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Explaining The Government's 1.8 Million Job Overestimation In Pictures

Tyler Durden's picture


Last October the BLS announced it would revise historical payrolls lower by 824,000 on February 5 (this Friday's NFP release). While this number will not impact the actual January NFP report (a loss of nearly one million jobs in a month would probably even take out the persistent SPY algo that has been hugging the bid for the past 10 months), it will be prorated across all months in the 2008-2009 reporting period. The reason for this adjustment has to do with a huge glitch in the birth-death model, which is exactly the same problem that the rating agencies faced when housing prices plummeted: the birth/death model assumes, in the long-run, jobs are created, not destroyed. Any period of excess volatility in the stock market therefore translates into major prior downward revisions to already disclosed payrolls. And while we know what the current revision will be, the scarier prospect is that the next historical adjustment, due out in early 2011, will be even larger, at least 990,000. This means that the government has overrepresented running payroll data by over 1.8 million jobs over the past 20 months.

Bloomberg has prepared a wonderful interactive presentation explaining just how the BLS is full of itself, absent the L.

First, here is what we know will be the BLS adjustment on Friday.

Second, the reason for the adjustment has to do with the great recession, which having run for over 2 years now is still in no way abating (contrary to what you may be hearing in other still GE-contolled media outlets).

Lastly, and most notably, the number that will have to be whacked from the payroll report in 2011 retroactively is even larger: according to Bloomberg it will be at least 990,000. And this is only for 9 months in the current period.

In essence, a Moody's-like glitch has misrepresented the true payroll picture due to modelling error to the tune of over 1.8 million jobs. How that will impact the president's "jobs saved or created" calculation has yet to be determined. Unless of course all those jobs appear merely on the same excel file that the BLS uses for all it other erroneous calculations.



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Wed, 02/03/2010 - 15:37 | Link to Comment Ben Graham Redux
Ben Graham Redux's picture

The BD model serves a political purpose - there is no reason why they would get rid of it. 

Wed, 02/03/2010 - 16:14 | Link to Comment Stuart
Stuart's picture

100% correct.  Good comment.

Wed, 02/03/2010 - 16:40 | Link to Comment Chopshop
Chopshop's picture

how bout that M3, eh. bueller ?

Wed, 02/03/2010 - 15:40 | Link to Comment crosey
crosey's picture

Will this be the nanothread that snaps the SPX?

Wed, 02/03/2010 - 15:41 | Link to Comment MongNutter
MongNutter's picture

This is bad, real bad.  I wonder what this will do to the 10.0 number... Should it not shoot it up immediately to 11+?

Wed, 02/03/2010 - 15:44 | Link to Comment Ben Graham Redux
Ben Graham Redux's picture

Different survey - unemployment comes from the household survey - not impacted by birth death

Wed, 02/03/2010 - 15:42 | Link to Comment Bear
Bear's picture

Created or saved job mythology seems to have no bounds, so another 1.8 mil shouldn't represent a problem

Wed, 02/03/2010 - 15:44 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

I just love it when information is expressed in pictures and graphs. It's one thing to read a number or hear it spoken and another thing entirely when you see the graph or bar chart grow before your eyes when the "adjustment" is factored in.

Of course, this is all rear view stuff, nothing to worry about, right? I mean it's been acknowledged for months that this "adjustment" was going to happen, so it's priced into the markets, correct?

The thing is, why haven't I seen this on the nightly TV news or on the front page of my local printed rag? Isn't this important? Don't you think the American public would like to know about this "adjustment" downward?

Oh, that's right, the public is currently sipping their 6th dose of Kool-Aid so now might not be a good time for a huge dose of reality. It might provoke some projectile vomiting and who would actually clean up the mess?

Sleep tight baby, and don't let the bed bugs bite.

Wed, 02/03/2010 - 20:51 | Link to Comment Anonymouse
Anonymouse's picture

The trouble with multiple doses of Kool-Aid is that, like iocaine powder, you develop a an immunity.  At some point, the Kool-Aid stops working its magic.  That is, unless the dosage gets greater... and greater... and greater.

