In the Bay Area of San Francisco, the official unemployment rate was, at the latest June 2005 figure, 5.1%. This was up from the official 4.6% rate which had been recorded for May. Such an unemployment rate is reflective of a prosperous part of the world.
Yet when Wal-Mart let it be known this week that they were looking for 400 people to staff their new store in the area, they had more than ELEVEN THOUSAND applicants. That's twenty-eight applicants for every job on offer.
Here is the story from the San Francisco Chronicle - dated August 17, 2005:
11,000 apply for 400 openings at retailer's new Oakland store
It is a well-known fact throughout the US that Wal-Mart does not offer high-paying jobs. Nor is there much in the way of "fringe benefits" attached to the jobs they offer. Indeed, Wal-Mart has long been the target of US unions for the paltry health benefits and low wages they offer.
How prosperous can a nation actually be, how robust can the economic "growth" of a nation actually be, when more than eleven thousand people line up to apply for 400 of the lowest paying jobs available in that nation? And how is it possible that such a thing could happen in a suburb of a major city in that nation which claims an unemployment rate of 5.1%?
The answers are, of course, simple. A situation in which eleven thousand people apply for 400 menial jobs is redolent, not merely of recession, but of actual DEPRESSION. It is a more eloquent indictment of the economic and financial policies of both government and banking system than any number of learned treatises on economics. It is also the slap in the face which reality always gives, sooner or later, to the official statistics by which governments seek to obscure the REAL state of the nation they govern. In such a situation, the claim that the unemployment rate is 5.1% is preposterous, and obviously preposterous.
On Tuesday, August 16, the July US CPI number was released. It was up 0.5%. This was only the "headline number", however. The number which the Fed prefers, the "core CPI", was up a mere 0.1%. Yes, we have no "inflation". On Wednesday, August 17, the July US PPI index was released. It was up a whole ONE PERCENT with the "core PPI" (the one the Fed prefers) up 0.4%.
Surprisingly, the farce of the "core" CPI and PPI is now being noticed even by the mainstream financial press in the US. Here's the lead paragraph from a Reuters report on the July CPI numbers: "Americans who avoided driving, eating, drinking and smoking in July experienced no inflation whatsoever. Unfortunately, everyone else felt a serious pinch."
Like the spurious employment numbers, the CPI and PPI numbers are a farce. The "headline number" is a farce. The "core number" is an even bigger farce. This is true on a number of levels
In the first place, the "core figures" exclude precisely the two categories of prices which EVERYBODY has to pay in a modern industrial society on a daily basis. Everybody eats and most people drive, or are driven, or have the things they buy delivered, every day. They face food and energy prices every day. In neither case are these "discretionary" items. Everybody pays them, nobody has any choice but to pay them.
That's the minor farce. The major farce is the absurd contention that one can "measure inflation" by compiling a number of prices and publishing them in an index like the CPI or PPI. On this level, the amount of massaging done to the figures before they see the cold light of official day is irrelevant.
The definition of inflation is simplicity itself. Inflation is an increase in the total stock of MONEY. Rising prices, whether they occur in the financial markets or in the markets for real goods and services, are one of a myriad of the EFFECTS of inflation
In this context, the "auction example" is always instructive. There are 50 people at the auction all of whom want to acquire the item on auction. Given an unchanged amount of money in the pockets of all those attending the auction, the price of the item on offer will be determined by the highest bidder. Bidders drop out of the competition either when they don't have any money left to compete or when the price has risen to a level that they don't want to pay.
What would happen if, in the middle of the auction, more funds were added to the wallets of those competing for the good? The answer is that the winning bid will be higher than it would otherwise be. There was a time when this process was deemed so obvious that it hardly rated a mention in the most elementary of economics textbooks. Those were the days when inflation WAS defined, in those same elementary textbooks, as an increase in the total stock of money.
Today, inflation is "defined" as rising prices. That being the case, all that is necessary to show that infation is "benign" is to make sure that the indexes which "measure" price rises are massaged so as to give the lowest readings possible. It is no secret that they are so massaged. The only surprising thing is that so many people take them seriously.
The most farcical part of this procedure is, of course, the emphasis put on the "core" (minus food and energy prices) rates. Yet it works. Take this test. Go to the Yahoo financial site and search recent entries under the heading of "core CPI" or "core PPI". See how many items you come up with which trumpet the robust economic condition of the US as based on these ridiculous figures.
Then do a similar search using the term "US employment". You'll find many of the same items. The situation has deteriorated to the point where the two most farcical and bent out of shape economic statistics going - US unemployment levels and US "price inflation" levels - are the leading items of "proof" for the contention that the US economy is "strong".
Nothing could be further from the truth, and everyone who lives outside the cloisters of Wall Street or Washington DC knows it.
Let us be more precise here. Everyone, INCLUDING those on Wall Street and in Washington DC, knows it. The difference is that most "everyday" Americans don't want to acknowledge it while their rulers on Wall Street and in Washington don't want to admit it.
But there are occasions where the natural tendency to look the other way when bad news appears on the horizon is not enough for those on Wall Street or in Washington. When the "higher than expected" 0.5% CPI number was announced on August 16, Gold climbed $US 4.70 to a new high in this cycle of $US 446.10. But the next day, on August 17, when the MUCH WORSE 1.0% PPI number was announced, Gold FELL $US 6.20 to $US 439.90.
Something had to be done about the ultimate "inflationary indicator" which is the Gold price. On August 17, faced with the worst official measure of inflation for years, it was. After all, if Gold is going down there can't REALLY be any "inflation", can there?
This kind of thing has, of course, been going on for decades. You may find it frustrating, but there's no way you should find it in any way surprising. After all, governments have been getting away with their unemployment and "price inflation" measurements for even longer.
Cindy Sheehan has blown the lid off the cauldron of deception which is Iraq and the "war on terror". The stampede for Wal-Mart jobs has blown the lid off the cauldron of deception which are the unemployment numbers. Gas prices have blown the lid off the cauldron of deception which are the official "inflation measures". The song sung by the sirens of Wall Street and Washington DC remain the same, but fewer and fewer are singing along.
In the immortal words of the late, great Robert A. Heinlein: "Time wounds all heels. It's about time, and it's getting closer by the day.