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Economic Recovery?

Story by posted on February 14, 2013. Filed under News and Features,Opinion and Editorials. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

By Mike Gattavara

 

The Dow Jones Industrial Average spiked to over 14,000 for the first time since 2007. This surge implies an economic recovery.

Recent numbers show a growing job market. However, understanding government counting methods is critical, and it may provide clearer insight.

The Bureau of Labor Statistics publishes information on the job market at frequent intervals, and they often use a process called “seasoning”.

Seasoning, in the context of employment, regards the influx of labor into the labor market during the holidays as positive growth. Seasoning does not take into account the greater picture.

A few months later that same influx of workers that went into the labor market during the holiday months emigrated back to their previous employment situations. This is a potentially misleading way to look at the statistics.

The BLS also publishes figures which are not seasonally adjusted. These different numbers show a more realistic view of the job market. They also tell a very different story.

The recent BLS employment statistics, which are not seasonally adjusted, show a significant decline in America’s job force numbers. A drop of 1.2 million full-time jobs and a decline of 234,000 part-time positions are recorded on the BLS website.

The Federal Reserve is partly responsible for America’s reported recovery. According to the Fed’s statistical release (H.3) on Jan. 31, the nation’s money supply is increasing. In a window from Dec. 26 of last year to Jan. 23 of this year, the Fed recorded an increase of $77.9 billion.

Assuming its accuracy, the Fed has indicated that there’s a clear correlation between the monetary base (money supply) and the wealth of the nation.

The two factors illustrated are significant influences over the labor market and the reported recovery. Furthermore, they also don’t tell the complete story but provide additional and vital information about the inner-workings of our economy.

I think it’s critical for people to educate themselves about these issues and refuse to take government/economic statistics at face value.

 

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