A Tale Of Two Distributions; Or Are These The Economic Numbers The BLS Now Openly Makes Up?

Tyler Durden's picture

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breezer1's picture

this is the kind of stuff that makes ZH , well , ZH...

Threeggg's picture

breezer 2 things jumped out at me.

#1 Meanwhile, even at propaganda-outlets like Bloomberg, they are predicting anywhere from 8 to 12 million more foreclosures/repossessions which are going to be dumped onto the U.S. market over the next few years. By itself, this is several years of supply. In other words, if U.S. homebuilders didn’t build even one house, and U.S. homeowners didn’t sell one home, it would still take more than two years  just to clear away all this additional, bank-owned supply.

#2 On the other hand, I firmly believe that it will be some sort of "deflationary crisis" or fears of an imminent debt-default which will LEAD to U.S. hyperinflation. In other words, in REACTION to some deflationary shock, the Fed will engage in "the straw that breaks the camel's back" - a new round of money-printing which causes FOREIGN holders of U.S. dollars to dump all U.S. dollar-denominated assets. It is ultimately NON-Americans who will decide when U.S. hyperinflation begins.

RockyRacoon's picture

Talk about your gloom and doom scenario!  This sort of message is not going to make the mainstream media circuit.  Too bad. 

AnonymousMonetarist's picture


We all agree that the Federales print all the data that's fit to uh ... fit.

But why in the world anyone puts credence into the Gaussian distribution is beyond my pedestrian understanding.

An oft used chestnut (and a follow-up to JM's oh-so advanced post) :

In 1900,  Louis  Bachelier published his PHD thesis , “The Theory of Speculation “, in which he presented a stochastic (random) analysis of the stock market.  Random Walk Theory was later endowed with gravitas by Einstein , whom in a 1905 paper, utilized a similar mathematical model  to indirectly confirm the existence of atoms and molecules.

It is said that Bachelier’s paper was not received well because it was poorly written.

It should have been ill received because it was wrong.

The markets are not as simple as ‘random walk’ suggests; successive price movements are neither independent nor normally distributed on a bell curve.  The markets are, in fact, fractal-based.  The term fractal was coined by Benoit Mandelbrot from the Latin fractus meaning ‘broken’ or ‘fractured’ – ironic given the’ fractured’ logic that adherents of Random Walk Theory ascribe to recent events such as the ‘flash’ crash.

‘From 1916 to 2003,’ Benoit Mandelbrot writes in “The Misbehavior of Markets”, ’the daily index movements of the Dow Jones Industrial Average do not spread out on graph paper like a simple bell curve.  The far edges flare too high: too many big changes. {Random Walk} Theory suggests that over that time, there should be fifty-eight days when the Dow moved more than 3.4 percent;  in fact, there were 1,001. Theory predicts six days of index swings beyond 4.5 percent; in fact there were 366.  And index swings of more that 7 percent should come once every 300,000 years;  in fact, the twentieth century saw forty-eight such days. Truly, a calamitous era that insists on flaunting all predictions. Or, perhaps, our assumptions are wrong.’

Verily 'tis fractilicious which is much better than a  random 'Guass'...

Wouldn't you agree?


Jeffersonian's picture

I don't see stock prices and index revisions as being similar. Granted both are changing a current value based on new information, but revisions are not dependent on the value of the prior revision, only the new information is relevant. So I don't see revisions as being fractal in nature, and more dependent and the accuracy of information and competance (or lack of) of the analyst, and both of these would seem to me to have a Gaussian distro.

DavidC's picture

Any system that is 'organic' (i.e. subject to, and based on, human emotions) cannot be, or respond to, mechanistic models (he says, dogmatically).

HFTs only work because of flashing orders and front running - as soon as the 'model' stops working we get 'HFT STOP' and flash crashes as per May the 6th.


jeff montanye's picture

does the conclusion of the original post depend on gaussian vs. fractal?  isn't the incredible difference in level of revisions enough (not to mention the asymmetry of the recent revisions, whatever their distribution)?  is gaussian vs. fractal a distinction without a difference in this context?  if accurate, i'm amazed this data hasn't had wider recognition and distribution.  if this is the scoop, poor, sad msm.

harveywalbinger's picture

Evidently you're not as disillusioned as me.  

