Friday, February 5, 2010

The Unexpected Expectation

Is it me or is everything so breathlessly unexpected in this historic presidency?

Retails sales unexpectedly weak. GDP unexpectedly low. Unemployment unexpectedly high. As a thirty plus year observer of the markets and the economy, never has so much unexpectedness bedeviled those whose business it is to forecast expectations.

How is it possible that the December jobless claims originally reported at a loss of 85,000 jobs (which I needn't point out was unexpected) be revised down to a loss of 150,000? How could it also be that the January report of an unexpected loss of 20,000 jobs added to the revised December number (which doubled the original jobless claims reported) result in a decline in the unemployment rate from 10.1? to 9.7%?

Excuse me for suspecting the numbers...but something unexpected is going on here.

According to today's Wall Street Journal, 2009 jobless claims were revised to reflect 600,000 more jobs lost than reported. Hmmm. Highly unexpected wouldn't you say?

And the Journal reports, "The so-called "underemployment" rate--which includes everyone in the official rate plus those who are neither working nor looking for work, but say they want a job and have looked for work recently--fell to 16.5% in January from 17.3%." But how can that be if the jobless claims were revised up?

Highly unexpected.

Nothing can be unexpected forever. Eventually the unexpected becomes a trend and the forecaster has to admit they are simply wrong. I now look at every number reported with suspicion. The government's "unexpected" has become my expectation and when that happens investors move to the sideline until they can figure out what exactly is going on.

For my part, nothing in rising unemployment, slowing to negative GDP growth, a weaker dollar and ballooning debt is unexpected. The policies of this Administration are having the expected effect.

Only a fool or the very naive would expect otherwise.

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