This page has been archived and commenting is disabled.

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

Tyler Durden's picture


A funny thing happened on the way to American central planning: normal distributions became abnormal. To wit - the classical, Gaussian distribution chart, which lies at the  basis of all modern statistics and offshoots thereof, such as quant theory, apparently is not good enough for the wonderful data aggregators and distributors at the all important Bureau of Labor Statistics, which is in charge of such key economic metrics as the unemployment rate, CPI, PPI, home sales, and virtually everything that tends to have a huge headline impact on stock futures (because let's face it, nobody trades during regular hours anymore). Curiously of the 25 or so data items tracked by the BLS, the vast majority have been revised over 50% of the time over the past decade. All, that is, expect for the most important, and politically critical ones: the unemployment rate (easily the only number the vast majority of the population understands), and consumer prices (which is the only number to direct impact the federal budget). In other words, as the chart below demonstrates, 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, something which Gaussian distributions would say is perfectly normal when running a $13 trillion economy, it has perfected confidence intervals and data estimates when dealing with the most economically sensitive and critical data. Whether the BLS has hired the same oracular prop traders that allowed Goldman to lose money on zero days in Q1 when calculating some numbers (but not others), or whether the BLS just spews forth what some excel model dictates (possibly the same used by Moody's that would crash upon imputing negative growth assumptions), while pretending to use traditional "ecostat" sampling, estimating and adjustments may be worthy of far more debate than currently afforded. Because the last thing an increasingly more cynical American public would want to believe is that the government is, gasp, lying to it.

Presenting Exhibit A:

So let us paraphrase: we have no complaint with the BLS for the massive amount of revisions on the bulk of the ecodata it collects and compiles. This is what Gaussian probability would dictate (although in all honesty we would prefer that prior revisions had a 50/50 distribution instead of the 90%+ downward revision as seen in some recent data series). What we do want to know, is just how does the BLS compile and analyze data on the following items which have a several standard deviation variation from the average revision rate for all other economic series:

  • Unemployment Rate
  • Core Consumer Prices
  • Core Producer Prices
  • Consumer Price Index
  • Producer Price Index

Because anytime something is too perfect, especially emanating from the government, it isn't. Especially in this case, when these are precisly the numbers that have the biggest impact on the stock market and on economic policy. And the last thing we would want is to speculate that the five most important numbers tracked by the BLS have absolutely no credibility because they not only do not reflect a practical reality, but merely are the artefact of possibly the same computer used by the FRBNY to reroute stock orders into the Citadel dark pool system.

BLS- the podium is yours.

Courtesy of John Lohman


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Sat, 09/18/2010 - 17:48 | 589984 breezer1
breezer1's picture

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

Sat, 09/18/2010 - 18:20 | 590015 Conrad Murray
Conrad Murray's picture

Took the words right out of my fingers.  Cheers ZH!

Sat, 09/18/2010 - 21:19 | 590159 mikla
mikla's picture


Sat, 09/18/2010 - 21:46 | 590189 Spalding_Smailes
Spalding_Smailes's picture

Accounting/cook books ???

Sat, 09/18/2010 - 23:09 | 590267 nonclaim
nonclaim's picture

From the Bureau of Lies and Statistics

Sat, 09/18/2010 - 23:48 | 590299 Atomizer
Atomizer's picture

Enron #54

Sat, 09/18/2010 - 22:26 | 590225 Threeggg
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.

Sun, 09/19/2010 - 00:23 | 590328 RockyRacoon
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. 

Sat, 09/18/2010 - 18:20 | 589999 AnonymousMonetarist
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?


Sat, 09/18/2010 - 20:17 | 590117 Jeffersonian
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.

Sat, 09/18/2010 - 22:00 | 590202 DavidC
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.


Sat, 09/18/2010 - 22:20 | 590221 jeff montanye
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.

Sun, 09/19/2010 - 10:49 | 590537 harveywalbinger
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.  

Sat, 09/18/2010 - 22:24 | 590223 fxrxexexdxoxmx
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.

Sat, 09/18/2010 - 22:44 | 590240 Spalding_Smailes
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.

Sun, 09/19/2010 - 11:53 | 590590 Spalding_Smailes
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...



Sun, 09/19/2010 - 12:01 | 590603 trav7777
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

Sun, 09/19/2010 - 12:03 | 590606 harveywalbinger
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.  