The day the msm brings honest substantive news to the lower strata of society about how fucked we are, is the same day the msm airs an honest analytical description of the current fractional reserve (debt backed) monetary system to help those unwashed masses understand that all aspects of the game are rigged against them.  

Then again, the majority of the lower strata is so bought into surreal America *as seen on TV* that it probably wouldn't matter.  Few would tune in... as long as Ouch! My Balls! can be found airing on another channel.  

fxrxexexdxoxmx's picture

There is no strength in being anonymously correct. Anonymosly prepared thesis, although sold and used by many seeking tenure, rarely gain influence.

Getting published is always more important than the  sound understanding or the validity of data. Unless published by SEIU members working for the BLS. BLS data is special and unique having neither the gravitas of published data or reality.

I have no idea if your analysis is correct but hope your anonymously penned thoughts disprove my ideas above.

Spalding_Smailes's picture


Anonymous Monetarist

If your mother does not understand what you are saying then neither do you.


'Fearful people are more dependent, more easily manipulated and controlled, more susceptible to deceptively simple, strong, tough measures and hard-line postures. They may accept and even welcome repression if it promises to relieve their insecurities.'
- George Gerbner

Liberalism is the belief in the importance of equality and liberty. It promulgates reason as the primary source for legitimacy and authority. It stands in direct opposition to religion endorsed by the state, and plutocracy, the modern equivalent of absolute monarchy and the Divine Right of Kings.

The American Revolution (can you hear me Mr. Teabag?) promulgated liberal philosophy as their justification in rising up against the Crown.

Civil rights, individual liberties, the peaceful coexistence of different lifestyles and interests, where the common good can be achieved on the battlefield of dialogue, where power is not concentrated, and mutual respect and tolerance are exhorted... that's liberalism folks.

The antithesis of liberalism is elite theory where the windfall apples need be reserved for the more equal brain workers.

And what is conservatism?

As Robert Eccleshall once opined : 'It is the persistent image of society as a command structure in which the responsibilities of leadership can be exercised within the framework of a strong state manifested in divine-right royalism.'

Deference to authority, traditional institutions, an opposition to modernism, a yearning for the 'good old days', and advocacy of minimalistic change is the bedrock of conservative opinion.

British Psychologist Glenn Wilson stated per his book, 'The Psychology of Conservatism' (1973), that a general factor underlying conservative beliefs is "fear of uncertainty."

To apply these categories, ontologically, to today's conservative and liberal is challenging to say the least.

A conservative president embarking on nation building with the aplomb of a bong-addicted college liberal? Hey we didn't put up that Mission Accomplished sign, we have no idea how it got there. Democracy is on the march dude!

A liberal president advocating Potemkin health reform, approximately a third a trillion to the insurance industry over 10 years, decried by conservatives, whose last president prescribed 8 trillion in unfunded benefits, as socialism? The same president lauding nearly a hundred billion in weapons as a jobs creation program?

An ubiquitous bankster friendly policy, (although to be fair Bush just gave Paulson the keys, Barry Dunham actually had a stronger hand on the rudder) where trillions in rich folks' bad speculative bets were swept under the FASB? And a continuing national discourse squabbling about nickels as the banksters steal gold bars out the back?

The liberal welfare state? Who's zoomin' whom? Welfare is most certainly not just for liberals in the United States of America LLC.

And our popular uprising du jour, crying for NIMBY libertarianism, denouncing the welfare state, save of course for the payments they are entitled to receive, and sickened by the socialism er fascism er well whatever ism 'tis is ... don't get all high-falootin' on me ya book-reading left coast effete... all we know is we don't like it!

It is curious though that few if any of the Tea-baggin' crowd would describe themselves as liberal and yet they seem to be drawn from the well of classic liberalism, as were our Founding Fathers, opposing elitism which ironically the ideology of the rich have conflated for them as today's liberalism.

