anyone. I do need those pointed out due to this.

          The reality is that the Newsbud team are working long hours, and is understaffed for what they are doing, and I have been complaining too much, and I will try to be more constructive in the future. They need more support so they can hire more people (and on that note what happened to the kickstarter or patreon they were going to do? I recall they were not going to use kick starter again, but I have not seen the new donation campaign.). That is what would fix most bugs. Unfortunately I and many others are limited in what we can accomplish there as far as recruitment and contributions are concerned.

          Also, if the volume of my posts bothers anyone, please realize that sometimes I post just to add something to the comments. I get tired of seeing so few comments, so I try to add something in the hopes it will entice others to comment. A couple years ago the comments were more lively. I wish Benny and Xicha would post more. And there were others too. Sometimes I wonder if some sort of web tool is being used to sort of fragment the commsnts sections so that only certain viewers see certain other viewers comments. That is not far fetched these days!

          Anyway, I am starting to ramble, I will try to be more constructive and less annoying.

      • VoiceOfArabi says:

        Hello Victor Friese,

        I have tried to leave a message directly below your post, but it seems like it is not working or i may have click the wrong buttons. regardless.. Here is what i want to say again.

        I don’t agree with shutting people up just because they have different opinion to us, regardless of how crazy, but i also understand that crazy comments delivered in abrasive way will eat on anyone’s nerve sooner or later.

        I am sorry to have to deliver this to you, but your comments and the style of delivery have a lot of room for improvement. I suggest that you read up on “blog etiquette” and improve your communication skills if you wish for people to “read” what you write on this and any other blog.

        I too have limited communication skills, and even more limited command of the English language, but I try to improve all the time..

        my comments are meant as constructive criticism, so I hope they are taken in that light.

  6. victor friese says:

    Um, okay. The only complaints I can recall making are
    1) Not being able to watch the members only vids (although I don’t recall complaining more than once or twice)
    2) That screwy paypal mess where I screwed up the subscription due to some sort of site bug.
    3) This time about the post moderation.

    I will try to keep complaints down though.

    You will have to be more specific about any other annoying posts.

    To Ralph, below is what I was trying to post. Should have just done it this way to begin with.

    Your comment is awaiting moderation.

    The below are just some examples…

    The Trump pushing, and general controlled opposition pushing, articles like this

    From Paul Craig Robert’s site “only in america an indiscreet selfie can put a kid in prison paul craig roberts”

    with quotes likes this

    “When I was in high school, the female age of sexual consent was 14 years old, regardless of the age of her sexual partner. Today to engage in consensual sex with a 14 year-old male or female is a felony. In some states if both sexual partners are underaged, it is a misdemeanor.

    I don’t know when the age of consent was raised from 14 to 18 and whether it progressed upward in stages or happened all at once. I suspect it was the product of conservatives who objected to welfare payments to unmarried black female teenagers for whom liberals made it possible to escape parental control via childbirth and possession of an apartment of their own.”

    especially in light of this

    From Land Destroyer

    How Breitbart Got Conservatives to Forget Morality and Embrace Pedophilia

    “It is an amazing feat by the establishment to have first – under the administration of US President Barack Obama – gotten liberals to embrace endless wars of aggression, and now to convince conservatives to defend advocates of child rape and the act of child rape itself.”

    Also see this for more:

    THIS IS A VERY VERY VERY IMPORTANT ARTICLE TO READ!!!!!!!

    From alt market “clinton versus trump and the co option of the liberty movement”

    “Whenever you have a rebellion focused on the inherent ideals of freedom, totalitarian institutions struggle to intervene. The issue is, freedom is not only moral, but practical. Wherever true freedom exists, people are not only happier, but more productive and prosperous. It’s hard for a tyrant to fight a rebellion based on freedom because the idea is more powerful than any weapon or any form of treachery. No matter how advanced the tyranny is, and no matter how many rebels they imprison or kill, the idea of freedom endures.

    The only way to destroy a rebellion like this, a rebellion like the liberty movement, is to make it about something other than freedom. The powers that be have to convince that movement to support policies that are destructive to their own ideals. If this can be done, then that rebellion has lost the advantage of principle – the only advantage that really matters.”

  7. Thanks for witing this article. There’s not much I can add at the moment, except to say that it seems that the staff producing the governments (US and others) data seem to be sincere in their beliefs that they are doing a good job. Some employers will argue that there is full employment because they cannot get more staff at the rates they are willing to pay, but that’s an arguement that quickly gets complicated, and that’s without the politics.
    And Shadowstats have sound arguments for the data they produce. I suspect both or either can be right depending on how the questions get asked.

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