Sun, 09/19/2010 - 16:52 | 590921 ZackLo
ZackLo's picture


if you want an example of random walk in action go to this ( of robert schillers lectures....I don't see the correlation..

starts at 42:00

Sat, 09/18/2010 - 18:20 | 590008 Spirit Of Truth
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.



Sat, 09/18/2010 - 19:13 | 590071 Kayman
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.

Sat, 09/18/2010 - 19:59 | 590107 Atomizer
Atomizer's picture

Taking the "L" out of "BLS".

Well said.

Sat, 09/18/2010 - 23:18 | 590245 Variance Doc
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.”

Sun, 09/19/2010 - 12:28 | 590638 trav7777
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.

Sun, 09/19/2010 - 16:25 | 590890 Variance Doc
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….

Sat, 09/18/2010 - 18:26 | 590022 bugs_
bugs_'s picture

I'm going to revise like its 1999!

Sat, 09/18/2010 - 19:00 | 590055 random shots
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?


Sun, 09/19/2010 - 07:16 | 590421 RichyRoo
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.

Sat, 09/18/2010 - 19:41 | 590093 Bose Einstein OracIe
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.


Sat, 09/18/2010 - 22:42 | 590236 jeff montanye
jeff montanye's picture

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

Sat, 09/18/2010 - 19:42 | 590096 MichaelG
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.

Sat, 09/18/2010 - 19:48 | 590100 Hephasteus
Hephasteus's picture

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

Sat, 09/18/2010 - 19:53 | 590103 Bose Einstein OracIe
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.

Sat, 09/18/2010 - 20:05 | 590110 Atomizer
Atomizer's picture

Gold, Silver, and Inflation vs. Deflation Update

Sat, 09/18/2010 - 20:09 | 590112 VK
VK's picture

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

Sat, 09/18/2010 - 20:20 | 590119 cossack55
cossack55's picture

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

Sat, 09/18/2010 - 20:27 | 590125 Artemis Fact
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.

Sat, 09/18/2010 - 20:32 | 590129 thedon
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.

Sat, 09/18/2010 - 20:36 | 590131 Atomizer
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

Sat, 09/18/2010 - 21:01 | 590145 Willie McVoid
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). 

Sat, 09/18/2010 - 22:48 | 590246 jeff montanye
jeff montanye's picture

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

Sat, 09/18/2010 - 23:19 | 590276 Willie McVoid
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.

Sat, 09/18/2010 - 21:07 | 590154 Zerro
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.

Sat, 09/18/2010 - 21:40 | 590156 Bose Einstein OracIe
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.

Sat, 09/18/2010 - 22:07 | 590201 Rusty Shorts
Rusty Shorts's picture

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

Sat, 09/18/2010 - 23:57 | 590305 Rusty Shorts
Sat, 09/18/2010 - 23:04 | 590260 Variance Doc
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.

Sun, 09/19/2010 - 01:06 | 590343 Bose Einstein OracIe
Bose Einstein OracIe's picture's_law


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.


Sun, 09/19/2010 - 01:41 | 590349 Bose Einstein OracIe
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.








Sun, 09/19/2010 - 11:26 | 590565 cswjr
cswjr's picture

Because the u-rate is a ratio of two cointegrated series I wouldn't expect you to see Benford's law.  When the rate is in the 9's you get a surge in marginally attached workers, suppressing subsequent u-rates.  Take a look at the U-6 rate, though...

Sun, 09/19/2010 - 13:28 | 590708 blunderdog
blunderdog's picture

I'd be very cautious about classifying the reported unemployment rate as a set of "real word measurements," which are what Benford's law appears to apply to.

Sat, 09/18/2010 - 21:34 | 590168 Atomizer
Atomizer's picture

Dear peasants of the world. Your role is to believe lies & distorted facts.

The Grand Design - World Government 1968 PT-1 of 8

Barack Obama The Scapegoat

Always enjoy your daily dose of CFR propaganda via MSM. Feeble minds must be formed. LOL

Keep up the good work Tyler, ZH is a blessing in disguise.

Sat, 09/18/2010 - 21:37 | 590177 TheManagement
TheManagement's picture

We prefer not to use the terms "shenanigans," "bs," "cooking-the-books," or any other negative terminology. "Revisions" is the preferable term.




Sat, 09/18/2010 - 21:45 | 590188 onlooker
onlooker's picture

The old saying that truth can be stranger than fiction appears to put us in the middle of a super spy story of intrigue, danger, and the scariest show ever. “The Final Solution for Americans” might be a good title, but the price of admission is a bit steep.


Nicely done again Tyler. Keep it up.