The end-game of their protestations, most probably, coalescing around the next American Demagogue, the Manchurian Mountain Mama who will, in this fella's humble opinion if she gets in, deliver the state to the elites in a fashion that will beggar credulity.

Spalding_Smailes's picture

I guess the "junkers" will not like this ... The truth hurts.


Epiphanies : they made the world worthy of us. We searched for them like stargazers. This was part of the decade's transcendental conviction that there was something apocalyptic lurking behind the veil of the ordinary, and that just a little more pressure was needed to pierce the last remaining membrane - of civility, bourgeois consciousness, corporate liberalism, sexual uptightness, or whatever else prevented us all from breaking through to the other side.

That was the authentic voice of adolecent Sixties radicalsism-impatient, destructive, nihilistic. Modern liberalism is its mature stage. The tempoary abeyance of the Sixties temper was due to radicals graduating from universities and becoming invisible until they reached positions of power and influence, as they now have, across the breadth of the culture. They no longer have need for violence or confrontation : since the radicals control the institutions they formaly attacked, the Sixties temper manifest itself in subtler but no less destructive ways .... ( Slouching Toward Gomorrah - Modern Liberalism and Americas Decline)

What the radicals did in the Sixties illuminates their mood and goals today...



trav7777's picture

This is idiotic bullshit.

Gay doesn't mean happy anymore.  Words change in meaning.

And there are manifold things my mom doesn't understand that I do.  The rest of this political polemic isn't worth commentary

harveywalbinger's picture

You're Judge Smails' boy alright.  I hope you're just playing the part for your amusement. 

Through the course of time the meaning of a word often changes due to societal/cultural change.  The important thing is to understand what the word means NOW.  

Our current struggle is to protect the individual liberty of US citizens as provided for in the Constitution, from the plans for tyrannical rule by a supposed elite globalist cabal which includes the current United States political power structure.  That's it in a nutshell.  (this is not an endorsement of the Tool of TPTB known as Mark Levine).  

Liberalism.  Conservatism.  Libertarianism...  Call it what you like.  The game of semantics you play is largely a waste of one's time.  

I do believe your conclusion is most likely correct though.  TPTB will never allow real power to be taken from them.  If that was a possibility, someone in DC might have had the idea that we could shrink the size of gubmint instead of bailout upon bailout.  


Oh and one more thing.  For propogating the "teabag" slur of TPTB, I'd like to invite you to have sex with yourself, and will refer to you in the future as a feminine hygienic cleansing facilitation apparatus.  


ZackLo's picture


if you want an example of random walk in action go to this (http://www.youtube.com/watch?v=pXJb29s3nmY&feature=related)...one of robert schillers lectures....I don't see the correlation..

starts at 42:00

Spirit Of Truth's picture

Taking the "L" out of "BLS".

As for fractal market patterns, obviously this is where Elliott Waves may be relevant.  That is a great passage from Mandlebrot.  Here's one I appreciate from Nassim Taleb, The Black Swan: The Impact of the Highly Improbable:

However, if you believe in free will you can't truly believe in social science and economic projection. You cannot predict how people will act. Except, of course, if there is a trick, and that trick is the cord on which neoclassical economics is suspended. You simply assume that individuals will be rational in the future and thus act predictably. There is a strong link between rationality, predictability, and mathematical tractability. A rational individual will perform a unique set of actions in specified circumstances. There is one and only one answer to the question of how "rational" people satisfying their best interests would act. Rational actors must be coherent: they cannot prefer apples to oranges, oranges to pears, then pears to apples. If they did, then it would be difficult to generalize their behavior. It would also be difficult to project their behavior in time.

In orthodox economics, rationality became a straitjacket. Platonified economists ignored the fact that people might prefer to do something other than maximize their economic interests. This led to mathematical techniques such as "maximization," or "optimization," on which Paul Samuelson built much of his work. Optimization consists in finding the mathematically optimal policy that an economic agent could pursue. For instance, what is the "optimal" quantity you should allocate to stocks? It involves complicated mathematics and thus raises a barrier to entry by non-mathematically trained scholars. I would not be the first to say that this optimization set back social science by reducing it from the intellectual and reflexive discipline that it was becoming to an attempt at an "exact science." By "exact science," I mean a second-rate engineering problem for those who want to pretend that they are in the physics department - so-called physics envy. In other words, an intellectual fraud.



