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Deconstructing The "Massive Beat" in Employment Data

ilene's picture




 

Deconstructing The "Massive Beat" in Employment Data

Courtesy of Lee Adler of the Wall Street Examiner

The headlines are blaring of a massive surge in January employment that blew away analysts expectations. Frankly, I find it hard to believe that any analysts would not have expected this "news." The real time Federal Withholding Tax daily data for January, which I dutifully cover each week in the Treasury updates, showed a massive surge beginning in late December. Since everybody didn't get a 10% raise, the analysts might have inferred that more people were working. Whether that's a sustainable trend or not is another question, but for January at least, there should have been no mystery.

I like to look behind the headlines at the real unadjusted, unmassaged, unmanipulated numbers to get some idea of what's really going on. Here's where things get strange. Total reported employment and full time employment plunged in January, as is normal for that month. So the Gummit survey data doesn't square with the tax collections. Had we based our forecast for the headlines (which is the only thing that matters to the market in the short run) on the withholding data, we would have gotten it right, but for the wrong reasons. It's a head scratcher that suggests that the Gummit's employment numbers shouldn't be trusted, which isn't news. What we do know for sure is that there was a gigantic surge in withholding taxes from late December to mid January, and that surge disappeared completely in the last week. 

 
 

So there's no question that things were fantastic in January, although why and how that happened is a mystery. Last week's action suggests that the good news may not persist in February. We also know that the big beat in the headline numbers was an accident. The seasonal adjustment fudge that the Gummit adds to the mix grossly overstated what the actual survey data showed. Here's a picture. The red line is the actual survey numbers. The blue line is the fake seasonally adjusted number. 

 
Remember: Red... actual. Blue... fake. 
 
Just so you know your eyes aren't playing tricks on you, let's zoom in to just the past 13 months.
 
 
There you have it. The headline, fake, number was up by 243,000, purportedly the biggest increase since 2006. But what's this? The actual survey number showed a decrease of 2.7 million jobs. In the world of seasonally adjusted government data, down can be up.
 
To be honest though, that's a good number for January. Last year the drop was 2.9 million, in 2010 it was also 2.9 million, and in 2009 it was 3.7 million. This year also compares well with the bubble years of 2005 (-2.7 million) and 2006 (-2.7). So looking at the top line, the bottom line is that it was a good report, just not the blowout positive number that the headlines reported. It wasn't a gain, but it was a much smaller loss than in the worst years of the slump, and about as good as any non-recession year.
 
I like to look at full time employment. There again the seasonal fudging overstated the case. The numbers were not good. Full time jobs declined by 1.2 million in January. That's worse than last year at 834,000, and 2010 at 1.1 million. But it is better than the 2.6 million drop in 2009 and the 1.7 million drop in 2008. Does that mean this year was just right?
 
The year to year gain was 1.5 million or just under 1.4%, which was a little less than last year's 1.5%. Is that a good thing?
 
 

To put this in perspective, the actual survey data says that 111.9 million people had full time jobs in January. That compares with a peak level of 119.3 million in January 2008. They call that a "recovery?" 

I wonder whether these numbers can be trusted at all, given the huge surge in withholding taxes in January. From that perspective, the BLS data would seem to understate the gain. But was the gain in taxes really about more jobs, or something else? What was behind that surge in tax collections is a mystery. Apparently, it may have had more to do with bonuses and sales commissions than a big increase in the number of jobs.

There may be a hint of that in the average weekly earnings report which showed a jump of 1.8% between December and January. Apparently some people got big paychecks during the period. I wouldn't attribute it to a sudden increase in inflation, at least not yet.   

In the end, it's hard to give any of these reports much credence. The blowout headline numbers are misleading, although the tax withholding data showed that some people clearly enjoyed a windfall from late December through the latter part of January. But then that disappeared last week. The chances are that these employment numbers will be heavily revised, and if last week's tax data is indicative of what's ahead this month, the "good news" won't be sustained.  

Given the confusion inherent in these numbers, the proof of whether there's any real improvement in the employment trend may not come until this summer when peak employment levels are normally reached. In 2009, 2010, and 2011, peak full time employment stalled at about the same level each July. This year and last year the seasonal lows have trended upward. So if the economy really is growing, given the running head start off the lows I would expect full time employment to leap past last year's highs in May or June. If that does not happen, then we have gained nothing. The initial indications will come in the rate of growth in February and March. Those are numbers to watch. If the growth rate holds up, then the economy is growing, but if those growth rates slow, then we're probably running in quicksand. 

