Unemployment Down, Everything is Perfect, No Sign of Manipulation

by JDH on October 6, 2012

All is good.  The U.S. unemployment rate fell to 7.8 percent last month, dropping below 8 percent for the first time since President Barack Obama was elected.  Everyone in the U.S. is very happy.  He will be re-elected and his pro-business policies will continue.  We will all be prosperous for many generations to come.

Well, that’s one view.

A closer review of the numbers does not paint quite as rosy a picture.

There were 873,000 more people employed in September as compared to August.  That’s great news.  However, 574,000 of them were made up.

Perhaps “made up” is too strong a phrase; let me be more explicit.  The Bureau of Labor Statistics uses the CES Net Birth/Death Model to estimate new business formations that may take a while to report.  They use fancy statistical means to make this estimation.  So whether these numbers are true are not is impossible to accurately determine.

Of course all of the conspiracy theorists were out in full force after the release of the job numbers.  Former GE CEO Jack Welch tweeted:

Unbelievable jobs numbers..these Chicago guys will do anything..can’t debate so change the numbers.

I don’t know if old Jack is senile, but he wasn’t the only person who marvelled at the coincidence of the first ever sub 8% number in the Obama presidency, two days after he lost the first presidential debate to Mitt Romney.  Even the charter members of the Main Stream Media on CNBC questioned Labor Secretary Hilda Solis on whether or not the books had been cooked.  She said that the Bureau of Labor Statistics (the aptly named BLS) fiercely guards their independence, so it doesn’t help when there are reports that at least two BLS economists donated to the Obama campaign.

Even if the numbers are correct, it would appear that the job growth is in the “services” sector, not the “manufacturing” sector.  This is an over-simplification, but the services sector tends to be lower paying jobs (like flipping burgers at McDonalds) as compared to hiring paying jobs (building cars at Ford).

So perhaps the numbers are not as good as they may appear.  Fortunately the market seemed to like it, with the Dow closing up almost 35 points on the day, as we head to new all time highs.

Luckily it was a great week for the conspiracy theorists.  Another example, as pointed out by sunseeker over on the Buy High Sell Higher Forum, where he points us to the evidence that even Kitco is complicit in deleting evidence of a cartel raid on the silver price.  Interesting indeed.

So what’s my take on all of this?  Is there a conspiracy?

I have no idea.  I have no proof of anything.

However, if I was an egomaniac running for public office (and by definition the vast majority of people running for public office are egomaniacs), I would consider doing everything in my power to get re-elected.  If I had friends in the government department that creates the birth/death model, and I could suggest to them that they tweak the numbers to bring unemployment under 8%, I’d do it.

If I was unethical and had the power to manipulate the silver market, I’d do that too.

If I could print money to bring the Dow to new highs the day before the election, I’d do that, too.

And, speaking of the Dow, there is no doubt in my mind that it will be at new highs, if only marginally, before the election.  The money printing has accomplished its objective; the balloon has been inflated.  There are very few retail investors remaining in the market, but the program traders and the Big Boyz are keeping it alive.

I feel silly that I did not see this coming, since in hindsight it was the obvious strategy.

Of course I did see the money printing, and as a result I’ve been loaded up on gold this year, and that’s worked out fine, thank you very much.

And that, in simple terms, is my take on the situation:  I don’t know what will happen next; I don’t know if the market will make new highs and then crash after the election (although that would be my assumption).  I do know that money printing leads to higher gold prices, either tomorrow or next year, so I will stay the course, and watch the action.

Thanks for reading.  Happy Thanksgiving weekend to my fellow Canadians (the Toronto and Vancouver exchanges will be closed on Monday), and see you next week.


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