Bureau of Labor Statistics
There was a time when Bank of America's archoptimist David Bianco would take any economic data point, no matter how fecal mattery, and convert it into 24-carat gold. Then, in late 2011 Bianco was fired because the bank realized that its only chance to persevere was if the Fed proceeded with another round of QE, (and another, and another, ad inf) and as such economic reporting would have to lose its upward bias and be reporting in its natural ugly habitat. And while many other banks have in recent days become content with every other central bank in the world easing but not the Fed in an election year due to the risks of record gas prices, BAC's push for QE has not abated and in fact has gotten louder and louder. So exposes us to some oddities. Such as the firm's 29 year old senior economist Michelle Meyer literally demolishing any myth that yesterday's job number was "good." Needless to say, this will not come as a surprise to Zero Hedge readers. Nor to TrimTabs, whose opinion on the BLS BS we have attached as exhibit B as to the sheer economic data propaganda happening in an election year. Yet it is quite shocking that such former stalwarts of the bullish doctrine are now finally exposing the truth for what it is. Presenting Bank of America as we have never seen it before - throwing up all over the Bureau of Labor Statistics.
When it comes to economic data, there is the BLS's seasonally-adjusted, Birth/Death-ed, Arima-factored, goal-seeked, election year propaganda, or there is real time polling such as that conducted every month by Gallup. And while there is no doubt tomorrow's NFP number will be just better than expected (after all it is an election year for the Derpartment of Truth), the reality is that in February unemployment, that measured by the impartial polling agency Gallup, soared by 0.5%, the most since late 2010, from 8.6% to 9.1%, and back to August 2011 levels. As for the U-6 BLS equivalent, Gallup's underemployment metric rose to 19.1% from 18.7% in January, and a 18% low in mid 2011. The good news, it is just modestly better than the 19.9% in February 2011. Gallup's conclusion, which should be pretty obvious: "Regardless of what the government reports, Gallup's unemployment and underemployment measures show a substantial deterioration since mid-January. In this context, the increase in unemployment as measured by Gallup may, at least partly, reflect growth in the workforce, as more Americans who had given up looking for work become slightly more optimistic and start looking for work again. So while there may be positive signs, the reality Gallup finds is that more Americans are looking for work now than were doing so just six weeks ago....In mid-February, Gallup reported that its U.S. unemployment rate had increased to 9.0% from 8.3% in mid-January. The mid-month reading normally provides a relatively good estimate of the government's unadjusted unemployment rate for the month." Ahh.. Unadjusted. As for tomorrow, expect the BLS to continue in treating seasonally-adjusted Americans like idiots, and pushing the disconnect between the economy as seen by DC bureaucrats and Joe Sixpack to record spreads.
Et tu, Brute!
Abnormally Warm Weather Keeps Inflation In Check As Energy Prices Rise, Core Inflation Highest Since September 2008Submitted by Tyler Durden on 02/17/2012 09:43 -0400
Bernanke, and his recent inflation targeting plan, should be delighted with today's CPI number which while missing headline expectations of a 0.3% increase M/M and printing at 0.2%, rose 2.9% year over year, just higher than consensus, although down from December's 3.0% - the primary reason for the "miss" being a drop in utility gas services courtesy of April weather in January and February. On the other hand, core CPI continues trends ever higher, and is now up 2.3% Y/Y, an increase of 0.2%, in line with expectations, and up from December's 0.1%. This was the highest Y/Y number since September 2008. The good news is that the possibility of further QE is still embedded in the number. The bad news, is that WTI is about to take out $103 courtesy of the global central bank pump discussed yesterday, and allegations that CPI reflects merely some irrelevant hedonically adjusted number spring up again.
