The Specious Reasoning of Census Employment

Well, the much-awaited unemployment report came out on Friday. The pundits, analysts, and kibitzers were all waiting. Their mouths open. Their pulses racing. They expected an “I told you so” moment.

Bloomberg polled them a week or two ago. The 2000 of them surveyed were overwhelmingly bullish…with the average forecast of a 27% increase for the stock market in 2010.

They must have thought the job figures would show that the ‘recovery’ was firmly underway…with unemployment finally turning down in a big way. Then it would be clear sailing…

Oops… Bummer!

It turned out that 95% of the new jobs were census takers – people paid by the government to count the people who pay the government.

It also turned out that people are waiting longer than ever to find a job…an average of 34 months compared to only 16 months in 2007.

Investors’ mouths turned down. They sold stocks so they could go home for the weekend without worrying. The Dow dropped 323 points.

The shorthand interpretation? It’s a Great Correction…not a recovery.

The census takers illustrate our point. Government spending – including government jobs – do not really make us richer. They make us poorer. If you could make people better off by hiring them to count each other, why not count them twice? Or three times?

The trouble is, no matter how often you do it…or how well you do it…counting people doesn’t add to our wealth; it takes away from it. Because it diverts resources – human labor – from worthwhile activities to activities that are a waste of time. And the more people you hire, the bigger the waste…and the poorer you get.

Why count people anyway? So you can apportion seats in the House of Representatives? We got a census form in the mail. It looked official…and very nosey. As far as we’re concerned, it’s none of their damned business!

But wait a minute. What if the government hired people to do useful things – such as baking and pole dancing? Well, as Jefferson put it, if you expect the government to do your baking for you, you “will soon want bread.”

As for the pole dancing, we don’t know…

But there’s no secret to what makes people wealthier. No magic. No miracles. No free lunches.

People want to believe that the feds can pull off some trick…that they can turn this Great Correction around by stimulating this or regulating that. Or how about tarring and feathering the BP chairman? Or sacrificing a few of Goldman’s young virgins? What? There are no virgins at Goldman? Well, how about some old sluts from JPMorgan?

JPMorgan just got fined $50 million – the largest penalty ever handed out by a UK regulator. What was its crime? “Failing to protect billions of dollars of client money by keeping it in segregated accounts,” says The Financial Times.

How much did clients lose as a result of JPMorgan’s faithlessness?

Not a penny. But they could have lost big-time, said the FSA. And besides, the regulators are getting tough everywhere.

Back in the USA, BP faces criminal charges. We don’t know exactly what its crime was either…but with so many laws on the books, it’s hard to imagine the giant oil company didn’t break a few of them.

Not that we’re shedding any tears for the goo pumper. If they can’t keep the oil in their pipes, they should get out of the oil business. But it’s a tough business. And accidents are bound to happen.

Destroying the oceans and endangering life on planet earth could be called a mistake. But destroying the economy is malicious mischief. Which is what the feds are doing.

So, Friday, the news was let out that the jobs stimulus effort was a flop. And as it made its way from one Bloomberg terminal to the others…the traders sold!

‘Risk off’…the traders call it. It means that they are selling their ‘risky’ investment positions and putting the money into safe positions – notably, US treasury bonds. The dollar rose on the news – and is now near a 4-year high.

Bill Bonner
for The Daily Reckoning

The Daily Reckoning