The Global stock markets fared well for the week and were finished off with a non-farms payroll report on Friday that was, frankly, unbelievable – literally, unbelievable. Many economists do not rely too much on the Bureau of Labor statistics (BLS) data for a plethora of reasons such as:
- BLS is a government entity and therefore susceptible to politics
- BLS does not cull the data in real time with tax receipts information which is available from the Treasury. This point begs the question, why not?
- Non-governmental entities that calculate the same data do not come up with the same figures as BLS
- BLS constantly revises their data by large amounts
I am all for a solid jobs report, but when this one is analyzed, it left me more concerned than overjoyed. There are two items in the BLS report I found interesting. Of the total employed people in the US, part-time workers increased by 699,999 in January, versus an increase of 80,000 full time workers. This is the largest increase in part-time workers in a month ever. This is not a good underlying statistic for economic growth.
The other item of interest is that the BLS reports two sets of numbers. The first set is the commonly reported seasonally adjusted numbers which are scrubbed numbers by BLS economists. The less reported, non-seasonally adjusted numbers are the raw numbers. The media reports the seasonally adjusted numbers, and very few people ever see the non-seasonally adjusted numbers. I liken the seasonal adjustment to folks who pay their utilities in equal monthly amounts versus as-used. Consider the below clip from Table B-1 of the most recent BLS Employment Situation Report. Note that in the non-seasonally adjusted numbers from November 2011 to January 2012 more than 2 million jobs were lost. Yet, in the seasonally adjusted numbers from November 2011 to December 2012, we see a gain of over 400,000 jobs. That is quite a lot of seasonal adjustments. Hmmm…
One other fact that does not support the idea that jobs grew in January is that US Treasury reports of payroll taxes from December to January there was a decrease in payroll taxes. More jobs in January does not equal lower payroll taxes than was had in December. Let’s just say I am not a big believer in the BLS stats.
Click on the table below to view full size
Ever wonder what could be in store for the economy if we stay on the current spending and debt trajectory? A debt spiral. I think the image below can help answer any questions about what a debt spiral could look like.
Click on the image below to view full-size
The only real option the US has to avoid a debt spiral, like the above, is inflating debts away through things like currency devaluations and negative real returns. As I have covered in previous commentaries, to deal with our current path growing the economy is not going to happen at the level needed, outright default is not an option (according to the Treasury), and finding money won’t happen; which leaves inflation and financial repression.
The point about the debt spiral is not to make a gloomy prediction, or to cast doom and gloom on the economy. The point is to recognize the cycle we are headed for if things continue on the current path, and to plan for the possible outcomes. I view my position as an advisor as being one to recognize the current state of affairs, and to have plans ready for all possible outcomes.
Do you have an investment strategy that seeks to protect your portfolio against volatile economic conditions? Call me to schedule a free review of your current investment portfolio – 913.402.6099.
John P. Chladek, MBA, CFP® is the President of Chladek Wealth Management, LLC, a fee-only financial planning and investment management firm specializing in helping families and couples who are not yet retired realize their financial goals. For more information, visit https://www.chladekwealth.com.