Wed, 02/03/2010 - 22:34 | Link to Comment Anonymous
Thu, 02/04/2010 - 03:42 | Link to Comment WaterWings
WaterWings's picture

thief not theiv

Wed, 02/03/2010 - 15:45 | Link to Comment anynonmous
anynonmous's picture

In essence, a Moody's-like glitch has misrepresented the true payroll picture

A glitch or a deliberate manipulation of the model?

Wed, 02/03/2010 - 15:46 | Link to Comment ReallySparky
ReallySparky's picture

Off Topic, TD what is Marla's take on Denningers claim that the AIG trust is unlawful?

Wed, 02/03/2010 - 16:11 | Link to Comment dumpster
dumpster's picture

denninger ,,, unlawful   lol


whats the point? the whole ponzi scheme is an unlawful attempt to keep in power the liers and fraud laden leaches off the body politic .

the courts are bought off. the news, and dennenger shows us something unlawful among a thousand other points of law.

its unlawful  now,  so do some thing about it. put this matter at the bottom of a very large stack if things to do. by a less than honest   justice department ..

but first was going to war in iraq lawful.. lol



Wed, 02/03/2010 - 16:45 | Link to Comment ReallySparky
ReallySparky's picture

Dumpster, point taken.  Agreed, sometimes I just think we might be able to turn this ship around.  Maybe it is a lost cause.

Wed, 02/03/2010 - 16:56 | Link to Comment dumpster
dumpster's picture

it would be nice if the ship could be turned around Really Sparky.. but lol  it looks to be listing to close to the ice flows ,, and the port side is at a 45% angle ..

Thu, 02/04/2010 - 20:00 | Link to Comment Anonymous
Wed, 02/03/2010 - 15:46 | Link to Comment Anonymous
Wed, 02/03/2010 - 15:48 | Link to Comment Racer
Racer's picture

I don't see why they even bother reporting the numbers because they are all fake.

Just someone in an office somewhere, sticking his finger out the window and seeing which way the winds blows, then writes the number that comes into his head

Wed, 02/03/2010 - 15:54 | Link to Comment Bear
Bear's picture

There has to be a constant stream of 'good news' (i.e less bad news) in order that the media will have something to spin into 'green shoots' ... kinda like Rumpelstiltskin.

Wed, 02/03/2010 - 21:47 | Link to Comment carbonmutant
carbonmutant's picture

Actually the guy who writes the number gets a phone call first.

Wed, 02/03/2010 - 15:51 | Link to Comment rubearish10
rubearish10's picture

So, even if NFP begin to flatten, there's no signs that we'll see any "acceleration" in job growth for maybe even a couple of years. How will the machines cope with this huge shortfall in job growth recovery as it extends thru this year and next etc? In other words, since we do not expect enough job growth to offset these huge UE numbers even over the mid-term, how does the FED, the Treasury and the fiscal puppets support the markets? It just seems that we're doomed to a "come to Jesus" event perhaps very soon!

Wed, 02/03/2010 - 17:19 | Link to Comment tenaciousj
tenaciousj's picture

"there's no signs that we'll see any "acceleration" in job growth for maybe even a couple of years"

Nuh uh, they just said on TV that we're gonna see acceleration by as early as March.  So take that you.. you nay sayer, with your logic.. and your sense!

Wed, 02/03/2010 - 15:52 | Link to Comment Bill - Yes That Bill
Bill - Yes That Bill's picture

Good post. Thanks!

Agreed - the Bloomberg Interactive Presentation is a Godsend; the only problem... it's apparently formatted so that one can't cut and paste the text out.




