Confusing "Employment" With "Productivity"
The Dow rose 44 points yesterday. Gold gained 8 bucks. What to make of it?
One of the advantages of being on the road is that you don’t get a whole lot of time to check the news. As the inimitably quotable Mark Twain famously observed, “If you don’t read the newspaper, you’re uninformed. If you read the newspaper, you’re misinformed.”
By the time you receive this reckoning, for instance, the Federal Government will have released another in an endless stream of entirely meaningless figures. This particular one has to do with jobs. We use the word “meaningless” because trusting the government to present a stationary target is like asking a monkey to pen a Shakespearian sonnet. Not only is the task impossible, but it serves the monkey no purpose anyway. If a 4 can be revised to a 5, or a 3 massaged into an 8, then the value of the information is not merely questionable, but dangerously so. Misinformation leads to misallocation…and misallocation leads to booms, followed by busts of equal and sometimes greater proportion.
Nevertheless, markets will have reacted, perhaps dramatically so, to this morning’s announcement. The talking heads on television will extrapolate the digits ad infinitum, as if the numbers were etched in stone tablets, unalterable to even God Himself. “News” sites will have declared the recovery to be either faltering or in full swing, depending on what the readings were. At least, that’s our guess…
The much-awaited report will detail the number of weekly jobless claims, a kind of precursor to Friday’s employment report. Economists expect Friday’s glorified press release to show a loss of about 65,000 non-farm payrolls in July. Bad, in other words. But they also forecast a gain of between 50,000-100,000 private sector positions. That’s quite a range, our Fellow Reckoners will observe. When you’re making predictions – especially about the future, as Bill likes to say – it’s good to leave a little wiggle room.
But job numbers don’t measure the strength or weakness of an economy any better than the fraudulent GDP number. What matters is the productivity of the jobs, their output. The Soviets, for instance, notched up decades of full employment…even as the bread lines grew around the block. The Luddites missed the concept of productivity, too. During the Industrial Revolution in Britain, mechanized looms were introduced in the textile industry to increase output. They were lower cost and worked harder than the hand-weaving artisans, who protested that their livelihoods were under attack from the new technology. Marching under the Luddite banner, the textile workers took to the streets, demanding their jobs and wages be protected. They burned mills and factory machinery and at one point even came to clash directly with the British Army. Eventually, their jobs went the way of the dinosaur.
And just this year, hundreds of thousands of “workers” in the United States got “busy” counting each other. And for what? Of course, all those temporary census workers will eventually go back to counting the days until their next unemployment check arrives in the mail. How’s that for progress!
Meanwhile, our journey across this vast land continues. For readers who may be just joining us, your Ho-Jo-hopping editor has been on a Coast-to-Coast Correction Tour for the past week. We wanted to ask some real Americans how they are dealing with the Great Correction. What are their goals, hopes and fears? Where do they see the country heading? And what are they doing about it?
We started in California last week, then blasted through to Las Vegas, Nevada, and down through Arizona, New Mexico and into Texas. Today we rambled into El Paso, a relatively small border town just inside the Lone Star State. We came in from the west, along I-10. The Interstate rises up as you approach the town and, as it curves along the border, gives you a strait shot view of Mexico. The land there is lush. Mountains cut a jagged edge along the southern horizon. Closer to the border, brightly colored houses and tenements pile on top of one and other as if they are all muscling in for a better view of their northern neighbor.
El Paso is really only half of the town. The other half, Ciudad Juárez, formerly known as El Paso del Norte, sits south of the border and is more than twice as populous as its northern sister. A pedestrian bridge links the two.
We stopped in for lunch at one of the many Mexican restaurants in town. Our waitress was kind and tolerant of our heavily accented Spanish. An older woman – maybe her mother – moved about slowly behind the counter, stacking plates and wiping the bench down. We spoke for a while, chatting about the weather, the food, how we all came to be in America. And when our Spanish failed, as it frequently did, the kind young waitress would interject in heavily accented, broken English. And afterward, each and every time, she said the same thing: “We learn together.”