Kayman's picture

All so-called social science, including economics, is art. It is the hurdle from descriptive to prescriptive that economics will always stumble.

Atomizer's picture

Taking the "L" out of "BLS".

Well said.

Variance Doc's picture

Your whole argument, or should I say Taleb’s, depends on the notion of equilibrium economics. That is what he means when he speaks of rational participants in the economic sphere. It boils down to equilibrium economics. That is where economics breaks down. There is no such thing as equilibriums in economics (maybe they may arise as temporal bursts in nature, but nothing long enough to establish a whole theory dependant on the notion.) Modern economics is really all about bullshit. I’ll say that again. Modern economics is really all about bullshit. They cook up notions of equilibrium so they can apply nice mathematical results to the problems at hand, all the while masturbating with the mathematics and looking smart. Just ask Paul “the memorial, not the real Nobel prize” Krugman or Larry “women are too dumb to be scientists” Summers. Assholes….

There is nothing wrong with the concepts of optimization, etc. You, as the user, just have to know when the proper time and place to apply the concepts. It really does not matter if average Joe does not understand what this means. It is his fault, not mathematics. Perhaps instead of aspiring to be a lawyer, doctor, business man (thus, taking the easy way through college and grad-school), he should have paid attention to mathematics/statistics/engineering, realizing that his is house is NOT an ATM, and develop the notion of mathematical thinking.

I’m so sick of cow-towing to the common denominator. Fuck them.Let it all burn!

We do not currently have the mathematical knowledge to properly model human behavior. This is something that many are working on (me included.) Until there are some concrete results, I’m happy to say that we don’t have a clue on what is going on. That is one of the basic tenets of being a scientist - the ability to say “I don’t know.”

trav7777's picture

It cannot be modeled because it is chaotic.

A basic primer in this concept is the Uncertainty Principle.  Despite Einstein's claims, all things are not deterministic in nature.  True randomness is a fundamental element of the universe.

Variance Doc's picture

Uhhh, you can't have it both ways: chaos and randomness. Chaos is order in what appears to be disorder (deterministic). Randomness is the outcome of an experiment that cannot be predicted with certainty (stochastic). They are different concepts.

In the future, I'm sure that we will be able to correctly model markets and human behavior. We just have not invented the mathematics/statistics yet.

Your whole notion that it cannot be modeled is myopic. Just like a thousand years ago, someone might have stated "In the future we will be able to fly like birds", and your ancestor’s reply was "No, it can't be done, we're not birds." Look where we're at now….

bugs_'s picture

I'm going to revise like its 1999!

random shots's picture

Federal Reserve Dual Mandate: Price Stability and Full Employment

The BLS is the Federal Reserve's CNBC. They have to show the Fedreal Reserve's actions are credibile or else...

From now one we should just refer to the BLS as the Ministry of Truth, eh?


RichyRoo's picture

I thinkt you just nailed the realpolitik explaination as to why FED's KPIs have different properties to the rest of the BLS' products.

Bose Einstein OracIe's picture

Tyler, run a check on these numbers applying Benford's law? Perhaps just as accountants apply this technique, we could use it to expose the likely lie you present here.


You know, thinking about it, 9 has been the leading digit in unemployment numbers for way to long, and  the easiest  reversion to 1 would be a move to ten or more, and stay there for a significant period of time( 11, 12, 13, 14%...etc.)


Applying this Benford's philosophy of numbers given the current situation and economy, a move to 20% or more would seem to make more sense over time than a move back through the more excited states of 9, 8, 7, 6%. I would hypothesize that when we do move back through these numbers of unemployment, we will pass each fairly quickly on the way back down (capitulation and recovery quickly returning in it's proper time when the "coast is clear")


The simple fact that unemployment number's haven't seen 1 or 2 as a leading digit since the 1940's if I recall, may lend to 10+%unemployment being necessary simply to fulfill the cosmic math implied in lists of numbers.


jeff montanye's picture

i find it interesting that benford's law and gaussian distribution both obey stigler's law.