Wed, 02/03/2010 - 15:59 | Link to Comment suteibu
suteibu's picture

Politicians like to trot out death totals for whatever cause fits their agenda.  Now we have this "birth-death" model that is swinging heavy in this recession.  It makes me somewhat curious what the real death total is.  How many committed suicide?  How many killed in robbery attempts?  How many disillusioned souls just gave up the ghost?  Additionally, how many decided not to have a child because they couldn't afford it.  (This, of course, might be offset by those who have children solely for the purpose of getting more government dollars and, seeing the door to the vault open, decided not to let this crisis go to waste.)

Wed, 02/03/2010 - 17:11 | Link to Comment delacroix
delacroix's picture

birth/death model= birth/death of businesses, not people

Wed, 02/03/2010 - 17:17 | Link to Comment suteibu
suteibu's picture

I'm aware of that.  Just made me think of the human factor.

Wed, 02/03/2010 - 19:29 | Link to Comment Rainman
Rainman's picture

Let's not overthink this. The numbers are political. And all political numbers will be what they want them to be.

Wed, 02/03/2010 - 16:01 | Link to Comment Anonymous
Wed, 02/03/2010 - 16:05 | Link to Comment 10044
10044's picture

Now THAT is change you can believe in! Lol

Wed, 02/03/2010 - 16:06 | Link to Comment TheGoodDoctor
TheGoodDoctor's picture

How about some of those pictures of the tent cities to get the point across?

Wed, 02/03/2010 - 16:08 | Link to Comment Gimp
Gimp's picture

Politicians will say anything to look good period. Unemployment where? mentality. Vote these useless F**ks out. You want to see the future, look at Detroit peeps and plan ahead.

Wed, 02/03/2010 - 16:14 | Link to Comment Charley
Charley's picture

Drip, drip, drip...

Wed, 02/03/2010 - 16:46 | Link to Comment Racer
Racer's picture

Looks like the computers are programmed to push it for the 1100 on the dot close

Wed, 02/03/2010 - 16:49 | Link to Comment Cyan Lite
Cyan Lite's picture

Nothing more than gamma hedging for OpEx in a few weeks.  1110 is a huge open interest on the SPX and $110 on the SPY.

Wed, 02/03/2010 - 16:47 | Link to Comment Cow
Cow's picture

This Obama administration is incapable of telling the truth about anything.

They'd make Pravda blush with embarrassment.

Wed, 02/03/2010 - 17:05 | Link to Comment moneymutt
moneymutt's picture

and the model under the last few admins was more accurate?...only thing guaranteed is this model will be off by more during and big boom and a big bust...a geek could correct it in a few days of spreadsheet tweeking but the new guy never wants to be the one to get honest about it...

Wed, 02/03/2010 - 18:05 | Link to Comment Anonymous
Wed, 02/03/2010 - 20:58 | Link to Comment Anonymous
Wed, 02/03/2010 - 23:16 | Link to Comment Anonymous
Wed, 02/03/2010 - 16:54 | Link to Comment Anonymous
Wed, 02/03/2010 - 16:55 | Link to Comment Anonymous
Wed, 02/03/2010 - 18:29 | Link to Comment Dburn
Dburn's picture

If the private sector provided such meaningless numbers they'd be relieved of their duties pronto.


Really? I thought meaningless or fake numbers was not only legal now but a good way to get a promotion depending on how creative you are.

Wed, 02/03/2010 - 16:57 | Link to Comment Anonymous
Wed, 02/03/2010 - 16:57 | Link to Comment Stuart
Stuart's picture

Bush, Obama... Repubs, Dems,... same corrupted pair of pants, just different pockets.

Wed, 02/03/2010 - 17:00 | Link to Comment Anonymous
Wed, 02/03/2010 - 17:00 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Cuttin some more meat from the bones.  Should provide a large boom to the markets.  Inflation should show it's hand on friday, again.

Wed, 02/03/2010 - 17:16 | Link to Comment faustian bargain
faustian bargain's picture

That reminds me - For those keeping score at home, bank failure friday last week saw 6 failures, cost to the DIF roughly $1.8 bln.

Wed, 02/03/2010 - 17:57 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Tallied, copy.

