good afternoon welcome to capital account i'm lauren lyster here in washington d.c. these are your headlines for tuesday october ninth two thousand and twelve the i.m.f. lowers growth forecasts offering its bleakest assessment of global growth prospects since the two thousand and nine recession and raising the risk of recession according to the wall street journal but is the i.m.f. already late to the party and it upgraded only one major nation versus its previous forecast the u.s. based on why we are in a q e induced coma we'll talk to mike shylock about all this and the calculus behind jobs numbers plus angela merkel is in athens she reportedly offered words of

support for her greek counterpart while that's easy going for any change but it's a far more expensive bailout countries the conditions of bailouts and debt write downs words of support don't pay the bills or reignite a stalled economy will discuss and look at where the mainstream media has gotten this thing all wrong plus iran faces hyperinflation or does it we'll talk about the economic impact of sanctions price controls and whether it's better to lose purchasing power quickly unnoticeably rather then slowly but surely you know what i'm talkin about who i'm talking about let's get to today's capital account.

the u.s. jobs numbers were released friday from the bureau of labor statistics which typically i think it's fair to say gets one solid day of play in the news cycle but not this time because the unemployment rate dipped to seven point eight percent and some high profile folks such as former g.e. c.e.o. jack welch suggested obama's team manipulated the data to give the president a boost well our guest is here to dispel conspiracy theories around the drop which is not to say the jobs numbers are manipulated but rather that they're manipulated on an ongoing basis one argue our economist argued in past have times look at this the unemployment rate has been low only because government programs especially social security disability have effectively been buying people off the unemployment rolls and reclassifying them as not in the labor force in other words the government has cooked the books faster back in two thousand and three austin goals be writing you may know him he went on to be an obama aide he was kind of loosening

standards for qualifying for disability payments in the eighty's and ninety's so people who would normally be counted as unemployed started moving to the disability system and you can see how those numbers have steadily increased. and today as the eighty's and ninety's that those standards were loosened and this trying to continue during the recent downturn the number of workers receiving disability insurance jumped twenty two percent from december two thousand and seven to april two thousand and twelve this is bloomberg reporting this citing social security data so looking at the labor force participation rate there you can see it has been falling this is something that we talk about month after month and the rise in disability could account for as much as a quarter of the decline in the labor force participation rate during this time from two thousand two thousand and seven to two thousand and twelve according to some economists so this is just one factor possibly clouding or complicating the unemployment picture that we headline every month we mean the media collectively

join me today discussing all. all of this though is mike said lot better known as nec his investment adviser for sycophantic capital author of the popular blog mischa's global economic analysis and i'm really glad that you're here today matt because i want to spend some time on this this latest sort of around the jobs numbers is a great opportunity to really probe into what goes into these so thanks for being here oh pleasure to be on the show again lauren always seems to be some kind of big controversy when i'm on air this time right heading right into the election big controversy on jobs and former c.e.o. jack welch let the fire there with a tweet that was a million and i have been able stars on the like that i know that for sure that tweet went very far and then other people jumped into his camp people like donald trump so outspoken on many issues to put it mildly so just to get this cleared up with september you think kind of the blatant accusations of manipulation that those are conspiracies cracked oh i think well those are the conspiracy theories and a lot of people e-mailed me that and said well you know michel look at this these

numbers are unbelievable actually it was jack welch and said these numbers are unbelievable and i dove into him and so well certainly it could be an outlier you know believe a ball unbelievable how i guess is the way do i think the b.l.s. is cooking the books per se no i allot of these people were hired under the bush administration they're not democrats the b.l.s. doesn't consist of a bunch of of democrats cooking the books for obama you know rather you know they do their job and sometimes there's outliers and sometimes there's not certainly the preceeding three months were really horrendous we had kind of a snap back lot of what we can discuss that a little bit but they were actually going out there and manipulating the data i think someone would squawk someone would be raising their heads and look at this look at what obama is doing ok so not

a crisp air in the series fall short. i totally hear you there so you said so you chalk this up to a conspiracy theory so let's just square away the september numbers in terms of what came out and them and how to how to square those corners so a there is seventy three thousand jobs added according to the household survey that shows them though it's just as three months the prior three months i had a little change this was the most since two thousand and three according to accounts so where did these jobs all come from or why where that was if not added but actually in the prior two months there were there was a loss of one hundred nineteen thousand jobs one month and then something like a hundred another month so you know here we were all of a sudden losing do yourself and jobs and then going to this monstrously big number i dove into some of the details five hundred eighty two thousand of them were part time jobs if you look at the u. six unemployment rate it stayed flat that means the entire three tenths of a point drop in the unemployment rate was all based one hundred percent of it was

