San Francisco Free Press - Greenberg - November 4, 1994

More bad news for bonds?

Job growth may be better than numbers show

By Herb Greenberg
Special to The Free Press

SAN FRANCISCO, Nov. 4 -- Whatever the unemployment rate to be released later today shows, it's likely to seem worse than it really is. Put another way: the job picture is much brighter than the official numbers suggest. And despite what some pros have said, that's not necessarily good news for the bond market or interest rates.

According to John Liscio, who publishes The Liscio Report from Montclair, N.J., "clearly there is a lot more income out there than the market has been led to believe."

Just look at the gap between the real tax dollars being collected and the personal income numbers dished up by the government. Liscio says that officials in some states have become so unnerved by the disparity that they have openly complained to the Bureau of Economic Analysis.

What's more, Liscio charges that Washington's number crunchers have done a lousy job counting heads in the workplace.

In California alone, he says officials believe the Bureau of Labor Statistics have undercounted jobs by as many as 280,000 to 300,000. California accounts for one-eighth of the nation's employed, which means someone really goofed.

If more people are working than we have been led to believe, then inflation may be stronger, too.

"The labor force, after all, is a very elastic thing," Liscio says. "When the economy starts to heat up, a lot of people who gave up on ever finding a job start dusting off their resumes, and they usually get hired."

As more and more people are hired, the result is a greater feeling of job security (unless, of course, you're on strike), which has created a euphoric feeling among consumers. The euphoria was most evident in last week's retail numbers, with a 25 percent rise last month in same store sales for Best Buy and a 21 percent gain for Sharper Image.

One analyst I know attributes the buying spree "to a growing sense of relief that the sweeping writeoffs (and subsequent layoffs) of the past three and four years are mostly behind the average worker.'' Stronger retail sales. Uncounted jobs.

Liscio's bottom line: "Bond bulls, brace yourself."

Copyright 1994 The Free Press

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