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Explaining The Government's 1.8 Million Job Overestimation In Pictures
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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The BD model serves a political purpose - there is no reason why they would get rid of it.
100% correct. Good comment.
how bout that M3, eh. bueller ?
Will this be the nanothread that snaps the SPX?
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+?
Different survey - unemployment comes from the household survey - not impacted by birth death
Created or saved job mythology seems to have no bounds, so another 1.8 mil shouldn't represent a problem
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.
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.
InconTHeivable!!!
thief not theiv
A glitch or a deliberate manipulation of the model?
Off Topic, TD what is Marla's take on Denningers claim that the AIG trust is unlawful?
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
Dumpster, point taken. Agreed, sometimes I just think we might be able to turn this ship around. Maybe it is a lost cause.
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 ..
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.
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%?
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
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.
Actually the guy who writes the number gets a phone call first.
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!
"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!
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.
BILL
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.)
birth/death model= birth/death of businesses, not people
I'm aware of that. Just made me think of the human factor.
Let's not overthink this. The numbers are political. And all political numbers will be what they want them to be.
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.
Now THAT is change you can believe in! Lol
How about some of those pictures of the tent cities to get the point across?
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.
Drip, drip, drip...
Looks like the computers are programmed to push it for the 1100 on the dot close
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.
This Obama administration is incapable of telling the truth about anything.
They'd make Pravda blush with embarrassment.
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...
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.
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.
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....
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.
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.
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.
The United States of Mythology.
Bush, Obama... Repubs, Dems,... same corrupted pair of pants, just different pockets.
POS employment model makes even global warming models blush.
Cuttin some more meat from the bones. Should provide a large boom to the markets. Inflation should show it's hand on friday, again.
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.
Tallied, copy.
Ooooooops there goes Leo's employment #'s
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.
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.
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.
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.
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.
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?
I did some graduate work on grants funded by the BLS. I still remember the look on my adviser's face when I told him I thought all the numbers that come out of BLS are phoney-baloney nonsense. Now here is an educated man, one with a PhD, who cannot cross the intellectual boundary between speaking the truth about these issues and going against your funding source. And that's how they get you. I am no longer involved in higher education because of that very type of experience--conflicts of interest every which way. You cannot govern this way, and if you are doing research, you have to let the chips fall where they may, otherwise you are breaching your ethical responsibilities.
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
http://globaleconomicanalysis.blogspot.com/2010/02/824000-will-disappear-on-february-5-bls.html
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 ...
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.
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.
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.
Educate people on how voluntary markets operate and why they are superior to coercion and heavy-handed, top down one-size-fits most policies.
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
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.
*Stands at rear of ship waving around broken off splintered rudder*
yelling:
"Was this thing important?"
-MobBarley
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.
lmfao
job losses 80 kagillion
dow rallies 2000 points
" kagillion"
i'd copywright that number probably be popular one day.
Already checked. It's in the Micheal Jackson Estate. Buried deeper than the truth about JFK.
how long until a Moody's-like glitch hits the federal budget?
this whole "recovery" is a Moody's-like glitch
thank you, I'll be here all night. drive safe and don't forget to tip your waitstaff.
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.
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.
Hey has anyone ever been interviewed for the unemployment survey? Or are we ZH readers all gainfully employed?
A fantastic alternative to the TARP disaster:
http://the-raw-deal.com/2010/02/03/tarp-alternative-by-lt-daniel-kaffee-...
Nathan R. Jessup
www.the-raw-deal.com
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.
Keep the line moving free kool-aid and cookies at the end.