based on part time workers now is that reasonable or not i don't know but i did a post just earlier this afternoon with some analysis that said will perhaps this is related to obamacare in the obamacare bill and i think we're just finding out some of the details that senate that are in it remember nancy pelosi said well we've got to pass it to see what janice but you know there's provisions in there that give. that are very onerous on full time employment so you know right as this kicks in our corporations going to contractors and part time workers here i don't know but it's a possible explanation and it's certainly much more reasonable explanation than we've seen regarding conspiracy theory yet but just to be clear as id obamacare

theory is that it. as theory at this point or is there any anything to to lend credence to it at this point in terms of that september rise in part time employment i don't know i mean i guess my question would be why is this all of a sudden you know is this some sort of year in effect that's the reason why i don't know but the the theory says and i looked at it and i looked at the data and i looked at provisions in the bill as you know actually are pretty onerous in terms of what it's going to cost to hire full time people so i don't know maybe there was a sudden hiring spurt and all the people just happen to be part time or contractors to not so that they would not have to pay for obamacare i don't know i think one month can easily still be an outlier it's actually my number two points there and they're going to revise some of this but there's a chance that part of it is also obamacare so those are the two factors i think and

it will need to analyze that further in the months to come conspiracy no i don't think so ok and just one more thing so i can show our viewers how the rise in the part time workers factor is and looking at it broadly so far and you can see a part time workers so five hundred eighty two thousand were added last month and this was just the largest rise that we've seen since two thousand and eleven for one month so mish you think this could be a statistical anomaly versus really five hundred eighty two thousand jobs coming online all at once yes exactly and some people were telling me well they expected this to happen because you all because of the election and others said i got e-mails from people omission look at this i mean this is just seasonal hiring patterns for teachers going back to school back to class know that explanation doesn't whole lot of the reader of the lord because these are seasonally adjusted numbers if it was just

a few years going back to work we would have seen this. before that we have and this is this is an outlier the outlier is the key takeaway for that so now we've got that temper squared away that's kind of weird report that we think could be an outlier let's look at the bigger picture of unemployment i think it's an important conversation to have about the ways that the figures are not necessarily overtly manipulated as an obama calling the b.l.s. saying we need a higher rate but in the way that people are counted as unemployed what's counted as the labor force and you heard me at the beginning of the show i was interested to hear often gold me in two thousand and three talking about how social security disability insurance and how the parameters for that had been expanded so more people were going onto the disability rolls and were being counted as unemployed and so this was kind of skewing what we look at as unemployment and is this one factor that you think kind of skews the picture that that we consider to be the unemployment picture absolutely no god between two thousand and many of this year

two point two million new point two million people with on. social security disability how much of that is fraud i think i don't know pick a number but let's let you have the raw data because that's what i think and we also saw that rise at exactly the same time worn as people were expiring all of their ninety nine weeks of of unemployment insurance benefits so they're collecting unemployment insurance they no longer can as a work it out with their doctor that they can file for not a physical disability a lot of these are mental disabilities how do you prove that and doctors are saying oh i'll write you a little note here or you know like your teacher wrote you when you want to play hooky from school oh joe you sick well doctors are doing this the brome is this is costing taxpayers a lot of money if that's what's happening and i'm sure that as a portion of it is will and we don't know if it's fraud we don't know if perhaps

some. that these people that have been disabled would work in better times because there were jobs available and they would just choose to do that and now those jobs aren't available so they are on disability we don't know i don't want to make them more or less that's not personally but i do want to ask in terms of the invisible unemployed what other groups are important to look at so we have disability is one that is not included in the unemployment figures they use three that we look at is are there other invisible unemployed that aren't counted oh absolutely students are the big ones students are staying in school longer because there's no jobs and also you have to remember if you're in school you know you're you're not considered part of the labor force therefore you're not considered to be unemployed if you don't have a job so we also have seen middle age workers going back to school obama and actually every administration is pressing people oh you just need draining i'd

only give the training is you know you're not going to retrain a truck driver into being a job a programmer or a java programmer and a bang i don't want canning that was happening people are going back to school to you know trying to get classes wanting to improve themselves because the for profit schools are pushing this so you need to go back to school will get you a job well great most these people are graduating and finding out soon there's no jobs there but while that's going on all those people aren't counted as right being part of the labor force they below us in two thousand and six s. to made that in two thousand and ten the labor force would be one hundred fifty six million hundred fifty six and a half million it's now one hundred fifty five million and we're almost three years later here going on a two thousand and thirteen so the below us was way off that was this was another argument that i kind of squabble i've gotten in do you. yeah and the participation

rate we've seen it dramatically decrease and you're saying even more than the b.l.s. anticipated so that's the other factor that's really impacted the actual unemployment rate in a way that may not be completely accurate i want to continue this conversation after a quick break mash we'll have more with mike shylock the investment advisor first six episodes at capital and also still ahead angela merkel arrives in greece and protesters take to the streets but what makes mainstream headlines we'll talk about financial and perception troubles on the other side of the world in loose change but first to close the market numbers.