Sat, 09/18/2010 - 21:53 | 590194 Holden Caulfield
Holden Caulfield's picture

We are running out of time as happy campers. We cannot afford to continue to do business as usual. We live in a finite world, with finite resources. A resource base system as proposed by The Zeitgeist Movement and The Venus Project offer a viable solution, don't you agree?

Sat, 09/18/2010 - 22:54 | 590251 Atomizer
Atomizer's picture

The Venus Project is a backup plan to encourage the sheep to join the ranks of serfdom.

The Superclass

Give me your best sheep noise. Time is narrowing. Beware, you have little time left. 2012 is the goal for implementation.


Sun, 09/19/2010 - 09:01 | 590481 rwe2late
rwe2late's picture

Thanks for the excellent YouTube link.

Sat, 09/18/2010 - 22:15 | 590216 Earl of Chiswick
Earl of Chiswick's picture

"All, that is, expect for the most important,"


grammar polize

Sat, 09/18/2010 - 22:26 | 590227 blunderdog
blunderdog's picture

What we do want to know, is just how does the BLS compile and analyze data on the following items which have a several standard deviation variation from the average revision rate for all other economic series:


I thought they just released numbers they wanted us to hear and are at least a tiny bit plausible.  Those other numbers are a real pain, because so many people are actually going to check their work.  But who is going to check work on unemployment?  And how? 

And the price indexes are "pre-massaged" with the substitution plays and the assistance of corporate marketing.

It really wasn't THAT long ago that "standard" cans of tuna were 6oz, and now they're 5.  It was only in the past 15 years or so that packaging engineers found a way to cram 11oz of coffee into a 16oz can.  (Amazing science.)

I don't think their numbers on the price indexes and unemployment are more accurate.  I just don't think anyone's trying to find the errors, so they see no need for revisions.

Sat, 09/18/2010 - 22:29 | 590228 CPL
CPL's picture

Sitting on a deck chair waiting, drinking a beer and waiting.  Collecting last names and tracking.


Not like IP addresses mean anything in 4 years.  Just names.

Sat, 09/18/2010 - 22:30 | 590229 CPL
CPL's picture

Sitting on a deck chair waiting, drinking a beer and waiting.  Collecting last names and tracking.

Not like IP addresses mean anything in 4 years.  Just names.

Sat, 09/18/2010 - 22:42 | 590239 CPL
CPL's picture

That's it

I'm making a 4chan for economic crap, all anonymous.  Everyone is WAY to cozy here.  The obvious is that we're all fucked.  We have no ability to fight an HFT.  So, why not attack ass with shiting back into sayd ass.


Anyone have a suggestion for a name?,, inb4


And yes there will be a /b/ park CP in it at your peril.

Sat, 09/18/2010 - 23:29 | 590286 Xedus129
Xedus129's picture

Maybe drop the chan and go with something like dump.  chartdump, finandump..

+1000 for idea

Sun, 09/19/2010 - 01:39 | 590354 palmereldritch
palmereldritch's picture

Sat, 09/18/2010 - 22:33 | 590232 Bob
Bob's picture

Ya almost had me going there, Tyler.  But, nahhh, the government wouldn't lie to us.  

Paternal optimists that they are, they're just being extra careful not to unnecessarily scare us . . . they have a solemn responsibility to not injure our confidence, you know. 

Surely it's all for our own good? 


Sat, 09/18/2010 - 23:00 | 590256 hedgeless_horseman
hedgeless_horseman's picture

Don't lie to yourself. 

Honesty is hard work. 

Honesty takes practice. 

Honesty is worthwhile. 


Sat, 09/18/2010 - 23:19 | 590275 tony bonn
tony bonn's picture

let's just say that the L is a non-sequitur

Sat, 09/18/2010 - 23:38 | 590291 Atomizer
Atomizer's picture

I'll bet Keith Rupert Murdoch is having chest pains. How will he spin this story on the WSJ?


Sun, 09/19/2010 - 00:31 | 590295 tom a taxpayer
tom a taxpayer's picture


Tyler Durden and Zero Hedge folks - The Freedom of Information Act (FOIA) provides that any person has the right to request access to federal agency records or information, such as Bureau of Labor Statistics records or information on unemployment rate, consumer prices, etc. "Records" is a very broad term, and includes not just the pablum the BLS releases for public consumption, but also all the internal records of distortions, lies, and dirty laundry the BLS uses to fool the public. 

