Bureau of Labor Statistics

The economy is in a structural readjustment that will leave the middle class higher and drier. Long-term factors will continue to negatively affect employment. We are headed to a higher level of permanent unemployment than the 5% that existed in pre-crash 2008.

Only in Washington would this be hailed as good news...

The manipulation of data in order to spin the economic situation in this country in the best light possible has become so blatant that only the most ignorant could possibly believe it. The corporate mainstream media dutifully reports the propaganda, without ever critically assessing what is being distributed by the government. The percentage of the American working population in the workforce consistently ranged between 66% and 67% from 1998 through 2008. Then, suddenly in 2008, after the economy went in the tank, a couple million Americans found better things to do with their spare time and left the workforce. Anyone with an ounce of brains knows these people gave up and are really unemployed. The percentage of people in the labor force should be 66.5%. Using this 20 year average would add 5.5 million people to the civilian labor force and the unemployment rolls. This exercise in reality gives a real unemployment rate of 12%. The true picture of the American economy is that in 2007 there were 146 million Americans employed, or 63% of the working age population. Today, there are 139.9 million Americans employed, or 58.5% of the working age population. Over this time frame, an additional 7.1 million Americans entered the working age population. In 2007 there were 26.3 million Americans on food stamps, or 8.6% of the US population. Today there are 44.2 million Americans on food stamps, or 14.3% of the US population. To call the current economic disaster a recovery is to practice the art of the Big Lie.

Back On March 14th, Zero Hedge first disclosed data originating from the SPEEDI (System for Prediction of Environment Emergency Dose Information) database, which showed that while radiation in the Ibaraki prefecture were about 30 times above normal, the core affected regions were "Under Survey." In subsequent posts we compared the "Under Survey" category to one step below what the BLS does on a daily basis - i.e., make up stuff. But at least in Japan, they did not even make data up: they just refused to release it. Well, we now have official confirmation from NHK that once again our well-grounded skepticism (and cynicism) was as usual absolutely spot on: "It has been learned that the Japanese government withheld the release of
computer projections indicating high levels of radioactivity in areas
more than 30 kilometers from the troubled Fukushima Daiichi nuclear
power plant. The estimates were made on March 16th following explosions at the plant by an institute commissioned by the government using a computer system called SPEEDI. The system made its projections on the assumption that radioactive substances had been released for 24 hours from midnight on March 14th, based on the available data." Of course, had the disastrous SPEEDI data been reveled in time, not even the hundreds of billions (or trillions in Yen) of emergency money pumped by the BOJ, would have been able to prevent a complete market disaster. In other words: Nikkei 1; Human Life 0. In the meantime we wonder what superpowers the X-Man from the affected regions will soon develop.

Your one stop summary of the week's key bullish and bearish developments.

Yesterday when we speculated that Kocherlakota may have been leaked the NFP number based on his hawkish tone, we presented an attempt at refutation by Morgan Stanley's David Greenlaw who claimed the following: "I've heard some stories that Kocherlakota has seen tomorrow's employment report and that explains his hawkishness comments.  However, there is no way this is true.  Only the Fed Chairman gets the report ahead of time (late in afternoon on the day prior to release) and he doesn't even share it with the other governors -- never mind the regional bank Presidents." Let's do a little math exercise. Today at 8:30 am the BLS came out with a step change in the unemployment rate which dropped from 8.9% to 8.8%. So far so good. Then at 10:00 am Dudley released his speech from embargo with the following disclosure: "unemployment rate has fallen sharply over the past four months, dropping to 8.8 percent from 9.8 percent in November." Obviously Dudley was aware of the NFP number at the time of writing the speech. So our question is: did Dudley write the speech in the 1:30 hours between the NFP release (presumably while in Puerto Rico)? Or did he simply leave the unemployment data blank until the last moment and just filled it in after the official number was released? Since an embargoed version of the speech was likely released to various news outlets in advance, that cuts the time he had to pencil in the correction. Or, of course, if the embargoed version went out before 8:30 am that confirms that Dudley was well aware of the NFP number ahead of time, and roundly refutes the "fact" that only Bernanke sees the jobs number before its public release. Which then brings the question: who else sees the NFP number in addition to Bernanke? And just how profitable is the industry of distributing forward looking economic data at time of embargo distribution, especially when it pertains to something as critical as the NFP number.

NFP reports March NFP at 216,000, above expectations of 190,000, and higher from an upward revised February 194K. Private payrolls at 230K on expectations of 30K. The unemployment rate at 8.8% is the lowest since March 2009. Underemployment (U-6) came at 15.7%. Average hourly earnings unchanged (0.0%), below expectations at 0.2%. Manufacturing payrolls below expectations at +17K on expectations of 30K, previous revised lower to 32K. But the kicker, as usual, continues to be the Labor Force Participation rate, which continues to be at a 25 year low of 64.2%. The average workweek was at 34.3 hours, unchanged from before, and confirming that from the Fed's perspective there continues to be a lot of slack in the economy.

Some highlights from the just released Philly Fed president's speech, bringing yet more hawkishness into the equation:

• Says stronger rebound in economy, inflation may require aggressive policy action
• Must not be too sanguine in believing time to tighten is long way off
• Recovery will continue at a moderate pace
• US economy growing 3.5% annually this year and next
• Prospects in labour markets have improved in recent months
• Expects inflation to be about 2% over the course of 2011... so not the 8.3% which is the accurate number? Odd.