here is mitt romney trying to figure out the name of that thing that we americans call. sort of here's what you saw. you know what kind of smile there terror cells you want to listen to featuring the on the ball and the current trend. is really sort of. you know closer to the structures from what you and i should care about because there are profit driven industries that sells a sensationalistic garbage because of breaking news i'm out of the market. and

we're going to break the. welcome back we're talking about the unemployment numbers and the way that the books are or are not cooked depending on what you consider it but i think it's important to understand what is left out of these numbers and how to better get an accurate gauge of the job situation especially when this is such an important economic issue and also a political one going into election so like shylock has been talking to us about all of this is investment advisor pacific capital and we're going to switch gears in a minute to the i.m.f. projections but i do want to stay on employment on unemployment for one more moment

because i want to ask is there any accurate gauge you think of what the true unemployment situation is in the u.s. for example they used to. everyone has their own perception i think we ought to come up with a more realistic way that i saw a proposal last week you know based off of. some other factors let's make it simple lord if you don't have a job and want a job your own employer what would that number be that number would be more like you five unemployment and but you also have to add in two million on disability you've got to add in some other people like that so the real unemployment rate here not car not counting the part time workers would be more along the lines of about ten percent that's what i think that's the people who want to job and don't have one add in people who are working part time. for economic reasons in other words

they want a full time job but don't that gets you an unemployment rate of around fifteen percent and then we can argue whether or not they're fudging any of those numbers or not but you know take your choice include part timers it's about fifteen don't include part timers it's about ten i realistically the unemployment rate is about ten percent in my opinion and you get that just by adding back in all these discouraged workers all the disability fraud all the things like that very simple calculation and a very simple definition learn very simple definition do you want a job do you have one ok no you're unemployed i'm totally with you there i think that it's such a rare world when maybe someone that's homeless on the streets would not be counted as unemployed because they haven't looked for work for four weeks or whatever so let's move on to the i.m.f. because i.m.f. today i came out with global growth forecasts they reduced them most of on from their prior estimates and this made headlines front page news in the wall street journal but when you and i were talking about earlier is that i.m.f.

late to the game on this. of course relate to the game we were talking about this lauren on all right guys we'll look out a really back in january as the i.m.f. is going to be dry dramatically lowering their growth forecasts well they didn't dramatically lower than they just lowered them and and so i think they're still way off the mark i think more of these revisions are coming down down the pike i think france in particular is going to be shockingly bad i think germany is going to be bad there are a lot of things happening in europe that they've just not accounted for off so we had this discussion last week and certainly nothing was settled a as a basis of the last jobs report but i think the u.s. is back in recession and so we've got the fiscal cliff coming up you know are they really going to let all these tax hikes go into. and apply all the defense cuts well they're not really because of or the reduction in the amount of deficit is

actually the deficit is even going up so they're not doing what they estimated they wanted the budget to be so. and we also have the fed cheerleading that just you know think about that for a second with the fed really be pressing congress this way if the economy was was a lot stronger so no there's economic weakness everywhere it shows up in the participation rate it shows up in the fed sure lading as lee jones of in bed found it which i think we talked about any i.m.f. is way off the mark here they're going to be lowering these for gas prices i love that the headline is that the i.m.f. downgrades forgot to say these are still far too rosy we just have a minute but no one nation that the i.m.f. upgraded with the u.s. and as you said you think the u.s. is in recession we talked about that before others i talk to you think a u.s. recession is bacon a cake so what gives with i.m.f. related to every priority war of them every party so there you go late every party but make you are very much here for the party i really appreciate you being on this

. show and expounding upon all of this from unemployment to global growth thanks so much mike said locke investment adviser for sick of pacific capital. all right let's wrap up with loose change dimitri kofi annan has so much to talk about in the world today a lot we're going to be difficult on a lot that we sure are let's get up and run in a gal because german chancellor angela merkel got saddled up and she left for greece she arrived there today for an official visit with the country for which there is so much contention between the two germany and greece i would argue and

while she offered support to the greek prime minister the greeks least those that got their pictures on t.v. didn't seem very supportive of her we have footage i believe they were going to show protesters took to the streets carrying some banners saying merkel out greece is not your calling me and this is not a european union it's slavery us media also commented on the protest check out joe scarborough is rant this morning wall talking about merkel's arrival. if you or your the street. about the germans carry you on your shoulders when you're too lazy and stupid it is time to form and make rules it's his or you can put your. yeah you. why. you don't see that before with friends like that on the mainstream media who needs enemies angela merkel doesn't need to do anything she has us mainstream media pundits on her side that's absurd what we were doing on earlier is