Under FOIA a ""record" and any other term used in this section in reference to information includes any information that would be an agency record subject to the requirements of this section when maintained by an agency in any format, including an electronic format."

You don't have to be the NY Times or hire a lawyer to file a FOIA request. It's simple, easy, and free up to a point, depending on how many records are invovled, etc.. Here is a link to the BLS FOIA webpage shows how to file a FOIA request.


Sun, 09/19/2010 - 00:50 | 590338 mark mchugh
mark mchugh's picture

This is a joke, right?  From the page you linked to:

.....However, agencies may withhold information pursuant to nine exemptions and three exclusions contained in the statute.......


that "nine exemptions...." link?  Dead as a doornail.

Maybe it's being revised too...

Sun, 09/19/2010 - 01:19 | 590350 tom a taxpayer
tom a taxpayer's picture

No joke, just a dead link. On the BLS webpage there is a good link to the nine exemptions and three exclusions three paragraphs down titled 'full text of the Freedom of Information Act - FOIA". At that link, about 2/3s down the page, the nine exemptions and three exclusions are in the Act's section (b) and (c).

Or, this link is quicker than scrolling thru the Act.

Sat, 09/18/2010 - 23:48 | 590300 Rusty Shorts
Sat, 09/18/2010 - 23:56 | 590304 williambanzai7
Sun, 09/19/2010 - 00:07 | 590311 Spalding_Smailes
Spalding_Smailes's picture

She should be selling green shoots on CNBC ...Lol'

Like the photoshop work, I ran a drum scanner back in the day, retouching/ color work for 15.

Sun, 09/19/2010 - 00:04 | 590309 israhole
israhole's picture

Anybody have a pic of Nevin Shapiro?  Not to be confused with David Brooks from DHB industries:



Sun, 09/19/2010 - 00:44 | 590334 GoldmanSux
GoldmanSux's picture

You are such a dumb fuck.

Sun, 09/19/2010 - 00:12 | 590318 Rusty Shorts
Sun, 09/19/2010 - 00:16 | 590322 Rusty Shorts
Sun, 09/19/2010 - 00:13 | 590319 Atomizer
Atomizer's picture

Wiping my forehead & changing my shorts. Have to love the MSM illusion. LOL

The Reserve Bank of Australia (RBA) analysis shows Australia's banks will be able to satisfy the Basel III requirements.

Follow the Central Bankers theft.

Kabul Bank TV Commercial for Afghan Market

The Kabul bank crisis

Sun, 09/19/2010 - 09:04 | 590484 Rusty Shorts
Rusty Shorts's picture

Max Keiser and Jim Willy




Sun, 09/19/2010 - 00:22 | 590326 Arkadaba
Arkadaba's picture

Ok, I have some stupid questions. I understand Gaussian distribution models but am having some difficulty thinking about how it is valid in markets/economics.

I have worked in R&D in data mining (natural language stuff) and there one can see normal distributions (people have tried to legislate languages but it never works). But in markets where there is extensive intervention, I wouldn't expect to see normal distributions. But like I said - these may be silly questions - any pointers to quants for dummies stuff would be welcome.


Sun, 09/19/2010 - 01:50 | 590360 Bose Einstein OracIe
Bose Einstein OracIe's picture

Don't expect to. If you do, you are ignoring the tail risk. Distribution is "fairly" normal towards the center, but the ends of the curve are muy loco, and happen more often than in normal distributions.

Sun, 09/19/2010 - 02:30 | 590368 Arkadaba
Arkadaba's picture

Yes even in languages you don't see a normal distribution but you can use the Gaussian model for comparison. Looking at languages one usually finds a long tail:'s_law

I guess my question is what are the right models to use when looking at economic data. I don't have a background in this area but want to learn a bit more.

I'm thinking because there are so many variables (human intervention) at play, a Gaussian model (which assumes random distribution) doesn't make much sense. But like I said - I'm new to this ;)



Sun, 09/19/2010 - 09:21 | 590494 mikla
mikla's picture

IMHO, to make sense of what's going on in this thing we call "economics" these days, distributions are completely the *wrong* way to go:

  • Distributions are not normal.
  • Distributions have long tails.
  • Distributions are significantly skewed (left or right).
  • There is more than one assumed aggregate population in the distribution (i.e., n-modal)
  • The populations in the distribution change independently of each other, significantly impacting (re-characterizing) the whole distribution.
  • Distributions change quickly/violently (e.g., money-market pullouts, secular society shifts, violent movement between stocks-and-bonds, violent movement responding to government programs relating to a market sector)
  • Distributions assume "perfect" knowledge of the future.
  • Distributions do not account for secular shifts (e.g., secular shift from consumers increasing credit/leverage to consumers now afraid of debt)
  • ...etc. (probably a zillion more if I got motivated to think about these)

In short, use of distributions ASSUMES your data collection was good (no, for economic data, it is beyond reprehensible), and ASSUMES past-behavior-relates-to-future-performance (no, consumers no longer want to increase leverage, Baby Boomers no longer want to gamble in the stock market, etc.)

