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Gallup Goes To Town On BLS Massagery

Tyler Durden's picture




 

Whether it is a fringe-blog pointing out the statistical un-possibility (here and here), or a previously well-respected 'elite' pointing out the suspiciousness (here), most of the general public (or their media-based oracles) prefer not to swallow the red pill of reality with regard Friday's data SNAFU. However, given the political (and economic) consequence of a single-number, Gallup has decided to weigh in on reality as they note "even though the Household survey tends to be very volatile, this decline seems to lack face-validity, particularly after the prior month's numbers" as they analyse why the household results should be discounted heavily. Critically, they, like us, suggest the 'unemployment rate' needs to be replaced as a measure of joblessness, suggesting a far simpler (and more transparent) measure - Payroll-to-Population - would avoid the 'adjustments' and 'biases' that are inherent in the BLS's bafflement. The Gallup measure suggests, as one would perceive using common-sense, that the real jobs situation was essentially unchanged last month.

 

Via Gallup's Behavioral Economy blog,

Time to Replace the Unemployment Rate

 

This blog mentioned in mid-September that it was possible -- if unlikely, based on Gallup's survey data that include 30,000 interviews per month -- that September's seasonally adjusted unemployment rate could fall to 7.9%. Still, Friday's BLS report of a drop to 7.8% in the Household survey seemed to surprise everyone, as has been the case on many occasions this year.

The problem is that even though the Household survey tends to be very volatile, this decline seems to lack face-validity, particularly after the prior month's numbers. The consensus estimate was that the government would report that the unemployment rate was unchanged at 8.1% in September. GDP growth was 1.3% in the second quarter and seems to be no better this quarter. The government's Establishment survey shows there were 114,000 new jobs created in September -- very close to the consensus of 113,000 -- and not sufficient to lower the unemployment rate.

The obvious conclusion is that a new employment measure is needed. Gallup has proposed such a measure -- Payroll to Population (P2P) -- the number of Americans employed full-time for an employer as a percentage of the U.S. population. This is a much simpler measure that has none of the numerous adjustments made to the seasonally adjusted unemployment rate. The P2P deteriorated slightly to 45.1% in September from 45.3% in August, suggesting the real jobs situation was essentially unchanged last month.

 

 

Household Results Should Be Discounted

A quick comparison of the government's seasonally adjusted and unadjusted employment data seems hard to reconcile with the weak economy. For example, the government shows the number of employed workers increasing by 775,000 in September from August on an unadjusted basis. This surge in hiring seems surprisingly large given the current economy, not to mention the even larger adjusted increase of 873,000. Similarly, the number of unemployed declined by 954,000 in September on an unadjusted basis. This is reduced to a smaller adjusted decline of 456,000 -- but both numbers are also surprisingly large.

 

The Household data raise similar questions when averaged over time. Over the past two months, the unadjusted increase in the number of Americans employed has totaled 207,000 while the number of unemployed workers has declined by 1.66 million. The difference is made up by a decline of 1.45 million workers in the size of the workforce.
As a result, the unadjusted unemployment rate has plunged by one percentage point over the past two months to 7.6% from 8.6% -- an enormous decline given the weak economy.
Over the same period, the seasonally adjusted rate has fallen 0.5 points to 7.8% in September from 8.3% in July.
Focus Should Be on Payroll to Population 

The lack of face-validity of the government's unemployment numbers creates major problems, particularly during a presidential election year. The situation is worsened by the huge number of complex adjustments made to the data. Rather than debate whether something is wrong with the government's estimation process, it seems reasonable to look at other measures as an alternative.

Gallup's P2P is such an alternative. It is simple to calculate and thus, transparent to the public. It is based on 30,000 phone interviews a month. Most importantly, it provides insight into real job market conditions.

 

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Sun, 10/07/2012 - 15:04 | 2865348 Conman
Conman's picture

Question - has anyone here known or heard of anyone getting this survey from gallup or BLS? I haven't. Who the fuck are they calling?

Sun, 10/07/2012 - 15:09 | 2865360 thad78
thad78's picture

Perhaps ET & his family- they were deemed legal aliens & now receive Social Security.

Sun, 10/07/2012 - 15:20 | 2865365 vast-dom
vast-dom's picture

the entire political system lacks this face-validity -- just track foodstamps and case closed.

 

THIS ELECTION YEAR BE A TRUE PATRIOT: DO NOT VOTE

THIS ELECTION YEAR ASK NOT WHAT YOUR COUNTRY CAN DO FOR YOU, BUT WHAT YOU CAN DO FOR YOUR COUNTRY: DO NOT VOTE

Sun, 10/07/2012 - 15:21 | 2865380 redpill
redpill's picture

Shadowstats has been more credible than anyone on this, for a long time

http://www.shadowstats.com/imgs/sgs-emp.gif

Sun, 10/07/2012 - 15:22 | 2865384 vast-dom
vast-dom's picture

yes. i think i would split the difference between U6 and SGS Alt.

