Wonderland Economics

Let’s assume that the latest jobs report showing unemployment at the lowest levels in 5 years is accurate, which it’s not, but let’s entertain the idea. Then why is everyone so broke and jobless? After all, the data needed to see this “looking glass” 7% number, where up is down, and down is up, is in each and every job report released by the Bureau of Labor Statistics.

Oh yeah, and GDP grew by 3.6% for the quarter (more on that in a minute).

First, most (if not all) economists know that the better measure of the jobs picture is the employment population ratio. This has been stuck in a rabbit hole for 5 years.

emratio 2007 

And according to the jobs report, the mean duration of unemployment hasn’t fallen out of the stratosphere for the last 5 years.

mean duration

So only 58% of the working age population have jobs, and those who are on unemployment are averaging 37 weeks of benefits before they fall off the radar.

Up is down and down is up. Can there be any more proof that this unemployment measurement isn’t showing us reality?

And that 3.6% GDP? The formula works something like this: GDP = C+I+G+(X-M)

We know that Consumption is stagnant (C=0). We know that Government purchases are down because of Congress’ Austerity (G=0, it really does!). And the export/import ratio is 0.7:1, giving us a negative number (X-M= -0.3). 

So that leaves only ONE place in the formula to account for the sudden rise in GDP: Investment (I). That’s Wall Street and Banks (if anyone cares to differentiate the two). And we ALL know that’s up.

So essentially, GDP=I. And 3.6% growth on just Investments is a scary bubbly-thing.

Can we calculate GDP without Investments to get a real picture? Maybe, but it’s complicated and beyond my superpower abilities to leap tall buildings of data in a single bound.

This does however, explain PERFECTLY why people were buying more 50-Cent bath towels at Walmart on Black Friday than TVs.

It’s Wonderland Economics, where down is up, and sideways is backwards. We do know that people are suffering no matter how distorted the looking glass is, and that reason alone should cause economists to start measuring things differently.

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