the way that the media in the us that we watch portrays the situation in greece first cover i don't even think that. i would want that i mean just a complete idiot like you're an idiot joe you're a complete retard sorry i mean what are you doing we're talking about i mean how do you go out and say things like that i want to tarnish the people and set me just it's ridiculous but anyway beside the point. yeah we were talking about how the media misrepresents misunderstands greece entirely and i think that they like to take the the inside like a larger european union and say greece's problems are about austerity and it's something that we can relate to with other countries in europe but it's not i mean greece is its own country with its own unique history its own problems and in fact austerity which is really just you know the cut the deficit is really just something that spark the powder keg that had been accumulating all that gunpowder to be accumulating for all these decades in greece and all of a sudden. they woke up and they said after all this after all this looting of all this money for all these years to call this wanted to get out of the country for

big counts all these people really rich all these years making money through government all the sudden now we're going to have a depression as a result of all the stuff that you guys say all these years it's ridiculous but that's the real story is that's what people are so angry people would not be angry just because of some budget deficit cuts right and more than that well it is a lot more than now but i think that what we see is whatever is convenient to whatever your political agenda is or whatever your your platform is you can easily just blame it on austerity and then it kind of precludes any discussion of cuts or tax reform and countries that are really need it like the u.s. because you can just say austerity and people are programmed to go oh no austerity is bad we're going to be greece and you see people on both sides of the aisle. use this argument and before i move on to the next story i just want to bring up a tweet that a greek journalist tweeted i thought kind of summed it up even if merkel decides to write off the greece debt today foreign media will still see the twenty people who burned nazi flags and throw stones at the police i mean it's just kind of the

always the focus of any kind of coverage that grace gets is going to have good pictures of people protesting throwing molotov cocktails but where we want to is going i misspoke for use the word from the use sorry but donna. before that i just thought of it now but anyway the point is that the r word you don't know i don't agree with joe nothing really really got me upset like you're going to say that really got me upset it really got me upset i had no plan and even going off on that sort of crazy clip well you're greek so you're here you're somewhat in i don't have seriousness and it was incredibly depressing yeah it is just ridiculous that some guys say lazy thirty hour work weeks go to the beach ball blah it's a complete. slanderous ok it makes it easier to target let's move on to another story but you're inside is appreciated by many of our viewers greece isn't the only place with money problems just pick a country pretty much but iran is facing what some call hyper inflation some say that this is actually not the situation at all but their reality has depreciated significantly against the dollar since august. the reaal has lost

a few percent to the dollar in a song that sanctions are working in sort of for good it's hurting the iranian economy but doesn't seem to be persuading the authorities to change their nuclear path. ok sanctions are working dimitri what do you think well that's so there's you've been looking into there's a look at iraq i don't have a chance to really read into this that all the past few weeks have been going on there the so there definitely working in the sense that they're having an effect the question is are they having the desired effect and what i thought was interesting from the analysis is that this morning in the sense that there crippling iran right on the right degree right right exactly but what what's interesting about this is that the iranian government because they have such a strong control over the economy they're able to put a price controls for for basic necessities food and medicine vetter most important for the lowest class in society right. and the inflation to see this proportionately to the middle class and why is that important because middle class

has been growing for all these years right they've been benefiting a lot but through the economic growth there's like that in the middle class is the more educated class and the class more likely from which change will come about well here's the thing that i would say i mean if they're subsidizing the poor for essential isn't that what a response but here's not everyone would do in a situation that was so dire that the things that strengthens the role of the state so that anybody who is in a shower and has their citizenry which is probably not what the u.s. or western countries would technically like to try to achieve with these crushing sanctions one thing i want to make one point i want to make that i think was a really interesting point that i assume we're going to read on the daily reckoning today was ok the real question is kind of what is more significant what is the difference between if your currency depreciates all at once very rapidly or if it depreciates eighty two percent of purchasing power of for forty years as in the case of the u.s. dollar which i thought was an interesting perspective to put it in because you don't see as many headlines when it depreciates over time but nonetheless the decline is there ok we got to go leave it there thanks for watching and have

a great night come back tomorrow and in the meantime you know you can follow me on twitter at lauren lyster you can like our facebook page right there you can watch us on you tube give us any feedback all respond on friday watch us an h d on hulu and from everyone here. there you go have yourself a great night. wealthy british style sun. spot on. the. market why not come to. find out what's really happening to the global economy with mike's concert for a no holds barred look at the global financial headlines tune in to cause a report on our. kelli arena.

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