Wed, 02/03/2010 - 17:03 | Link to Comment Anonymous
Wed, 02/03/2010 - 17:11 | Link to Comment glenlloyd
glenlloyd's picture

It's fair to say that the rationale for the birth / death model is that it allows the BLS create fantasy metrics to show something that cannot possibly exist in the world of reality.

Wed, 02/03/2010 - 17:13 | Link to Comment moneymutt
moneymutt's picture

I wonder it there is a way to make stats more devoid of political influence. There are some areas of govt that we have protected, with certain systems, better from politicians. The civil service rules helped lessen unqualified political appointees. For 40 plus years, have done a pretty good job keeping DOJ less political and when Bush really went for it in his term with Gonzo and preference given to less Christian rightees and a blacklisting of liberal grads, there was push back because of the many years of non-partisan nature of everyday hires.

I would think we could set up some sort of stats cops that are independent and just plain geeks...most of these hidden stats are not even partisan nature, just worse news than whomever is in power wants out. There are different angles on numbers, but even that can be addressed by tracking many different ways of measuring something and summarizing all the different handy ways raw data could be interpreted.

Wed, 02/03/2010 - 17:57 | Link to Comment divide_by_zero
divide_by_zero's picture

Thanks for the laugh, I remember when Clinton's man Reno fired all the AGs (I guess that was political or more bipartisan in a way, but the re-hiring wasn't), Gonzo being less of a man could only manage firing 8.

The whole system is corrupt.

Thu, 02/04/2010 - 01:25 | Link to Comment moneymutt
moneymutt's picture

ask anybody that has been at DOJ over last 40 years...even tho the dept heads, so to speak, are new political appointees with each new prez, the DOJ did a good job of hiring well-qualified, diverse staff lawyers and not being overly partisan...Gonzo's big crime was not replacing a few of their own appointees that they didn't like, it was hiring staff based on their politics, ideology in a consistent and brazen way that had not been done in previous Repub and Dem admins...

we could either say all govt is corrupt and sit around for complete tyranny or revolution, or we can see what works best and worst, and trying learning from what works well and move more towards it. DOJ is one of the things that has worked better than not at getting overly partisan.

Wed, 02/03/2010 - 17:15 | Link to Comment Heroic Couplet
Heroic Couplet's picture

IRS is the only government agency needed to calculate the unemployment number. If you get a job, the IRS takes about three days or less to calculate the withholding rate.  That's as long as it takes to calculate the unemployment rate. Social security number (a unique identifier) matched to a W2, 1099, or EIN for a small business. Three different flavors of spreadsheet or whatever fastest processor it takes to send a rocket to the moon. The BLS, "home survey," "payroll processing" "etc." are smokescreens.

Wed, 02/03/2010 - 17:24 | Link to Comment moneymutt
moneymutt's picture

just as Soc Security database is instant way to determine who is legal or illegal immigrant and who is using fake/stolen number...but as they say, "we don't want to know the truth". Businesses want the cheap, cheatable slave labor, so we do nothing or talk about a fence, when all we have to do is only hire legal immigrants. If only jobs are cash under table that gives you no legal, non-laundered money trail to get credit etc, way way less incentive to illegally immigrate.

IRS, is good for employed wage earners, not so instantly great for tracking earnings of self-employed or small-business. Lots of people working for corporations full-time are not "employees" but independent contractors. When they are told not to come back to work one day, or they only get work 1 day a week, are they "unemployed" according to BLS? 

Wed, 02/03/2010 - 18:28 | Link to Comment Anonymous
Wed, 02/03/2010 - 17:18 | Link to Comment moneymutt
moneymutt's picture

By the way, Mish has done some great posts and analysis on BLS stats and the birth death model over the last year...he has comments on same Bloomeberg graphs


Wed, 02/03/2010 - 17:22 | Link to Comment Prof Gulliver
Prof Gulliver's picture

Adjustment = "Wow, sure glad I didn't know this when I bought the SPY a year ago." It just doesn't matter now. And next year's adjustment won't matter either. Or the year after that, or ...

