Monday, March 19, 2012

Art Cashin shows that Government adjustments to jobs reports masking the real picture

Highly respected UBS economic analyst Art Cashin did a critique of the recent BLS reports coming out of the government regarding jobs and unemployment.  His focus was on the massive 'seasonally adjusted' tools that are used to estimate data that isn't confirmed, and with so much of the latest reports showing job growth that isn't actually there, Cashin assesses that the reports no longer carry much weight as an economic indicator.

Most economic data is seasonally adjusted. This is a good thing because there are seasonal patterns during the course of the year. But the sheer size of the recession we went through had an unintended impact on the way those algorithms run. When the economy fell off a cliff in the Great Recession it was like no other recession we have experienced, so it wasn’t easily compared. The systems received data in Q4 and Q1 expecting it to be particularly weak on a seasonal basis. Therefore, they adjusted upwards and that was not intended. There is an easy, un-confusing, fifth-graders-can-do-it, way around this, which is to look at the year-over-year growth rate which shows something quite ominous. When we look at our forward-looking indicators both sets surged initially coming out of the recession. Then they rolled over. They popped up briefly again about a year ago and now they have turned down again. The Weekly Leading Indicator is now at its worst readings since July 2009. These leading indicators have hardly been swayed from their recessionary trajectory. So it brings the bigger question, can unprecedented global monetary policy repeal the business cycle? And these pictures say no. - Zerohedge


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