Reality Continues To Baffle Economists


Initial claims for state unemployment benefits increased 6,000 to a seasonally adjusted 386,000, the Labor Department said. The prior week’s figure was revised up to 380,000 from the previously reported 377,000.

Economists polled by Reuters had forecast claims dipping to 375,000 last week. The four-week moving average for new claims, considered a better measure of labor market trends, climbed 3,500 to 382,000.

Read more here.


Yes, they thought things would get better in the labor market.  Why?  What could possibly be occurring that would increase our labor demands?  Why do people listen to these people who are so consistently wrong?  Sigh, I guess I’ll let them in on a couple of secrets so that they may accurately forecast our economic condition. 

The U.S. current account deficit widened more than expected in the first quarter to $137.3 billion, the largest gap since fourth quarter 2008, a government report said on Thursday.

The current account, which measures the flow of goods, services and investments into and out of the United States, widened to 3.6 percent of gross domestic product, also the biggest since fourth quarter 2008. In the fourth quarter of last year the deficit was 3.1 percent of GDP.

Read more here.  See economist guys and gals, when you see news like this, we can see that we’re still exporting our wealth to a great degree.  This doesn’t help employment here, it helps employment overseas.  But, that in and of itself isn’t always a good tell about which direction we’re heading.  There are others which you can consider in the aggregate.  For instance, …..

Consumer prices fell in May by the most in over three years as households paid less for gasoline, possibly giving the U.S. Federal Reserve more room to help an economy that is showing signs of weakening.

The Labor Department said on Thursday its Consumer Price Index dropped 0.3 percent last month after being flat in April. May’s decline was the sharpest since December 2008 although analysts polled by Reuters expected a bigger decline.

Outside the volatile food and energy category, inflation pressure appeared to be modest. Core CPI climbed 0.2 percent higher as expected, matching the increase posted in April.

Okay, see what’s happening?  Prices fell because of the price of gasoline.  The price of gasoline is consistently set to the expected demand.  When the gas prices drop without any external forcings, we should understand that people don’t believe we’ll be using as much as what they previously thought.  (Some would term this as projected demand.)  In technical jargon we say, “this is bad”.  To compound the “bad” we also see core prices increasing, meaning much of our other stuff costs more.  in more technical jargon we say, “this is worse”. 

So, let’s review.  Fuel people don’t believe we’re going to be needing as much gasoline as they previously thought.  We see core prices increase.  We also see we’re exporting more capital instead of importing it.  So, I’ll ask our super smart economists, which way do you expect the labor market to move?  Will the employers be hiring more people because there is so much extra capital and demand here?  Or will the economy be stimulated by more food-stamp applications?  Either way it’s gotta go up, don’t it?

These things are not good. 

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2 Responses to Reality Continues To Baffle Economists

  1. philjourdan says:

    I am an economist by education, but a network engineer by trade (Hey! When I was in college, there were no such things as networks!). But what I am not is a stock broker/trader. If I told you to “buy” Amalgamated, you would have about a 50% chance of getting a winner. In other words. no better than doing it yourself.

    What that means is I do not follow companies. I only follow economies. As such, I can predict the trend of the market fairly well – as well as my broker. I just hope he knows which stocks to invest in at the right time.

    All of that is to say, that the economist Reuters has been talking to must all be Paul Krugman. He has yet to be correct in anything. He advised Enron – we know where enron is today.

    Any economist worth a salt can tell you what is happening and why – and that there is not going to be a shift in current trends until things change at the top in Washington AND Europe (we can go gang busters over here, but with no one to sell the stuff to, there will not be much profit).

    Companies do not like uncertainity, and that is what is happening. The additional costs of Obamacare are real. Companies are looking at that, and trying to plan for it. Contrary to popular thought, most companies do not want to be Government Motors.

    Carbon taxes, carbon credits, restriction of power, greater power given to lawyers in lawsuits, increased regulations of everything that one does – these are uncertainties from a company’s perspective. They are adding costs, but no one knows how much. And Obama has promised to implement these things. So companies are playing it VERY conservatively. Until such time as the future costs of doing business are BETTER known (nothing can be fully known about the future), they will not hire. Period. So growth will suffer, employment will suffer, and the economy will suffer.

    I would like to think that Economics is Rocket Science (since my Cousin is one of the most famous Rocket Scientists in history). But it is not. Anyone with an open mind, and a smidgen of logic can do as well (better actually) than most of the “Economists” the MSM and Obama rely on. The latter lack the 2 necessary ingredients – open minds and logic.

    Reality has not baffled me since I realized that economics is the science of logic. Not of wishful thinking.

    • suyts says:

      Well stated. I can’t get over how some alleged economists come up with their bizarre thoughts……. like Paul “when you’re broke spend more” Krugman. Or the other pinheads who think we can just inflate our debt away.

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