Wed, 02/03/2010 - 17:29 | Link to Comment B9K9
B9K9's picture

While the first & second rules of Fight Club are that you do not talk about Fight Club, the first rule of ZH is to accept that both political parties are bought and paid for by the ruling oligarchy.  Heaven knows I've been on the forefront of labeling Hussein as an affirmative-action poster boy, but then so too was Bush. (I mean, how else did either one of these inarticulate, brain dead chimps get into graduate school?) If McCain had won in 2008, I am fully confident that the exact same pattern of behavior (fraud, corruption, wholesale lying, etc) would be exhibited on a daily basis.

The situation we now find ourselves facing has been brewing since 1913. Indeed, it is as timeless as history itself. Americans had to overcome a 10 year recession/depression after Andrew Jackson disbanded a similar gang of thieves way back in 1832. The issues typically discussed @ ZH assume a basic understanding of the underlying political-economy. While many come to be educated, others use this resource as a sounding board to mount a new American revival.

Here is the crux of the issue: our money/credit system requires an expansion in money/credit to cover the costs (principal+interest) of the previous cycle of money/credit expansion. Government is not only a party to this system, it is THE party behind the charade. Without a foil like the Fed, the central government itself would have to take the blame for debasing the People's wealth - a clear violation of the 5th amendment (takings clause). But if the central government couldn't inflate the money supply (ie have first claims on counterfeit tickets aka FRNs), then its operations would have to be funded purely via taxes & debt. As this would severely crimp the life-styles of all those who feed off the government teat, it soon becomes obvious why the system we have in place today IS in place today.

So, the goal is to force government to live within its means. This, of course, would kill both the warfare & welfare state, which is why there are so many entrenched interests fighting for its survival. Clearly, this opportunity would never exist during a period of economic expansion (ie money/credit inflation), so the government is THE active agent in keeping the hampsters (or debt slaves) running on the spinning wheel. But, a funny thing happened on the way to the forum, in that in this case with the 2002-2007 housing bubble, it looks like they may have finally over-reached and seriously screwed the pooch.

If so, then this is our golden opportunity. Opportunities like this don't come along any old day; they are multi-generational events. It is important for people to not only recognize the uniqueness of our particular situation, but that this is our window to really make some significant changes as to how things are done.

Wed, 02/03/2010 - 17:44 | Link to Comment boiow
boiow's picture

and so what to do.

1/  buy gold and silver and save it. not trade it.

2/ only vote in libertarians/constutionalists

3/ reduce taxes by any means necessary  (starve the beast)

4/ only use frn's/ banks frugally.

whats next.

Wed, 02/03/2010 - 18:08 | Link to Comment WaterWings
WaterWings's picture

If one really does believe that we are head for a multi-generational event/period as Benign put it (disclaimer: I do!), and you recognize the utter fragility of the food/energy distribution system, you would be wise to seek a storable food and renewable energy solution for you and loved ones. It's either that or you, along with millions of other Americans, will be starving in the dark.

Heavy violence accompanies these events and the sun also rises. Humans never change. Seek methods to protect yourself.

Wed, 02/03/2010 - 18:25 | Link to Comment Anonymous
Wed, 02/03/2010 - 23:03 | Link to Comment Mrmojorisin515
Mrmojorisin515's picture

been trying to do that since the bail outs, but most people do not care.  My god can you believe the president is going to have the state of the union when lost is ON!!!!!!!!  THE NERVE, i mean how do you crack the blue goo encasing most americans brains from the projection tubes (plasma now i suppose).  If you try to educate them, most will shun you, your friends do not want to hear it, they could care less and will defriend you if you try to tell them what is going on.  I mean geez, how can people on this site openly acknowledge that the government will rob you and has been doing it for years, but that very same government would not kill its own citizens for power, then they call you a wingnut or tell you to put on the tin foil.  Most Americans will not take any notice of what is going on until the welfare checks or unemployment runs out and by that time it won't matter much because they'll be clamoring for a savior, just like most thought obama would be.

