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Tue

09

Oct

2007

Is the economy "out of the woods?" Can we trust the rosy forecasts?
Tuesday, 09 October 2007 23:29
by Danny Schechter

On Sunday, October 6, the Public Editor of the New York Times pointed to all the discrepancies and conflicts in the violence figures coming out of Iraq. He called for more nuanced reporting and increased public skepticism. He noted that the perception of progress there has been bolstered by the release of questionable statistics.

What's true of reporting from Iraq is also true about the job figures that the government releases monthly gauging the health of the U.S. economy. Can they be trusted? And what about the reporting on them? This is an especially timely issue as Fox News gets ready to launch its own heavily-hyped new Business Channel.

For weeks, we have heard all these warnings about the financial crisis sharpening and a possible recession. Reality intruded after a big subprime relief rally sent stocks soaring. Wall Street was quickly back in swamp, and it looked like the Federal Reserve Bank would have to cut interest rates again to further bail out the markets.

But then, on Friday, the Bush Labor Department announced a new jobs report and much of the coverage turned upbeat.

The report offered preliminary data claiming that the economy added 100,000 jobs in September. Suddenly, lower job figures from July and August were also magically revised upwards.

Wall Street went crazy. The S&P went up and the headlines went positive.

Here are two examples of the spin:
The New York Times:
"JOB GROWTH LOOKS ROSIER, EASING RECESSION FEARS."

The Wall Street Journal:
"US ECONOMY DOWN, NOT OUT."
The new numbers accounted for the turn around? Bear in mind, back in the 90s, in the Clinton years, 200,000 new jobs was expected on a monthly basis to assure economic growth. That was the gold standard. Now that number has been cut in half and is suddenly being treated as Great Leap Forward. How did the job numbers turn around?

Or have they?

Reports the Journal: "Much of the revision was caused by recalibrating seasonal fluctuations in government employment, including teaching."

Mmmmm... recalibrations of seasonal fluctuations! I'd love to let Stephen Colbert loose on that phrase. Look more closely and you will see these recalibrations deal with GOVERNMENT EMPLOYMENT, not jobs in the private sector. There were 71,000 jobs "recalibrated" in local education.

Yet establishment economists are saying these jobs are not what the economy really needs. The Journal quotes Nigel Gault, chief economist at Global Insight, to the effect that "private sector jobs are the underlying driver of the economy."

Yes they are, but these are not them. The biggest jump here is in government jobs. NBC News reported on yet more job cuts in Flint, Michigan Saturday and that manufacturing jobs are at their lowest point since 1950.

Presumably you would think the disappearance of these jobs would be upsetting to the wise men of Wall Street. In fact, they are but their concerns are being buried in stories that fuel the perception that the corner is being turned.

Example: Way down in the 19th paragraph of the Journal article Donald Kohn, the Vice Chairman of the Federal Reserve Bank, says he expected that the nation's "economic performance would be better." He says, "You should view these forecasts even more skeptically than usual."

But the business press, like the market that loves any excuse for a good rally, is not that skeptical. They tend to like positive numbers and downplay negative ones often without analyzing them.

Back at the NY Times, you had to jump from page one in the Business section with its, "Job Growth Looks Rosier" headline to page 8. There, at the very bottom of the last page, next to the corporate bond data — a place most readers don't venture — are these quotes:
"I don't think we're totally out of the woods yet," said Jan Hatzius, Chief United States economist for Goldman Sachs. "There are some real problems at the foundations of the economy. If nothing really bad happens, we can muddle through and unwind some of these problems over a lengthy period of time. And if something bad happens, we go into a recession."
So there it is, that depressing "R word" again, but pushed all the way down in the story. In journalism we used to call this "burying the lead."

Clearly the recession threat hasn't gone away. Not at all! As for "bad things" to fear, that surely includes the expected jump in oil prices and more unemployment. The actual rise reported in unemployment was minimized in most of the press accounts. (On Sunday, London's Observer reported: "Tens of thousands of New York bankers are braced for a crippling round of job cuts as the aftershocks of the credit-market collapse reverberate the length and breadth of Wall Street.")

Says Ethan Harris, the Chief United States Economist at Lehman Brothers, "We're likely to go through an extended period of slow economic growth. We're likely to see a further drop in the job market, a further rise in the unemployment rate, and, ultimately the fed will come back again and cut interest rates."

So there you have it, expectations of more bad news and hopes for another intervention by the Fed. These experts quoted in the stories actually contradict the upbeat tone of the stories and their headlines. Next month's Jobs Report will have to factor in the 100,000 plus jobs lost in finance and housing which have already occurred but are not yet reflected in the statistics.

In other words, these reports, like the coverage that say the surge is working in Iraq, are selective and inflated. They are aimed more at influencing perceptions than providing truth.

My questions: How do they get away with this? Why does the market buy it? Why does the press do it? And what are they leaving out?

Businessman and financial analyst Eric Janszen says our economy is increasingly showing the features of a Banana Republic, with low-paid government and service jobs for all. He writes on his website iTulip.com that the private goods producing sector so vital to a sound economy is shrinking:
"Construction firms cut 14,000 jobs in September, Factories slashed 18,000. Retailers got rid of just over 5,000 jobs. Financial services companies eliminated 14,000 slots.
However, gains in education and health services, professional services, leisure and hospitality, and in government work more than offset those losses, leading to a net gain in new jobs in September."
Jobs in government now parallel jobs in the good producing sector, he reports, as the dollar is being depreciated.

"The magic of a depreciating currency is working," he writes. "Foreign investors are buying UBRA (United Banana Republic of America) stocks and other assets at fire sale prices. Tourism is up as visitors from Asia, Europe, Canada and all other countries whose currencies have appreciated... visit the US for a cheap UBRA vacation, driving leisure and hospitality jobs within the service sector where most of the job growth occurred."

And wages? They are not rising as fast as prices. His conclusion:
"Suppression of wage increases has been the centerpiece of monetary and government policy to manage inflation in the Production/Consumption Economy since 1980. Given the difficulty in acquiring legitimate measures of actual inflation rates in the US economy, there is no way of telling whether these wage increases translate into increased purchasing power. Given the rise of oil and other commodity prices, it seems doubtful. In fact, it looks like the UBRA is going full-bore banana republic, including wage and price inflation to maintain employment going into an election year."
So there you have it: politically influenced numbers, another reason not to trust the mainstream media and search out more thoughtful analysis elsewhere.

As the old saying holds, "Figures lie and liars figure."
Danny Schechter spent eight years working for ABC News. He now edits Mediachannel.org [0]. Info on his latest film at InDebtWeTrust.com [0]. Comments to Dissector@mediachannel.org
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