By Patrick Heller
Liberty's Outlook
The U.S. Bureau of Labor Statistics released its monthly jobs and unemployment report last Friday. Once again, as has been almost a perfectly consistent string for the past 4-1/2 years, the news was terrible. And, once again, gold and silver prices were suppressed, at least for a while, to try to keep investors from exiting the stock market for the safety of precious metals.
The U-3 definition of unemployment rose from 9.6 percent in October to 9.8 percent in November. However, in determining this rate, the BLS excludes unemployed people who have not actively searched for jobs within the past four weeks. It also does not include the underemployed who might be seeking a full-time job but are now only working part time.
The BLS U-6 definition of unemployment, includes additional categories of unemployed people: people now available for full-time work who have looked for work in the past 12 months but have not searched in the past four weeks, people working part-time but looking for long-term and those with a job-market related reason for not currently looking for a job. This unemployment rate remained unchanged from the prior month at 17.0 percent.
Still, even this lofty unemployment figure does not report the unemployment rate using the same methodology that the BLS used during the Clinton administration. John Williams (http://www.shadowstats.com) analyses the BLS report using the LBS methodology of the 1990s and computes the current unemployment rate to now be about 23 percent.
But that isn't the only distortion on the jobs and unemployment report. As I have discussed before, the BLS adjusts this report by something called the birth/death model. In essence, the BLS surveys employers and employees to ascertain how many people are working or are unemployed. Then these statistics are fudged by assuming that more people are working because the U.S. population is growing faster than people are dying.
The population growth is already factored into the original survey, so this adjustment double counts some job creation. Even the staff at the BLS acknowledges that this adjustment overstates employment. Once a year, a catch-up adjustment is made to back out this fictitious adjustment. You can go to the BLS website at http://www.bls.gov/web/empsit/cesbd.htm to view these adjustments. You can see that for the February 2010 jobs report, the BLS had to wipe out 427,000 jobs for the annual correction.
From February through October, the BLS had added 921,000 jobs for the birth/death adjustment, averaging more than 102,000 per month. I was surprised to see that for the November adjustment the BLS actually subtracted 8,000 jobs. Is it coincidental that this did not happen until after the elections? A negative adjustment occurred for November 2009, so this latest adjustment may not be a recurring factor rather than politically motivated.
The mainstream forecasters had been expecting jobs growth, on average, of about 140,000 for November. The actual reported increase was 39,000 jobs. This difference of 101,000 jobs is more than accounted for by the 110,000 decrease of the jobs adjustment in the birth/death model for November compared to the average of the previous nine months.
Along with the higher reported unemployment were statements made by top government officials to expect the U-3 definition of unemployment in the near future to exceed 10 percent. So what does the jobs and unemployment report have to do with the prices of gold and silver? Plenty.
A poor report on jobs and unemployment is an indicator that the overall US economy is doing poorly. If the U.S. economy is doing poorly, that portends lower profits for companies whose stock is publicly traded. A dismal jobs report could have investors looking to sell out of the stock market to put their money into alternatives - like gold and silver. If investors were to move from stocks to precious metals, that would further hurt the value of the U.S. dollar and exert even more pressure for higher gold and silver prices. This result would inevitably lead to higher interest cost on U.S. government debts.
To avoid the move out of stocks and into gold and silver, it is necessary to hold down the price of metals as the jobs/unemployment report comes out. For the past 4-1/2 years, gold and silver prices have been clobbered just before the new jobs report was made public. Almost always, there was then a continuing effort to hold down precious metals for the rest of the day.
Contrary to the scenario preferred by the U.S. government, last month gold and silver prices jumped after the release of the disappointing jobs/unemployment report. Last Thursday afternoon, within 24 hours of the release of this month's report, precious metals prices suddenly declined with no news to account for the dip. This drop is a perfect example of the suppression of gold and silver prices by the U.S. government, its trading partners, and allies.
Last Friday, for the second consecutive month, the effort to suppress gold and silver prices after the release of the jobs/unemployment report failed. Silver jumped almost 3 percent to reach its highest close (ignoring inflation) since February 1980. The COMEX close for gold set another all-time record high (again ignoring inflation).
On Monday, Dec. 6, both metals reached new highs in late trading, with silver topping $30. In early November when the spot price of silver was $24.43 I had forecast a more than 50 percent chance that silver would top $30 by the end of November. As is not uncommon, my very short term predictions were on target for the size of the move, but slightly premature for the timing. This time around silver reached my target six days later than I anticipated. Those who acted upon my forecast are not complaining.
Editor's Note: Patrick A. Heller owns Liberty Coin Service and Premier Coins & Collectibles in Lansing, MI, and writes "Liberty's Outlook," a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at www.libertycoinservice.com. Other commentaries are available at CoinUpdate (http://www.coinupdate.com).