MichaelG's picture

"while the BLS has the track record of a blind and retarded monkey throwing a dart at a wall full of numbers when presenting initial economic data"

I LOLed.  Also stoned out of its gourd.

"Because anytime something is too perfect, especially emanating from the government, it isn't."

As you say, whenever something is too good to be true, it isn't.  What gets me is why the market never reacts to revisions.  Even when they occur after only seven days.  Isn't it supposed to be a near-perfect information/pricing mechanism?  Rather than a giant pile of horse manure?  Well, anyway, I'm going to hire a stupid blind whacked-out primate to manage my portfolio, as they clearly have a knack for hitting the green.

Hephasteus's picture

Gaussian distributions. You can do those on Nvidia workstation cards.

Bose Einstein OracIe's picture

Normal distributions in a very real world are seem to me the financial version of Linus' blanket. They make ya feel good, but don't really protect you from the truth of the fat tail....Especially when you lie when drawing your data points.

Atomizer's picture

Gold, Silver, and Inflation vs. Deflation Update


VK's picture

Damn that's some huge discrepancy in the data! Wowzaaa! BLS is full of crap.

cossack55's picture

"blind and retarded monkey throwing darts at the wall" ...more likely to be throwing feces.

Artemis Fact's picture

This is fairly reminiscent of the Daily Kos finding pollster fraud through the use of statistical reasoning, though in this case I'm sure it's more nuanced, and perhaps even subconscious.


thedon's picture

Bureau of Lying Statistics. Interesting how the most revisions are with non-farm payroll yet those revisions have no impact on the unemployment rate.

Atomizer's picture
Disappearing dollars. 'Hugo Chávez, the country’s left-wing president, imposed exchange controls back in 2003, during a crippling strike by the management and workers of Petróleos de Venezuela (PDVSA), the state oil company. But he also fixed the exchange rate, from 2005 at 2.15 to the dollar even though inflation has since ranged from 14% to 31% a year. This triggered an import boom.'


A good progressive is a failed progressive

Willie McVoid's picture

Not to say that the BLS isn't up to shenanigans, because this revision nonsense is rather transparent, but couldn't the fact that the often unrevised numbers for uneployment, CPI, PPI, ect, are small numbers, whereas the often revised numbers for things like home sales and non far payrolls tend to be in the hundreds of thousands have something to do with it?  The revisions are often relatively small percentage  wise, (other than Q2 GDP revision). 

jeff montanye's picture

the post says frequency of revisions not amount or percent of the data change.

Willie McVoid's picture

If the non far payrolls are revised .04%, it's 20,000 jobs, that's a normal revision.  If unemployment is revised .04%, it may not move the numberat all, affecting frequency of changes.  For something like CPI or PPI, it has to be an even bigger move percentage wise  to show up in the data.

Zerro's picture

The monkey is alive.....

unfortunately this contribution is in Dutch, but the fully vegetarian stock selection proces by Jacko has returned 8% over the past ten years....

A picture is a thousand words, but to this blind and retarded monkey a numbered banana equals stock.


Bose Einstein OracIe's picture

A point was made that revisions don't behave like stock prices. This is true, but the underlying unemployment numbers should generally follow Benford's law.


Hey, anyone ever notice that a stock at 9 dollars like to rocket to 10 in a quickness, or fall to  like 5 or so if not? I can almost guaruntee you it wont stay at 9, 90 or 900 dollars for long before moving to a price with a first digit that isn't a 9.. This is actually highly tradeable.  Maybe the algo's have part of this right...Sometimes price determines value, even though this makes no sense at all from a human perspective. 

I would also add that one must consider that ALL possible future outcomes already exist in a quantum physics reality, so maybe we are all just pissing in the dark to some degree, and maybe some of us are just more favored observer participants, collapsing the profitable wave functions more often than the unlucky observer participants.


There is no market without an observer.


To try and separate the stock market from the rest of the system (universe) is impossible. Economics and Physics are sister schools.