And still you believe
this aristocracy gives a fuck about you.
They put the mock in demockracy
and you swallowed every hook.
The sad truth is you would rather
follow the school into the net
cuz swimming alone at sea
is not the kind of freedom you actually want.
So go back to your crib and suck on a tit
go bask in the warmth of your diaper.
You´re sitting in shit and piss
while sucking a huge pacifier,
a country of adult infants.
A legion of mental midgets
all regaining their unconsciousness


Wed, 02/03/2010 - 18:05 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

The first rule of Zerohedge is that you talk about Zerohedge.  The second rule of ZH is that you talk about ZH.  The third rule is you post on your first night.  The fourth rule is to accept that both political parties are bought and paid for by the ruling oligarchy.  Yes that is correct.  Bought and paid for.  However they do NOT change diapers.  So when Obama soils himself when he figures that Summers and Rubin conned him, he will have to clean up his own mess.  The oligarchs have more important ways to spend their limited time on earth.

Wed, 02/03/2010 - 17:35 | Link to Comment Anonymous
Wed, 02/03/2010 - 18:45 | Link to Comment merehuman
merehuman's picture

Oregon. Many of our trades men are self employed contractors. Drywall, painters , framers, plumbers and electricians. And more.

I dont believe the Dentist or my bookkeeper get unemployment.

Wed, 02/03/2010 - 19:05 | Link to Comment RoastingBankers
RoastingBankers's picture


job losses 80 kagillion


dow rallies 2000 points

Wed, 02/03/2010 - 19:57 | Link to Comment boiow
boiow's picture

" kagillion"

 i'd copywright that number probably be popular one day.

Thu, 02/04/2010 - 03:45 | Link to Comment WaterWings
WaterWings's picture

Already checked. It's in the Micheal Jackson Estate. Buried deeper than the truth about JFK.

Wed, 02/03/2010 - 19:05 | Link to Comment chunkylover42
chunkylover42's picture

how long until a Moody's-like glitch hits the federal budget?

Wed, 02/03/2010 - 19:06 | Link to Comment chunkylover42
chunkylover42's picture

this whole "recovery" is a Moody's-like glitch

Wed, 02/03/2010 - 19:07 | Link to Comment chunkylover42
chunkylover42's picture

thank you, I'll be here all night.  drive safe and don't forget to tip your waitstaff.

Wed, 02/03/2010 - 20:10 | Link to Comment jmc8888
jmc8888's picture

As with most things destroying us, over reliance on bunk models (see all models are guesses) strikes again.


See also (cap n trade)

See also (derivatives at large)

See also (climate change)

See also (Comparative Effectiveness Research and QALY)


When so much of everything is run on models, (or wants to be) somebody sure should realize they are guesses, and be constantly checking them for error.  Whoops people generally forget the last part and take these models as if they were the word of god.  They aren't.  We're paying for it.

Wed, 02/03/2010 - 22:22 | Link to Comment Fidel Sarcastro
Fidel Sarcastro's picture

I first read about this on Oct 3rd last year. Somehow this massive revision is "baked into the cake."

After an initial drop in futures, the ES will climb back to only marginally unchanged before the opening bell...then there will be a moonshot to new highs.

It's all that fkg crazy.

Wed, 02/03/2010 - 23:15 | Link to Comment Anonymous
Wed, 02/03/2010 - 23:37 | Link to Comment Anonymous
Wed, 02/03/2010 - 23:42 | Link to Comment walküre
walküre's picture

When will you all learn?

Bad numbers are "not as bad as expected" and will drive markets higher several percentage points.

Since March, this has been the biggest baddest promo effort of any junket campaign team ever. While the insiders sold en masse, the masses bought overpriced stocks - again.

Thu, 02/04/2010 - 04:44 | Link to Comment Rick64
Rick64's picture

Keep the line moving free kool-aid and cookies at the end.

Do NOT follow this link or you will be banned from the site!