Inflation and employment: Do you believe in magic or math?

MagicianIt’s a simple question — do you believe in magic or do you believe in math? As more and more economic data pour out of the government, it would appear most economists prefer a little slide step, a little sleight of hand — magic really — and are ignoring the actual math most regular people see right in front of their noses.

The government’s magic is meant to entice you into believing something good is being pulled out of a hat. “Trust us” they say, when you know in your gut something very different is really happening.

Jobless claims

Take this week’s initial jobless claims report. The Department of Labor would have you believe things are getting better. Initial jobless claims last week fell by 21,000 to 323,000. It is the lowest number in two months, good news. Magically employment in the U.S. is improving right?

But wait, last week included a holiday, Veterans day, so it was a four-day business week, not five days. Further, this is the start of  holiday shopping season, so retailers are hanging on to their seasonal, low wage employees. And yet, 323,000 people filed for unemployment last week.

Unemployment

Let’s look even deeper. The number of people continuing to receive unemployment benefits actually rose by 66,000 to 2.88 million last week alone and at the state level, 47 states and territories reported an increase in claims, only six reported a decrease (as reported by Bloomberg).

Finally, in the month of October, Labor reported that 204,000 new jobs were created and economists cheered. Wait. Didn’t we just say that over 300,000 people are filing for unemployment EVERY WEEK? Do the math — that’s a net negative of a million jobs.

It’s clear that the only magic happening is when jobs disappear before your eyes, faster than they are being created.

Let’s take a quick look at prices. Do you believe in magic or do you believe in math?

The producer price index fell last month dropping wholesale prices by 0.2 percent in October, suggesting inflation is nonexistent. But wait, gasoline alone fell 3.8% that must mean everything else rose right? Food costs in fact soared by 0.8% in October alone, that would equate to a 10% rise over the course of a year. Core wholesale costs, excluding food and energy rose by 0.2%.

Economists say the PPI proves inflation is no danger to the economy. Do you believe in magic or do you believe in math? When was the last time you went to the grocery and paid less?

Bolstering employment and avoiding both inflation and deflation are  all reasons the Federal Reserve gives for continuing its easy money policies — policies that Senate committee-confirmed Fed Chairwoman-to-be Janet Yellen embraces. Given the above, can the Fed stop magically making dollars appear out of thin air?

Of course not. The relentless Fed money printing must continue, fueling the devaluation of the dollar.

Do you believe in magic or do you believe in math? At this rate, it might be best to believe in gold.

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