Ok, I'm going to go all out here and say that eventually, there should be a way to tell exactly what the market is going to do in the next moment. The kind of technology required is near at hand. All I can say is that under the proper microscope, even the quantum process can be viewed macroscopically. What will we do then? The winner will be the guy with the best quantum computing tradestation, literally front-running the entire financial system. To be honest, I wouldn't be surprised to learn this is already going on. Out algo-ing the algos. Now thats fucking arb.


But, now then, what does this say of the world as a whole , when we can literally "tell the future" . I sometimes wonder if Alvin Toffler's Technological Singularity will be soon upon us. And if we can "tell the future" in any way, what does that say of our concept of time, causation, and reality. 

Our outlooks on almost everything are flawed and the systems based around these flawed beliefs are failing to prove it. Perhaps our world is about to undergo some REAL change you can believe in. According to Toffler, you won't recognize the world on the other side as anything reminiscent of the world before that moment.

Rusty Shorts's picture

 - staring through a peep-hole is a hell of a way to go through life.


Variance Doc's picture

"...unemployment numbers should generally follow Benford's law." What gives you the notion that unemployment numbers should follow any distribution.  What non-equilibrum theory can you point to?

Econ and physics are NOT sister schools.  Physics is an experimental science.  Econ is not an experimental science, hence the controversies of "hyperinflation" vs. "deflation", etc.  There is no experimental result that justifies the path of the economy towards either one, just people's conjectures.  That's it.

Bose Einstein OracIe's picture



It's counterintuitive I know. But would you likewise say that there is no relationship in the 1st digit in a list of river lengths, street addresses, stock prices, returns on trades? There is. Benford's law applies to many different sets of data, especially in finance. I honestly did not even check to see if there is a proven correlation, it is pure conjecture. From a quick glance and a thought, I assumed they did. Can anyone verify for sure? Ill plot out the last 100 years when I have the time and see. 


I didn't mean they are sister schools in that sense, I mean that there are many phenomena that appear in both studies and more and more keep being found. Many physics and math principles apply in the market as it is just another a complex system within a complex system. I wasn't trying to be as black and white on the matter as you are. But I stand corrected..."there are relationships between the two schools"



To say that economics is not an experimental science is a slippery slope. Setting aside everything the text books say for a second about it's classification pedigree, it sure seems like one big fucking experiment to me. ( Let's see what happens when we try to subjugate the world with paper wealth proxies called dollars)

To say you can't repeat the same bullshit Keynesian experiment and get the same results every time doesn't apply quite right either. If you print money to the sky the economy hyperinflates....every time. Ok, so maybe not every time. I guess if it is enough peoples conjecture that it really doesnt matter, maybe it won't. But this just proves my point, as you dont get the same results every time in quantum physics either. Sometimes, the totally improbable outcome is the actualized one. Just as there are fat tails in the market, there are fat tails in physics. The more I look, the more relationships I find between the two fields.


Bose Einstein OracIe's picture

Benford's law, also called the first-digit law, states that in lists of numbers from many (but not all) real-life sources of data, the leading digit is distributed in a specific, non-uniform way. According to this law, the first digit is 1 almost one third of the time, and larger digits occur as the leading digit with lower and lower frequency, to the point where 9 as a first digit occurs less than one time in twenty. This distribution of first digits arises whenever a set of values has logarithms that are distributed uniformly, as is approximately the case with many measurements of real-world values.


Wouldn't this apply to unemployment figures? I just looked at the monthly figures since 1940. It seems to apply except that as I said, It hasn't spent nearly enough time with a leading digit of one or two.It spent very little time at 9, which is to be expected if I'm right, a little less time at 8 7 6 respectively, and most of the time high 3s to 5s. Yet it hasn't spent nearly enough time in the 1s and 2s to fit a Benford distribution. So maybe I'm wrong, but maybe I'm right as the theme of our current collapse worldwide, in finance and environmentally, basically all around seems to carry the theme of "reversion to the norm". Unsustainability. "Too much time at the nines"  Perhaps we got our 3s-9s out the way and its time to come back home to 1 and 2.. .It sure seems to me like we are headed that way.  Besides, I don't need Benford to tell me that this ship is goin down.