In the financial news we have this last quarter’s “growth” given as 1.1% for the quarter.
UPDATE: My Bad. Watching the news crawler, it states it is “1.1% annualized rate this quarter”, not just for the quarter. So all the below discussion that shows 1.1% / quarter is really nothing is really 4 times that bad… I’ll adjust the numbers to reflect the annual basis of the quarterly number.
The problem is that 1.1% “growth” is no such thing. For background, read:
First off, we have to de-rate it for actual inflation. Good luck figuring out that number, since the government numbers have been “cooked” since the Ronald Reagan years when it was redefined. The official Fed Target is about 2% / year, and last time I looked at it, the official number was about 1%, but the real number is significantly higher.
Shadow Stats tries to do that, and their chart for 2016 shows, by my read, about 4% or 8% depending on which of the prior official methods you choose to use. Split the difference and call it 6%/year consumer inflation. That’s 1.5% / quarter.
Simply using the less cooked inflation methods, the entire quarterly “growth” evaporates into an inflation artifact. Much more in line with my personal experience, and more reflective of reality, IMHO.
UPDATE: Using the annualized 1.1%, that 6% annualized actual inflation covers it 5 times over.
But then we have the added problem that GDP includes Government Spending. How much of that 1.1% was growth of GOVERNMENT?
From the Wiki on the U.S. Budget, we find these numbers:
In the fourth paragraph:
During fiscal year 2015, the Federal government received approximately $3.25 trillion in tax and fee revenue and had outlays (spending) of $3.7 trillion; the difference was a $440 billion deficit.
Under “Major Expenditure Categories” it refines this a bit to:
During FY2015, the federal government spent $3.68 trillion on a budget or cash basis, up $182 billion or 5% vs. FY2014 spending of $3.50 trillion.
Though we ought to note that the budget submissions are a tiny bit different. Down at the bottom:
2016 United States federal budget – $4.0 trillion (submitted 2015 by President Obama)
2015 United States federal budget – $3.9 trillion (submitted 2014 by President Obama)
So looks like asked for $3.9 T and actually spent about $3.7 T (to the extent any government numbers are “actual”…)
The 2016 Budget is $4 Trillion. So we have roughly $300 Billion of “growth” of GDP baked in the cake from just The Federal Budget. 4/3.7 = 1.08 or an 8% increase.
That’s 2% Government Growth / quarter. Or about 1/2 % GDP “growth” just from government growth. ( really 1/5 of 2% or 0.4%, but then we would need to figure growth of State and Local budgets too to get real government growth. The point is it knocks off the fractional part of this quarter’s “growth” all by its lonesome.)
UPDATE: Using the 1.1% as annual, not quarterly, means Government Growth of just the Federal government at 8% times an 18% Fed take of GDP, gives 1.44 % of “annual GDP Growth” just from The Federal Budget alone. That means the “private sector” shrank a real 0.34% of GDP given the 1.1% annual rate number. Take out Government we’re in a recession.
Slop in these numbers? Oh hell yes. It ignores ‘ex-budget’ expenditures that are now quite large (most of our “wars” on the rest of the world and anything the party in power wants to demonize). The usual slop in anything from the Government (like, was that Iranian 1.9 Billion a budget item? I don’t think so Tim…) The fact is that the stats are cooked the other way much of the time (they are made by government employees under the “guidance” of politicians). And more.
But the key “takeaway” is that anything down in the 1% range is way deep in the error bands of reality. And those error bands are not symmetrical about the value, but strongly biased to making the Government and Politicians look good even when things are really bad.
Like employment numbers where many folks have started to catch on that they are just “plug numbers”:
And a recent month had folks crowing over the big job growth of something like 200,000 when in fact almost all of it was a ‘seasonal adjustment’. There had been no real jobs added, but a ‘seasonal adjustment’ made them appear… Yes, you do need to allow for the Christmas hiring binge and seasonal farm jobs, but just don’t be fooled into thinking that adjusting out those folks losing their job every year at the same time is the equivalent of creating jobs.
Job growth is swirling down the drain
By John Crudele
May 7, 2016 | 10:00am
Yikes! Splat! Plop! Oy vey!
Job growth fell hard in April as the government’s employment numbers confirmed the disappointing reality already self-evident on nearly every Main Street across the US.
The economy was a loser this spring, and the statistical proof of this is catching up with reality.
The Labor Department on Friday announced that only 160,000 jobs were created last month. Put another way, most economists think that is barely enough to absorb even the people looking to enter the job market for the first time, much less give work to the 7.9 million Americans looking for a job.
That bigger problem is this: included in the 160,000 figure are 233,000 phantom jobs that Labor added to the mix.
So IMHO that’s why the financial markets did a jump up on the first report of growth and The Fed talking up raising interest rates, then took a dive on the realization both were just bogus shadow plays. The “growth” is a statistical hand waving exercise and The Fed is busy saying everything is great we’re gonna raise rates Real Soon Now ™! while then saying “except maybe not as things are not all that great”…
To me, the reality looks a whole lot more like stealth inflation being passed off as economic “growth” and the increasing government bloat that is destroying the private economy being passed off as jobs.
I long for the days when folks just spoke the truth clearly and accepted the consequences.
I am not made younger by calling me “senior” instead of old. I am not made thin by calling me plus-size instead of fat. I am not made rich by making my dollar worth less nor am I given a job by seasonal adjustments.
And folks wonder why I sometimes rant about the pervasive lying in our society…