Hard to believe stocks went all wobbly yesterday in nervous anticipation of payroll numbers due out this morning. With Ford and GM drifting steadily toward bankruptcy, and what remains of America’s manufacturing economy dying from the economic equivalent of pancreatic cancer, what sort of “numbers” could Wall Street possibly be looking for?  The ironies abound, for it could not have been even three months ago that investors allegedly were scared to death that any evidence of statistical strength in the economy would cause the Fed to tighten, or at least to think about tightening. Now they supposedly are biting their nails, worrying in a way they have not worried since the early 1990s that the economy may actually be turning statistically weak.

We take pains to distinguish the statistical economy from the real economy because they are so very different. The real economy, the one based on real-income growth and net fixed capital investment, is by far the weakest of the post-war period. A Martian economist with no political axe to grind would diagnose it as terminal.  But the statistical economy reportedly has been going gangbusters, as strong as the government’s spinmeisters can contrive to make it. Tweak the inflation number just a tad and you can turn even an economy riddled with pancreatic cancer into a picture of health. Need to assert that GDP grew at a 3.5 percent rate just before elections? No problem. Just fabricate an inflation number that understates the problem by half, and – voila! – an instant real-growth miracle. Want to make Americans feel rich? Simply tell them the “value” of their homes now stands at $22 trillion, having risen at an 11% annual rate since 1999.

Christmas Sales Un-Fudgeable

One statistic the spinmeisters can’t fudge, though, and which will be far more important than the government’s laughably corrupt payroll figures, is retail sales. In an economy whose growth is 70% consumption-based, what could be more important than retail sales for the month of December? Our guess is that the deteriorating housing sector will take quite a whack out of this year’s holiday sales, except perhaps at the ultra-high end. Will Bergdorf’s and Neiman’s sell enough $5,000 wallets and $300-an-ounce perfume to make this a “green” Christmas? Tune in next month for the answer.