Use of distributions means you are willing to launch a human mission to Mars where your operational systems are built based in, "rules of thumb" (e.g., ideas that only need to individually be "close-enough" as to be viewed as "possibly sensible", WITHOUT validation, and WITHOUT consideration of propagated effects across the system [e.g., "stacking error"]).

IMHO, far better is a systems modeling approach with sensitivity analysis through stochastic (random) inputs.  This is very typical in many fields:  Measure what you know, and quantify dynamics based on *unknown* information.  In that manner, we can measure positive and negative feedback loops, and appraise likelihood of spinning into the abyss when somebody touches something with a light breeze.

For the systems modeling approach, Steve Keen is the only one I've seen doing it.  If you're interested, you should read everything you can get with his name on it.

Arkadaba, you seem to be asking smart questions, forming complete sentences, understanding the nature of technical terms, and considering the possible future impact of actions.  Please!, PLEASE!, PLEASE! do NOT look to ANYTHING in the field of Economics as a possible "value" in helping you understand (1) What's going on, (2) How it works, (3) What system fiddling might do.  You can get ALL those things MUCH BETTER by doing what you are doing -- thinking the problem through with the discipline of an engineer.

Sun, 09/19/2010 - 00:52 | 590339 Rusty Shorts
Sun, 09/19/2010 - 01:00 | 590342 Rusty Shorts
Sun, 09/19/2010 - 02:34 | 590369 RabidYack
RabidYack's picture

I love that movie!!!!!!!!  

Sun, 09/19/2010 - 01:25 | 590351 palmereldritch
Sun, 09/19/2010 - 01:40 | 590356 MrPalladium
MrPalladium's picture

Gupta's law of creative anomalies (From the James Bond movie "Tomorrow Never Dies.")

"If his file is too perfect, its a plant and he's a government agent."

Sun, 09/19/2010 - 03:34 | 590388 toathis
toathis's picture

Okay, I am going to ask a serious question guys. Maybe this will help those unenlightened, as to what degree this UP-COMING depression will feel like.

A HARD UNWIND of 30 years of wealth, savings and living standards>?

Rather than what you see now which has been maybe about 6 years downtrace?

Sun, 09/19/2010 - 05:04 | 590402 Cheyenne
Cheyenne's picture

Exhibit A is without a doubt the most disturbing graph I've seen on this site, which is saying a lot.

Sun, 09/19/2010 - 06:09 | 590409 bozzy
bozzy's picture

The markets don't give a shit about bad unemployment numbers - they stutter a bit then press on up into yearly bonus territory. Hang on a minute, there is someone tugging at my elbow telling me not to forget to credit the PPT......

Sun, 09/19/2010 - 09:22 | 590489 rapier
rapier's picture

People want lies.  Everyone knows the numbers are produced to put the best possible light on things.   Everyone also knows why.  To maintain confidence. If the government isn't maintaining confidence it isn't doing its job. I can absolutely guarantee if BLS just started reporting numbers pretty much straight up the party  in power would suffer large losses, all other things being equal.  Not because the numbers are worse but because they were not  as rosey as possible. A government that won't lie and say that America is doing as well as could possibly be expected doesn't deserve the right to hold power.  It would be nabobs of negativism, defeatest, an aid to terrorists and our enemies.

Thus this rant is way off the mark.  TD doesn't understand the subtleties of American culture nor do many ZH'ers who suffer from an excess of literal mindedness.