The task of the financial/political/media Status Quo is to convince Americans to overlook the abundant evidence of economic deterioration and focus on heavily juiced "evidence" of robust "growth." The game plan is this: if the Status Quo can convince you that the economy has righted itself and from here on in everything will get better and better, every day and in every way, then we will abandon financial rationality and start buying homes we can't afford on credit, cars we can't afford on credit and boatloads of stuff from China that we don't need on credit (of course looking cool is a "need," i.e. having an iPad to carry around). In other words, believing it is so will make it so. That is the essence of the campaign to stimulate "animal spirits" confidence: though the economy is actually tanking, if they can only convince us the Dow is moving to 15,000 and then on to 20,000, jobs are being created left and right and things are looking up everywhere, then the resulting piranha-like shopping-feeding-frenzy will create the expansion that is currently chimerical.
The adjustment to the population over the last decade was the second largest on record. However, the devil is in the details, as the population of 55 and older didn't really increase — they were always there but just not counted. The real concern is with the 16-24 age group. The longer that age group remains unemployed, the higher the probability that they will become long-term unemployable due to degradation of job skills. As we have seen in the recent reports, this age group has a much higher unemployment rate than any other category, and that doesn't bode well for economic strength in future as this group moves into lower wage-paying positions. Recent manufacturing reports show that one of the problems they face is finding "skilled" labor to fill available positions. The shift away from a production and manufacturing base over the last 30 years in the U.S. is now starting to take its toll. The problem, in trying to bring manufacturing back to the U.S., is not just education and skill training but also competitive advantages that the U.S. will have a difficult time overcoming in terms of underlying production and labor costs. Countries like China and Korea have no regulatory, environmental and minimum wage requirements to meet. Those are all additional costs that the U.S. must build into production costs, which limits our competitive potential. Outsourcing is going to be a long-term problem that will be very difficult to reverse.
Mind versus technicals.
TrimTabs Explains Why Today's "Very, Very Suspicious" NFP Number Is Really Down 2.9 Million In Past 2 MonthsSubmitted by Tyler Durden on 02/03/2012 16:01 -0400
We have examined the nuance of the euphoric jobs data this morning from every angle and by now there should be plenty of 'information' for investors to make their own minds up on its credibility. However, the avuncular CEO of TrimTabs, who despite channeling Lewis Black lately, likely knows this data a little better than the average Jim on the street having collected tax witholdings data for the past 14 years, is modestly apoplectic at the adjustments. In one of his more colorful episodes, and rightfully so, Charles Biderman notes that "Either there is something massively changed in the income tax collection world, or there is something very, very suspicious about today’s BLS hugely positive number," adding, "Actual jobs, not seasonally adjusted, are down 2.9 million over the past two months. It is only after seasonal adjustments – made at the sole discretion of the Bureau of Labor Statistics economists – that 2.9 million fewer jobs gets translated into 446,000 new seasonally adjusted jobs." A 3.3 million "adjustment" solely at the discretion of the BLS? And this from the agency that just admitted it was underestimating the so very critical labor participation rate over the past year? Finally, Biderman wonders whether the BLS is being pressured during an election year to paint an overly optimistic picture by President Obama’s administration in light of these 'real unadjusted job change' facts. Frankly, in light of recent discoveries about the other "impartial" organization, the CBO, we don't think there is any need to wonder at all.
Panic at the mere thought of rising real wages.
