When you hear the economy created 150,000 new jobs in a month you hear a fairy tale. Once upon a time, your economy created...and they all lived happily ever after.
This is a fairy tale because too many in government and media use outdated measuring sticks. When they look at the economy they do. And using these old-fashioned measuring sticks, they come up with a distorted picture of our economy. A fairy tale. Which they pass along to millions of Americans. A pity, for certain.
The jobs figures you hear come mostly from the Bureau of Labor Statistics. It surveys mostly big companies. It surveys established companies. It conducts roughly the same sort of survey it conducted twenty years and thirty ago. It comes up with a new jobs figure every month. The fairy tale.
The economy does not work today the way it worked two and three decades ago. For instance, there are tens of thousands of folks who now make a living on eBay. They have created businesses, tens of thousands. Those businesses constitute jobs. Does the BLS survey them?
The economy churns out hundreds of thousands of jobs that fall below the BLS radar. These are real jobs. In softwear and small construction. In landscaping and home maintenance. In those millions of jobs the illegals are doing.
The BLS misses them because this is the stuff of small businesses. And because these businesses often pay no unemployment insurance.
Now, the BLS conducts another survey. A household survey. It calls people to ask if they are working. That survey tells them there are hundreds of thousands of new jobs the other survey misses.
So what figures are you fed by the BLS and media? The figures from the first survey. Which are impressive for the last several years. But the figures from the household survey are far more impressive.
Does this matter? Well, it can explain why the government predicts tax revenues about as well as a monkey would. It predicts what the consumer does about as well as you predict the weather.
The government is so lousy at predicting for a good reason. It uses figures like those from the first BLS survey. It says, well, the BLS says companies created this many new jobs. They should provide this much new income. Which will generate this much new revenue. They will create this much in consumer spending.
The truth is the economy created a lot more new jobs. The truth is government recently stumbled upon $160 billion of income Americans were earning - income it never knew existed.
And so, consumer spending has held up when the economists said it would slump. And tax revenues pouring into Washington are hundreds of billions more than economists predicted.
All around the economy, government uses measuring sticks that were created long ago. Before the age of computers, some of them. Before the era when a company sprouts from a garage into a billion dollar firm in five years. Before the era when geeks create million-dollar software out of their heads. Before the era when thousands hit Salvation Army clothing depots for clothes to sell for big profit on eBay.
‘Tis a brave new world. Yet government is not brave in using new tools to measure and understand it. Too many government economists live in a fairy tale world. Unfortunately, they feed the fairy tales to people who make policy. They feed the fairy tales to voters. They feed the fairy tales to media types who are too lazy to dig out facts from the real world. They feed the fairy tales to people who make or withdraw investments based on them.
They mislead a lot of people. And that is no fairy tale.
From Tom... as in Morgan.
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