Sun, 09/19/2010 - 10:01 | 590505 Terra-Firma
Terra-Firma's picture

I read an article on the fall of Communism recently and there are parallels to the US. Let me explain how the Christian movement will, like the Christian movement in Poland in the 1980's, bring morally and financially bankrupt rulers down. In the late 1970's the Catholic Church through its Polish pope at the time Wojtyle bringing world attention to the plite of the polish dock workers. This emboldened the Polish ship yard workers who eventually took to the streets and forced "elections" in Poland. This leads us up to about 1988, when Gorbachev, the Soviet leader announced   new policies of 'perestroika'  (reform) and glasnost (openness in government)

I now paint a parallel inductive hypotheses for the US starting with the early 1990's. During the 90's Canada and several other 'Western economic' nations were facing severe financial and economic problems. This led to huge debts and eventually significant cuts in government spending and a rethinkingof the role of government. In summary, Canada, Sweden, New Zealand were approaching debt levels the US has now far surpassed. Their currency were under stress and government had to balance budgets or impoverishment through debasement. Canada et al balanced their budgets, cut government spending and essentially hunkered down. Didi it hurt? You bet!

While Canadians were trying to live within their means, the US did not take its budget problems seriously when we in Canada were hunkering down the US was raising its standard of living by off-shoring production. That is, people could buy more goods and services because the inflation associated with additional production needed to sustain the demand associated with the low prices was also off-shored. This is where the parallels with Poland begin. The Christian movement is emboldened because of the poverty now ravaging the US and the moral injustice of what Wall Street is perpetrating. The Christian movement is also wiser after being manipulated by the Bush conservative strategists. Enter Obama and his version of perestroika (reform). Say 'change you can believe in?' Obama sets in motion monumental changes in how the US operates as a country. This 'Tea Party' thing is a concoction, but the sentiments its tapping into are not. They are visceral and powerful. What happens next? I don't know, but there will be a trigger event. Something beyond anyone's control that unites Christian and secular actions. An insider exposing stock and bond manipulation; or, should I say patriot? Disclosure the US has sold most of its gold? legalizing human cloning for body parts? Just a hypothesis.

Sun, 09/19/2010 - 11:35 | 590576 New_Meat
New_Meat's picture

+ "2+2=4"

Sun, 09/19/2010 - 11:14 | 590552 Implicit simplicit
Implicit simplicit's picture

Gladman sucks should create a futures market for betting on these figures. Manipulation is right up their alley.

 Good, honest hardworking Americans that believe in "truth, justice and the American way" could get flleeced while believing and betting on the accuracy of the first releases, while gladman took the other side, especially on the figures that rely on  estimated data from surveys rather than hard data.

Sun, 09/19/2010 - 11:24 | 590559 Atomizer
Atomizer's picture

 I'd gladly pay you Tuesday for a austerity hamburger today.


'As anticipated by LEAP/E2020 last February in the GEAB No. 42, the second half of 2010 is really characterized by a sudden worsening of the crisis marked by the end of the illusion of recovery maintained by Western leaders (1) and the thousands of billions swallowed up by the banks and the economic « stimulation » plans of no lasting effect. The coming months will reveal a simple, yet especially painful reality: the Western economy, and in particular that of the United States (2), never really came out of recession (3). The startling statistics recorded since summer 2009 have only been the short-lived consequences of a massive injection of liquidity into a system which had essentially become insolvent just like the US consumer (4). At the heart of the global systemic crisis since its inception, the United States is, in the coming months, going to demonstrate that it is, once again, in the process of leading the economy and global finances into the « heart of darkness » (5) because it can’t get out of this « Very Great US Depression (6) ». Thus, coming out of the political upheavals of the US elections next November, with growth once again negative, the world will have to face the « Very Serious Breakdown » of the global economic and financial system founded over 60 years ago on the absolute necessity of the US economy never being in a lasting recession. Now the first half of 2011 will dictate that the US economy take an unprecedented dose of austerity plunging the planet into new financial, monetary, economic and social chaos (7).'


Sun, 09/19/2010 - 12:09 | 590619 bankonzhongguo
bankonzhongguo's picture

Sadly, its about time the Commissioner at BLS, Mr. Keith Hall, as well as the next three layers of unknown ass-clown managers be loaded into a circus cannon and fired into the yawning maw of the angry volcano that is the unemployed American public.  A $645 million dollar budget to produce consistently wrong or misleading information?  They are only deploying 8th grade math.  Do you think they could take their work product and get a job at a Fortune 50 firm? 

Sun, 09/19/2010 - 21:42 | 591281 Monk
Monk's picture

Corporations and households are doing similar, e.g., mark-to-market and hyper-leveraging.


Sun, 09/19/2010 - 22:25 | 591318 taxpayer
taxpayer's picture

Most of the series in the center and right sides of the chart aren't produced by BLS, but by Commerce or other agencies. As for how BLS come up with their numbers, they do post a rather complete "Handbook of Methods" at

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