That the fine economists at the San Fran Fed are known to spend good taxpayer money in order to solve such challenging white paper conundrums as whether water is wet, or whether a pound of air is heavier than a pound of lead (see here and here) has long been known. Furthermore, since the fine economists at said central planning establishment happen to, well, be economists, they without fail frame each problem in such a goal-seeked way that only allows for one explanation: typically the one that economics textbooks would prescribe as having been the explanation to begin with. Today, is in some ways a departure from the default assumptions. In a paper titled "Why is Unemployment Duration so Long", a question which simply requires a brief jog outside of one's ivory tower to obtain the answer, Rob Valleta and Katherin Kuang, manage to actually surprise us. And while we will suggest readers read the full paper attached below at their leisure, we cut straight to the conclusions, which has some troubling observations. Namely, they find that "the labor market has changed in ways that prevent the cyclical bounceback in the labor market that followed past recessions... In addition, anecdotal evidence suggests that recent employer reluctance to hire reflects an unusual degree of uncertainty about future growth in product demand and labor costs."Oddly enough, this is actually a correct assessment: the mean reversion "model" no longer works as the entire system has now broken, and since the administration changes rules from one day to the next, companies are not only not investing in their future and spending capital for expansion, and hoarding cash, but have no interest in hiring: an observation that previously led to a surge in profit margins, yet one which as we pointed out over the weekend, has now peaked, and margins have begun rolling over, even as the rate of layoffs continues to be at abnormally high levels, meaning all the fat has now been cut out of the system. Yet it is the following conclusive statement that is most troubling: "These special factors are not readily addressed through conventional monetary or fiscal policies." And that is the proverbial "changeover" as the Fed has just acknowledged that both it, and Congress, are completely powerless at fixing the unemployment situation. In which case is it fair to finally demand that the Fed merely focus on just one mandate - that of controlling inflation, and leave the jobs question to the market, instead of making it worse with constant central planning tinkering which only makes it worse by the day?
A triptych of greece, cement and resolutions.
While this will hardly come as a surprise to any of our regular readers, occasional visitors may be confused to learn that according to a discovery by the Carolina Journal, North Carolina "Gov. Bev Perdue’s press office has received access to confidential employment data from the U.S. Bureau of Labor Statistics hours if not days before its scheduled release, quite likely in violation of federal law." Once again the rabbit hole, which these days is pretty much everywhere, emerges: "Documents and correspondence obtained by Carolina Journal show that the Division of Employment Security, formerly known as the Employment Security Commission, sent a draft of the press release each month to Perdue’s press office. The governor’s spokesmen typically rewrote the text and added a positive spin, even if the data did not support Perdue’s talking points." And while one may say this is a perfectly innocuous leak of otherwise embargoed data, others may highlight the following facts: "While the operation may sound like a harmless effort to add political spin to the release of jobs data, sharing confidential BLS estimates while they are protected by an embargo violates a federal law barring the early release of employment data. This is no small matter: A conviction for breaching the Confidential Information Protection and Statistical Efficiency Act of 2002 carries a fine of up to $250,000, up to five years in prison, or both." Of course, when it comes to breaking the law, both members of the US banking class, as well as America's politicians, are perfectly immune from any repercussions. But at least the next time the market does its usual pre-NFP acrobats, the only question will be: which particular US politicians i) traded in advance of the embargo lift, and ii) leaked the information to ten of their closest friends, who did the same, who did the same, etc.
Today's announcement by the BLS that it decided to flat out estimate nearly a third of all initial jobless claims (courtesy of several large outliers) due to a "clerical holiday" which resulted in a major beat to estimates, caught many offguard by just how tendentious and manipulative the US Department of Truth can be. This is nothing. To visualize just how ridiculous the perpetual upward bias is at the Labor Bureau, we present a chart demonstrating the weekly jobless claim revisions by the BLS: in a nutshell, 90%+ of the time the bureau has revised prior claims upward, meaning it consistently strives to create an optimistic picture at the moment, only to have it revised it to its true, uglier state a week later when nobody cares. The implication is that fraudulent (and we sure hope this is inadvertent, although a 90% error rate definitely would invite a criminal investigation into just who and how stands to benefit from such an manipulative upward bias) data reporting is responsible for a persistent upward bias in data, and that fundamentals have been disconnected from the "government's reality" for years, confirming that the recent pathological breakdown in the market's relationship with fundamentals is not a new development. For example: today stocks would be flat to down if the BLS were to report the initial claims as they really are. Instead, here we are, almost 1% higher on nothing but soon to be revised lies. In other news, the China-US data distribution Joint Venture/Vassal State development is progressing better than expected.