In his latest newsletter, Mr. Mauldin explains how the official unemployment numbers are flawed. The problem lies in adjustments which attempt to correct for jobs that aren’t tracked well by current methods:

Last month saw the number of unemployed rise by 345,000. What was not in the headline data was that 217,000 of those jobs were estimated from the “birth-death” ratio. The US economy creates new businesses that do not get counted in the data, so the BLS estimates what that number is, using previous data patterns. When the economy turns, it overestimates new jobs in recessions and underestimates them in recoveries. No conspiracy, it is just the best methodology we currently have. But does anyone really think 200,000 jobs were created last month? The real number of lost jobs is worse than the headline. And next month the birth-death number will likely be over 200,000 again. Add another 100,000 or so to the headline number to get closer to reality.

Mauldin ends the newsletter by stomping out some Green Shoots. Yes, I hate this overused term as much as any self-respecting bear. But as long as Kudlow and his ilk keep using it, we bears need to provide counterarguments using the same silly terminology. Goldilocks Economy? Really?

On to Mauldin’s take:

Again, analysts talked about a turnaround because job losses were “just” 345,000. That is a higher number than any month in the 2001-02 recession, and larger than the month after 9/11. That is a green shoot? Yes, we will see the monthly unemployment numbers fall, but they are falling from historic highs.

While the rate of decline is decreasing (oh so slightly), it is only doing so because of drastic government actions. Taxpayers, foreigners, and future generations are footing the bill. Even if citizens realize what’s going on, digital-printing will likely continue. Entrenched powers view inflation as the least-evil outcome, and so do a majority of Americans. Those with lots of leveraged assets are praying for big inflation (REITs, for example).

If you don’t already subscribe to Thoughts from the Frontline, I highly recommend it. It’s free, and is the only way to get his entire post. The site only has excerpts from each letter.