Five Alternative Facts

No Labels states “five facts” about the economy in a piece at RealClearPolicy:

  1. According to POLITICO the nation’s economy added 312,000 jobs in December 2018 alone.
  2. On top of this, the construction industry is facing a critical worker shortage, highlighting the continued real estate development boom.
  3. In December 2018 average hourly earnings had risen 3.2 percent from the year before and 0.1 percent from the month before.
  4. The national housing market slowed in 2018 because of record prices and high mortgage rates, a trend that could continue in the new year.
  5. While the stock market has been volatile over the past few weeks many experts believe it is not an excellent predictor of the economy in the short term.

Here are my five alternative facts in response:

  1. We don’t really know whether jobs were lost, gained, or their number stayed the same. The actual number of jobs counted in the Bureau of Labor Statistics’s Employment Situation report is just a fraction of the reported number. More of the jobs reported are derived from the broken business birth/death ratio than are actually counted.
  2. Not merely in construction but in many other sectors of the economy there are critical labor shortages because the pipeline is broken. It used to be that laborers became apprentices became journeymen became master craftsmen. The “laborer” level jobs are now being filled by immigrants (legal or illegal) who are less likely to rise to “master” status.
  3. If Jamie Dimon’s wages rise high enough, it will cause the average wage to rise noticeably. With wages as unequal as they are today “average hourly earnings” has become next to meaningless.
  4. In my neighborhood houses that have been on the market for a year or more with too high an asking price are being withdrawn from the market. In every block of my neighborhood there is at least one unoccupied house.
  5. 15% of the stocks that make up the DJIA are technology stocks of companies whose total employment accounts for just one or two percent of total employment. Another 15% are financial company stocks that represent a similarly small proportion of the actual economy. How good a predictor could the DJIA be?
14 comments… add one
  • steve

    Kind of tired of the wages up 3% thing w/o any mention of the inflation rate. Imagine if we decided Ford and Carter were our very best presidents because wages rose so fast.

    Steve

  • Andy

    #1. I read somewhere that the potential error for these estimates is +/- 80%. These initial figures do not seem to be worth anything.

    #2. It’s a big problem in my brother’s business – there’s a glut of (mostly Mexican) labor at the low end and a severe shortage in the middle, like job-site supervisors and foremen. The subs with experienced craftsmen are in super-high demand. It’s currently an industry where a low bid really does mean lower quality as a low-bid means that contractors will hire the inexperienced subs.

  • there’s a glut of (mostly Mexican) labor at the low end and a severe shortage in the middle, like job-site supervisors and foremen

    Yeah, that’s a good example of what I meant by a “pipeline” problem. Another example is in any engineering field. Junior engineers become senior engineers. If companies won’t pay junior engineer enough to live on (because they can offshore the work or recruit from overseas), eventually they won’t have senior engineers. Since the process really began to gain steam in the 80s, “eventually” is now.

  • TarsTarkas

    Medium and heavy truck equipment mechanics capable of working on hydraulics and electrical wiring are in severe short supply and have been for well over a decade. The ‘everybody’s gotta go to college’ push (originally started to keep blacks from taking white jobs) hammered the vo-techs and it’s not letting up.

  • Thank you for bringing that up, TarsTarkas. The over-emphasis on college degrees has made people reluctant to take jobs in which one works with one’s hands. IIRC Mike Rowe has been complaining about that for quite some time.

  • Andy

    Plus, things like shop class are gone from public education. Those were some of the most valuable classes I had in High School.

    For example, my oldest is a freshman in what is considered a good school. They have fine arts and theater/performance programs but the closest thing to a “shop” class is a couple of engineering technology classes where they main learn principles and CAD software.

    Juniors and Seniors do have an option to take “vocational” courses at the local community college, meanwhile multiple types of honors and college-prep courses are available at the high school.

  • bob sykes

    I think all of your alternative facts are either wrong or irrelevant.

  • Guarneri

    ??

    Did you write this in a state of pique?

    I yield to no one in skepticism of economic statistics precision or potential for abuse, but –

    1. Are you implying the job market is not robust? If I recall the prior two months were upwardly adjusted. Talk to employers. Where I live, Naples and Asheville, the employment situation is extremely tight. In locations of portfolio companies: GA, FL, MI, PA, TX same.

    2. That the apprenticeship system is broken and poor public policy on funding higher education for those ill suited has prevailed does not change the reality that construction workers are in short supply. Talk to anyone building a house, or any GC, in attractive markets and they will groan over labor availability. The real question is what interest rates will do to the situation over the next 6-12 months.

    3. Hourly wages are not Jaimie Dimonds wages. Are you denying wage growth.

    4. Chicago and IL voters have shot their own dicks off. And they just voted to reload with Pritzker. Stupidity has not been outlawed. Try buying a house in FL or TX or NC. Inventory is scarce.

    5. The stock market is not the economy. Only to the degree the numerator of the economy dependent cash flow stream in a DCF valuation is reflective of the economy is the stock market a predictor.

  • steve

    “Are you denying wage growth.”

    Are you claiming wage growth? That 3% does not account for inflation. (Always knew you were a secret Jimmy Carter fan.)

    Steve

  • Are you implying the job market is not robust?

    No, I’m suggesting that the tools we are using to measure employment/unemployment do not have the resolution needed to make policy and pointing out the limitations of BLS EmpSit report in particular.

    That the apprenticeship system is broken and poor public policy on funding higher education for those ill suited has prevailed does not change the reality that construction workers are in short supply.

    No, it doesn’t but it does suggest policy approaches for addressing the problem. For example, we can’t solve our problem by importing laborers from Mexico or Central America.

    Hourly wages are not Jaimie Dimonds wages. Are you denying wage growth.

    No, I’m saying that average wages are a terrible metric. If you’re going to quote averages you should also state the standard deviation.

  • Guarneri

    Dave

    Hence the ?? Of course. But when were these imperfections not so?

    Most importantly, we have right now a pitched battle over your second point. Dems and the media are apoplectic. Bravo.

    As far as wages, I think real economists slice and dice like crazy. Forget std deviations. And, apparently unlike steve, understand inflation is always with us, and doesn’t single out certain groups.

  • But when were these imperfections not so?

    What has changed is that poor statistics haven’t always been used as lodestars for policy as they are now. Less was delegated to alleged experts or to the executive than at present. I don’t think our present phony technocracy is an improvement. I think it’s an enormous step backwards.

    BTW, here’s a prediction. The hazunga will hit the fan when the next BLS Employment Situation report is published. The February report is always weird. That’s because the BLS dumps their errors into February. That won’t stop the media and/or the punditry from overreacting.

  • CuriousOnlooker

    Let’s be patient – thus far the labor market still looks healthy and trending in the right direction.

    Unemployment claims is still plumbing record lows – they will probably turn much faster then the jobs report when the labor market turns.

    The worry should be that the labor market tends to turn last in the economic cycle – ie it is a lagging indicator. Policy makers (ie the FED should not rely on the job market to figure out to determine if they are being restrictive or accommodative).

  • steve

    “And, apparently unlike steve, understand inflation is always with us, and doesn’t single out certain groups.”

    This is real easy Drew. I know you had to take arithmetic to be an engineer. Wages increased 3%, but inflation was 2%. But then we have already determined you are a closet Jimmy Carter fan and liked it better when wages went up 6%. (Note that I nowhere here singled out any group, just looking at the wage number Dave gave and the reported inflation rate.)

    Steve

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