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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Ben Graham Redux's picture

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

Stuart's picture

100% correct.  Good comment.

Chopshop's picture

how bout that M3, eh. bueller ?

crosey's picture

Will this be the nanothread that snaps the SPX?

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+?

Ben Graham Redux's picture

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

Bear's picture

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

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.

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.

Anonymous's picture


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?

ReallySparky's picture

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

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



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.

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 ..

Anonymous's picture

I'm not Marla but I am a lawyer. I can't read Denninger because he routinely misunderstands the law. (He reminds me of Gilda Radner/Roseann Rosanadana on the original SNL except that he doesn't say "Never mind" because he never seems to understand that he's got the premise or important information wrong.) If people point out the mistake, he gets defensive, etc.

IOW, I would not trust Denninger in connection with knowing the illegality of anything. I'm sure he occasionally gets it right but he seems to be wrong far more often than he's right. However, I have not looked at the particular claim in question.

Anonymous's picture

So will this affect the headline U3-Unemployment Rate...or will they correspondingly reduced the workforce participation numbers in order to keep the headline rate near 10.0%?

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

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.

carbonmutant's picture

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

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!

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!

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.




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.)

delacroix's picture

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

suteibu's picture

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

Rainman's picture

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

Anonymous's picture

Jobs? Who needs jobs when you have a printing press.

Just give a title, a stack of fancy business cards, and a bi-weekly check. Little bits of paper are what bring prosperity afterall.

Statistics certainly don't.

10044's picture

Now THAT is change you can believe in! Lol

TheGoodDoctor's picture

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

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.

Charley's picture

Drip, drip, drip...

Racer's picture

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

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.

Cow's picture

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

They'd make Pravda blush with embarrassment.

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...

Anonymous's picture

The only reason people in government bullshit the rest of us is because they want to define and manage outcomes. It is the worst sort of disturbed thinking that leads them to set these policies. It is the same kind of wrongheaded decision making that led the CIA to put that underwear bomber guy on that plane to Detroit. WTF were they thinking? Was it a psyop to create a media event or what?

We would be so much better off a nation if we got these diseased social engineers out of our lives. We might actually make the social progress we say we want if just inject honesty back into the body politic.

Anonymous's picture

I believe they call themselves "progressives", and their means justify the ends. At least the ones on the right are tied to some morals, the ones on the left are pure critter.

Anonymous's picture

the cia bomber stunt was to warn obama to cough up
more war money and remind us all how we need
the protection of the storm troopers....

Anonymous's picture

It is an interesting coincidence that Obama is claiming that 2 million jobs were saved with the Recovery Act. He said as much when speaking at the House Republican retreat in Baltimore.

Anonymous's picture

Amazing that the numbers could be that off. It brings new meaning to the term "Close enough for government work". All those involved in projecting should be fired without pay. If the private sector provided such meaningless numbers they'd be relieved of their duties pronto.

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.

Anonymous's picture

The United States of Mythology.

Stuart's picture

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

Anonymous's picture

POS employment model makes even global warming models blush.

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.

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.

Anonymous's picture

Ooooooops there goes Leo's employment #'s