Meanwhile, the government's own survey data show that 7.4 million fewer people have full time jobs today than was the case 4 years ago. Those 7 million jobs were the fake jobs spawned by the housing and credit bubbles. Those jobs were vaporized when the bubble economy collapsed. They are NEVER coming back. The "new normal" is just the old normal without the added froth. What we are left with is the bitter reality of fewer people carrying the tax load and more people needing government assistance. We have yet to see any real proof that the trends are improving enough to ameliorate those burdens on the economy.

 

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Fri, 02/03/2012 - 18:20 | 2125031 walküre
walküre's picture

I call BULL SHIT on these numbers and dare to ask the overlords, which sectors and what industries are hiring?

Please, pray tell?

THE GOVERNMENT LIES, folks!

It took Russians a few years to figure out that the propanda was smoke and mirrors to cover the slowly creeping collapse and downfall of that "empire".

The lies are more blatant today than ever. We have access to uncensored and unmanipulated economic information from nearly every corner of the world. People across the world are taking notes and comparing stories.

THE GOVERNMENT LIES because it serves them to keep this ponzi going! Government layoffs are few and far in between and government payrolls need to be met. If government can't pay its people, government needs to print money or ask their banking stooges to do it for them. They can't print indefinitely unless they're showing that the private sector is benefiting! Manipulated employment numbers can accomplish just that.

As long as a majority of people is willing to ignore the LIES and accept the fraud that government bestowes upon us daily, then the US will exist forever or at least until the rest of the world accepts US Dollars.

For now, they are on track to keeping the illusion going.

Great employment numbers and a Super Bowl weekend. USA, USA, USA!!! (barf)

Fri, 02/03/2012 - 19:05 | 2125182 Mark Noonan
Mark Noonan's picture

Well, they say that retail, manufacturing and construction are hiring...at a time when Kmart-Sears is closing stores, we're making less than we used to and home construction hit rock bottom.

All it takes is a little hope, trust and pixie dust, and you're off and running...

Fri, 02/03/2012 - 21:18 | 2125587 walküre
walküre's picture

The real issue for me is this government arrogance which is adding insult to injury. People that are actively looking for work must feel totally bitch slapped. Very demoralizing when government suggests that jobs are being created but maybe he or she who is suffering from job loss is jsut not good enough to make the cut.

Is this supposed to encourage job seekers to search harder, be better prepared or perhaps terminate a few other job seekers who might get the job instead?

There are no jobs. The jobs we lost since 2007 are not coming back. Period. Hey, but the FED is already discussing how any further QE is no longer necessary.

Truth is, QE3 was never on the table. It wasn't feasible and the FED couldn't afford to keep bond purchases up w/o completely destroying the Dollar. So voila, they pull out a very bullish jobs report and keep doing whatever it is they're doing. In the meantime, in the real world things are getting uglier and people are strained more and more.

FYI, the day the market wakes up from the FED induced Hopium QE binge and realizes there is no further QE, the correction will come and bring all assets crashing down. Because in the real world, the demand that all these corporations are literally banking on has how shall I say... evaporated..

 

Fri, 02/03/2012 - 17:58 | 2124937 The Old Man
The Old Man's picture

Why do tax revenues fall?

This is an easy one. Go to the Part Time article posted today. Now assume you make $11.00 an hour, 20 hours per week, or let's splurge, and say 32 hours a week. How does the tax scale handle this?

As if this new Part Time job is your only job, of course; and taxes you on that scale until your YTD gross catches up.

But this Part Time job only lasts, oh let's say 3 months. Poof, you go and get a new Part Time job. The redundant tax cycle starts all over from zero YTD. 

Presto: Statistics explained.

Fri, 02/03/2012 - 18:15 | 2125019 LawsofPhysics
LawsofPhysics's picture

Yep, long black markets.

Fri, 02/03/2012 - 17:52 | 2124903 YC2
YC2's picture

That seasonal adjustment doesnt look that bad in context of the last few years.  I mean, I dont trust govt stats, but its a seasonal data series, lets not get carried away.

Fri, 02/03/2012 - 17:32 | 2124830 Commander Cody
Commander Cody's picture

Can you say Christmas Bonus?

Fri, 02/03/2012 - 17:31 | 2124824 gimli
gimli's picture

The US is now specializing in vaporization jobs as well as money in client accounts.

The Federal withholding tax was higher because severance pay is taxed at a higher rate (I should know) ...........

Fri, 02/03/2012 - 21:33 | 2125636 rsnoble
rsnoble's picture

The state of ks vaporized my checking acct today.

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