John Crudele

John Crudele

US plays delusional economic numbers game

This may be the quickest economic recovery on record.

At 8:30 Wednesday morning the Commerce Department announced that the US economy barely grew in the first three months of 2014.

By 2 p.m. Wednesday, the Federal Reserve said that economic activity had picked up “recently.”

Which is more nuts, the Fed or the Commerce Department? The answer, I believe, is that they are equally delusional.

Let’s start with economic growth. The Commerce Department announced that the nation’s gross domestic product (GDP) for the January-March quarter expanded by an infinitesimal annual rate of 0.1 percent.

That needs explaining.

The “annual rate” part of that sentence means that actual growth in the first quarter was really only a teeny-weeny 0.025 percent. The economy would have to continue to grow at that speed for another three quarters to achieve the 0.1 percent “annual rate.”

Another thing: If the Commerce Department hadn’t reduced the inflation rate it uses in making its GDP calculation — from 1.6 percent, to 1.3 percent — the economy would have contracted in the first quarter.

Hey, but why worry? You’ll always have growth if you can play with the numbers.

I told you in my last column that an economic contraction and talk of a recession wouldn’t shock anyone. But nobody is worried right now because that old scapegoat — the weather — is being blamed.

And that’s exactly what the Fed did when it cut another $10 billion from its now $45 billion monthly Quantitative Easing purchases.

The Fed needs to make these QE cuts under the guise of an improving economy. That’s why the “recently” improving phrase — truthful or not — is so important to Janet Yellen and her band of eternal optimists.

Plus, “recently” is a beautifully cagey word to use because it is extremely fluid and open to so many interpretations.

Did the pickup happen yesterday? And did it get annual growth up to 0.2 percent, or a more normal historical rate of 3.6 percent?

We, of course, will have to take the Fed’s word on the alleged improvement. From where I sit it looks as if the housing industry and other business sectors are losing what little oomph they had.

And despite that the Fed said yesterday that household spending is reviving, that, too, could be an illusion.

There are indications that the extra spending might be nothing more than increased health care costs associated with the Affordable Care Act.

So — bottom line — the economy is doing poorly. But the Fed needs to put this poor performance in a brighter light so it can slink away from Quantitative Easing, a failed experiment that has done very little to help the economy but a lot to shift wealth in the country from savers to the already rich.

What’s next? On Friday the Labor Department will announce the employment report for April. And guess what? It’s likely to be better than most experts expect — but not for the right reasons.

Right now the “experts” think that Labor will announce that 200,000 new jobs were created in April.

The unemployment rate is expected to decline to 6.6 percent, from 6.7 percent, in March but don’t even bother with that number because it stinks with fraud.

Each April, May and June, the Labor Department assumes that a very large number of new jobs are being created by small companies that may not really exist.

This is called the Current Employment Survey’s Birth/Death Model, and in April 2013 the Department added 236,000 jobs to its count without knowing whether they are real.

But for now those 236,000-or-so phantom jobs should make Friday’s report stronger than expected.

The Fed shouldn’t know Friday’s number yet. But it should be relieved when it finally sees it.