Economy Is Collapsing; Non-Farm Payroll Friday – Dave Kranzler

TND Guest Contributor:  Dave Kranzler

The Government’s “non-farm payroll” report – aka “the employment situation” – reported an alleged 160k jobs added to the economy in April.  I am loathe to even discuss this fairy-tale report out of disdain for ascribing any legitimacy to a complete work of fiction.  It is mind-blowing to me that economic “experts” like Mark Zandi jump on the financial market propaganda networks and attempt to conduct a serious discussion about the numbers (I remember when Zandi was a mediocre analyst for Moody’s – he was hack then and he’s a bigger hack now).

Having swept aside those reservations I want to point out that, of the 160k jobs allegedly added to the economy in April, the Government whipped up 233k jobs from its “birth/death model” statistical plug metric.  Without this fictitious numerical addition to the overall report, the economy in April lost jobs (the 233k number is pre-seasonal adjustments so it’s not mathematically correct to subtract 233k from the 160k, but it is correct to infer that the pre-birth/death number was negative).

The birth/death model is the Government’s estimate of the number of new businesses that were created in April net of the number of businesses that closed.   There’s not really words available that can describe the absurdity of the B/D model.  I’ll let the reader scan through the numbers in the graphic above to decide whether or not – in the context of every other economic report released in April – if the economy produced enough new businesses to affect the amount of hiring reflected in the Government’s report.

Ironically, Goldman Sachs has raised its forecast for the U.S. non farm payrolls (NFP) on Thursday,  expecting the employment report to crush expectations with a number closer to 250,000.  This is despite the fact that Goldman itself has slashed its payroll this year, cutting its fixed income division employment by 10%.  It’s just amazing how fraudulent the entire U.S. system has become.  It would be interesting to see the motivation behind Goldman’s highly misleading research reports, specifically the bank’s jobs forecast and its interminable forecast of sub-$1000 gold.

Please recall that when gasoline prices were falling the story-line pitched by Wall Street was that it would create a big bounce in consumer spending. This big bounce never materialized per retail and restaurant sales reports over the last several months. But also notice that Wall Street and the financial media market promoters are dead silent on the effect that higher gasoline prices will have on the consumer.

The non-farm payroll report with the birth/death model job additions stripped away  – i.e. significant job losses in April – is likely the accurate reflection of the level of economic activity in this country.   This assessment is reinforced and confirmed by the number of recent bankruptcies in the retail and energy sectors.   The 16% plunge in rail traffic during April reported by the Association of American Railroads further confirms this assessment –LINK.  Rail carload traffic reflects the level of business activity at the manufacturing and wholesale distribution level of our economy.   If activity in that sector is collapsing, it means that retail demand in every sector of the economy is collapsing.  Housing is next…

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About Dave Kranzler:

 I spent many years working in various analytic jobs and trading on Wall Street. For nine of those years, I traded junk bonds for Bankers Trust. I have an MBA from the University of Chicago, with a concentration in accounting and finance. My goal is to help people understand and analyze what is really going on in our financial system and economy. You can follow my work and contact me via my website Investment Research Dynamics.  Occasionally, I publish on Seeking Alpha too. As a co-founder and principal of Golden Returns Capital, LLC Mr. Kranzler co-manages the Precious Metals Opportunity Fund, a metals and mining stock investment fund.

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