After first it was disclosed that TEPCO does not know the different between millions and thousands, the firm which is now set to be at least partially nationalized, has decided to blame its computers for the ongoing catastrophic handling of the Fukushima disaster. From NHK: "Tokyo Electric Power Company says it will review all data on radiation
leaked from the damaged Fukushima Daiichi nuclear plant, citing errors
in a computer program. The utility says it found errors in the program used to analyze
radioactive elements and their levels, after some experts noted that
radiation levels of leaked water inside the plant were too high." In other words, every "fact" you have heard so far in the past 3 weeks - you can forget it. And since the BLS is coming, and the Nasdaq is about to fund (105% debt financed) the Japan government's multitrillion restoration effort, it will all be well from now.

Tomorrow's NFP number will be one of the most critical releases from the BLS: if on one hand the number is far greater than expected, it will effectively mean that QE3 will not begin immediately after the end of QE2, just like QE1 ended on March 31, 2010 only to see QE Lite implemented 4 months later. That the Fed is not willing to take a political gamble and send oil to $150 is conceivable, which is what would happen should Jon Hilsenrath start leaking QE3 rumors. On the other hand, the economy is once again turning lower as recent diffusion data (not to mention housing) has been indicating. Should the Fed implicitly tighten, by not loosening, the economic contraction will accelerate drastically, and capital markets will follow suit. And since as Hugh Hendry noted earlier, there is no China to pick up the slack, the stakes on the all in gamble in this bet that the virtuous cycle has picked up, will likely cost Bernanke his job if he ends up wrong and QE3 is needed anyway. Of course, as many believe, and as Bernanke himself has said, manipulating the market and stimulating inflation is and continues to be the Fed's only objective. Obviously, the waterfall effects in either direction here are huge. Which is why if tomorrow's NFP number is a beat and not just any beat but a massive one (read well over 250,000), it will be an attempt by the administration to cement the idea that the economy is now recovering. Anything at or below consensus will merely push the decision one month forward, however it will be too late to prepare the political landscape for QE3 in May, just two months ahead of the end of QE2. So tomorrow is likely D-Day on QE3 (or at least a direct continuation of POMO past the June 30 expiration date).

As usual, the Department of [no] Labor did not fail to deliver its usual Thursday morning humor: yet more upward revisions to initial and continuing jobless claims (initial were revised upward by 8,000, while continuing were revised 12,000 higher). What was news, however, were the annual revisions that were released with the report. More humor: they were larger than the first revisions and contained comparable levels of upward bias. While free entertainment is always welcome, one can’t help but wonder why the DOL doesn’t borrow one of the FRBNY’s interns to adjust the specs in their model. It’s not like removing a predictable bias in a model is rocket science. All that said, nothing compares to Santelli finally losing it when confronted with yet another day of unimaginable bullshit coming at him from all directions, although in this case from Princeton professor Alan Blinder of whose op-ed he says: "if this is the qualification they teach in ivy league my daughter should be head of the university."

Something remarkable happened to property taxes in the U.S. while housing lost 31% of its value from 2006 to 2009: they went up by $100 billion (27%). Equally remarkably, as we can see from this U.S. Census Bureau data on state and local tax revenues, property taxes went up even when housing slumped in the early 1990s. So though U.S. housing continues losing value--U.S. home prices declined in January, continuing a downward trend that began in August, with average U.S. home prices retreating to summer 2003 levels, according to the S&P Case-Shiller home-price indexes--property tax revenues continue their inexorable rise. So even as the net worth of property has fallen by a third, the property taxes collected from the owners have risen 27%. Exhibit A in this ceaseless rise of property tax revenues is the structural shortfalls in state and local government budgets between what was promised to various fiefdoms and constituencies at the apex of various bubbles, and what is sustainable in non-bubble times.

The ADP private payroll number has disappointed, coming below expectations of 208K, and down from a previously revised 208 from 217K. The number is also far weaker compared to a whisper expectation that actually had a 3-handle in front of it (unclear how much BarCap was involved in setting that benchmark). From the report, which does its best to hide the fact that the economy needs to create about 150k jobs a month just to stay in line with population growth: "This month’s ADP National Employment Report removes any remaining doubt that private nonfarm payroll employment accelerated heading into 2011. The increase of 201,000 is in line with the consensus expectation both for today’s report and for Friday’s jobs report from the Bureau of Labor Statistics. The average monthly increase in employment over the last four months – December through March – has been 211,000, consistent with a gradual if uneven decline in the unemployment rate. This is almost three times the average monthly gain of 74,000 over the preceding four months of August through November." The worst performing sector continues to be construction: "In March, construction employment dropped 5,000. The total decline in construction employment since its peak in January 2007 is 2,126,000. Employment in the financial services sector increased 4,000 in March." But that's ok: financial services sector employment increased for the first time since 2007.

Just the ADP report today on the docket, while the Fed's hawks will be on parade once again after being let out last week, with Hoenig, Lacker and Bullard spreading the anti-QE3 gospel. In the meantime a $6.5 billion POMO will close at 11am EST.

Here's a simple test of whether the economic recovery is self-sustaining or not: cut Federal spending back to 2007 levels (a $1 trillion reduction) and cancel all Fed intervention such as quantitative easing. If the economy is self-sustaining, it will move forward without Federal spending and Fed intervention. If "self-sustaining" is a fiction, an illusion, a mere figment of propaganda deployed to enable the Status Quo to feast off the remaining productive elements of the U.S. economy, then the economy will absolutely crater.