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May 9, 2006 -- THE high price of gasoline is starting to kill the economy: More than 100,000 jobs would probably have been lost last month if Washington hadn't made some very optimistic assumptions.
That's what the Federal Reserve should be considering tomorrow when it decides whether 15 consecutive interest rates hikes is enough. But it won't even come up because the facts I'm about to tell you aren't the kind that are shared by government agencies.
Last Friday, the Labor Department officially announced that only 138,000 jobs were created in April. That won't even cover the number of new people entering the workforce.
Wall Street had been expecting 200,000 new jobs, so investors used the disappointing employment number as an excuse to rally stocks based on the misguided belief that a weak economy is somehow good for corporations.
It isn't, except for the near-term and fleeting benefit that the Fed will have to think before it pulls the trigger on more interest rate hikes. The main idea behind the rate increases was to slow speculation in the housing market. That's starting to happen, but the bigger problem is that the rest of the economy isn't nearly as perky as the statistics suggest.
Take Friday's employment report as an example. The Labor Department had to work some statistical magic to even come up with the inadequate 138,000 job figure, which included a whopping 271,000 positions it believes - but can't prove - were created by newly formed companies.
The government doesn't actually know if these new companies exist. The Bureau of Labor Statistics calls this its birth/death model.
The 271,000 jobs amounted to a much more optimistic assumption than even last April's guesstimate.
Do the math. Without those estimated 271,000 jobs from new companies the country would have lost 133,000 jobs last month - not gained 138,000.
A chunk of those 271,000 jobs probably do exist, but the number is a guess.
And with the recent spike in oil prices there are probably more companies disappearing than the government thinks. So, unless oil prices give the economy a break, don't be surprised if you start hearing the words recession and stagflation.
The last backward-looking economic statistic was the 4.8 percent annualized growth in the gross domestic product reported recently by Washington for this year's first quarter. That number was as great as it was deceptive.
For each tick up in inflation, the GDP comes down by a tick.
The April jobs report was a warning sign. It should have been good - very good. Instead it was worse than it looked.
Fed Chairman Ben Bernanke had better take note. With energy prices already eating up so much of consumer's incomes, the Fed shouldn't push interest rates any higher.
[email protected]
That's what the Federal Reserve should be considering tomorrow when it decides whether 15 consecutive interest rates hikes is enough. But it won't even come up because the facts I'm about to tell you aren't the kind that are shared by government agencies.
Last Friday, the Labor Department officially announced that only 138,000 jobs were created in April. That won't even cover the number of new people entering the workforce.
Wall Street had been expecting 200,000 new jobs, so investors used the disappointing employment number as an excuse to rally stocks based on the misguided belief that a weak economy is somehow good for corporations.
It isn't, except for the near-term and fleeting benefit that the Fed will have to think before it pulls the trigger on more interest rate hikes. The main idea behind the rate increases was to slow speculation in the housing market. That's starting to happen, but the bigger problem is that the rest of the economy isn't nearly as perky as the statistics suggest.
Take Friday's employment report as an example. The Labor Department had to work some statistical magic to even come up with the inadequate 138,000 job figure, which included a whopping 271,000 positions it believes - but can't prove - were created by newly formed companies.
The government doesn't actually know if these new companies exist. The Bureau of Labor Statistics calls this its birth/death model.
The 271,000 jobs amounted to a much more optimistic assumption than even last April's guesstimate.
Do the math. Without those estimated 271,000 jobs from new companies the country would have lost 133,000 jobs last month - not gained 138,000.
A chunk of those 271,000 jobs probably do exist, but the number is a guess.
And with the recent spike in oil prices there are probably more companies disappearing than the government thinks. So, unless oil prices give the economy a break, don't be surprised if you start hearing the words recession and stagflation.
The last backward-looking economic statistic was the 4.8 percent annualized growth in the gross domestic product reported recently by Washington for this year's first quarter. That number was as great as it was deceptive.
For each tick up in inflation, the GDP comes down by a tick.
The April jobs report was a warning sign. It should have been good - very good. Instead it was worse than it looked.
Fed Chairman Ben Bernanke had better take note. With energy prices already eating up so much of consumer's incomes, the Fed shouldn't push interest rates any higher.
[email protected]
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