Sun, 10/07/2012 - 15:39 | 2865407 DoChenRollingBearing
DoChenRollingBearing's picture

Fringe Blogger Bearing notes that at least FIVE of Barron's columnists this weekend's issue also have big doubts about the BLS numbers.

Review of Barron's -- Dated 8 October 2012

http://tinyurl.com/9r8xkne

Sun, 10/07/2012 - 16:12 | 2865471 Ralph Spoilsport
Ralph Spoilsport's picture

Informative article Bob. +1

Sun, 10/07/2012 - 16:17 | 2865479 DoChenRollingBearing
DoChenRollingBearing's picture

If you are the Ralph I think you are, then I slap ya back with a + 1!  (And even if you are not THAT Ralph!)

Sun, 10/07/2012 - 16:22 | 2865574 Ralph Spoilsport
Ralph Spoilsport's picture

Don't think I am THAT Ralph but I enjoy your posts about your business. Real world stuff and good data.

Sun, 10/07/2012 - 16:25 | 2865689 DoChenRollingBearing
DoChenRollingBearing's picture

Very kind, I appreciate it.

Sun, 10/07/2012 - 16:45 | 2865814 GAAPpreNixon
GAAPpreNixon's picture

Shadowstats deals in truth and reality. They are the last shred of reliable economic data out there.

But there are too many people, in and out of government, from the corporate media to Wall Street to Government by Game Theory lakeys  being paid too much money to lie for a living.

Rod Serling: Logic is the enemy and truth is a menace.

 

http://www.youtube.com/watch?feature=player_embedded&v=oADlQPJ_Zfc 

Sun, 10/07/2012 - 16:22 | 2865587 therearetoomany...
therearetoomanyidiots's picture

So, your answer is to re-elect obama?  Just trying to understand the logic of how this makes one a patriot.  By turning the entire system over to this fucking maniac...you know what he will do if he gets the second term, negotiate with the russians, bend over and take it in the ass from the chinese.   Yeah, good idea, don't vote.

I'm sure TV and the newspapers will pick up on the total non-vote and say that we need to not honor whomever gets elected  and that we should start anew. 

Not voting is worse than voting for this illegitimate marxist in the white house.

Sun, 10/07/2012 - 20:24 | 2866273 Curt W
Curt W's picture

Write-in :  None of the Above

Sun, 10/07/2012 - 23:08 | 2866655 monad
monad's picture

ET tasted like chicken. Not much meat on him, either

Sun, 10/07/2012 - 15:22 | 2865383 Popo
Popo's picture

Well, it's .01% of the population that gets surveyed, or just 30,000 out of 300,000,000

So the chances are slim you'd know anyone who got surveyed.

Sun, 10/07/2012 - 16:54 | 2865406 SafelyGraze
SafelyGraze's picture

one had ought best not to forget the language of yon constitution:

"[t]he validity of the numeration of unemployed within the United States, authorized by law and published by the BLS, including loss of jobs and inability to remain self-employed, notwithstanding time spent accumulating debt by leaving the workforce to return to college, shall not be questioned."

Sun, 10/07/2012 - 15:40 | 2865410 Conman
Conman's picture

Well im taking a sample of this population that least someone here has or known of someone that has been surveyed.

Sun, 10/07/2012 - 15:30 | 2865393 Lost Wages
Lost Wages's picture

It's everyone who 1. still owns a home phone and 2. doesn't hang up when a telemarketer calls.

Sun, 10/07/2012 - 15:49 | 2865429 LMAOLORI
LMAOLORI's picture

 

 

If you are on the donotcall list it eliminates the telemarketers but not the political calls. I answer the calls just to mess with them lol and yes I still have a home phone beause out here you couldn't get internet/cable without it so I might as well.  We get a ton of those calls living in a swing state.  

Sun, 10/07/2012 - 16:19 | 2865525 slaughterer
slaughterer's picture

Are there blessed angels downarrowing every comment that uses the word FUCK in it?  FUCK FUCK FUC FUC FUCK FUCK FUCK FUCK

Sun, 10/07/2012 - 16:24 | 2865625 Ralph Spoilsport
Ralph Spoilsport's picture

Yeah. FUCK that asshole whoever he is.

Sun, 10/07/2012 - 20:22 | 2866271 edb5s
edb5s's picture

Gallup called me (on my cellphone).  I was told they dial random numbers. 

Sun, 10/07/2012 - 15:05 | 2865349 Let The Wurlitz...
Let The Wurlitzer Play's picture

Keep in mind that a large population of people lost their unemployment benefits the last three months.  One way to get benefits back is to be "employed" part time.  Are these "real" jobs - I think not.

I WANT MY OBAMA MONEY!!!!!

 

 

Sun, 10/07/2012 - 15:10 | 2865354 vinayjha
vinayjha's picture

I calculated one time "CAN US UNEMPLOYMENT RATE HIT 0% IN 2013 ?"http://www.freefdawatchlist.com/2012/02/can-us-unemployment-rate-hit-0-in-2013.html

Sun, 10/07/2012 - 15:09 | 2865355 SDRII
SDRII's picture

AIG and GE...again Coincidence that both are being brought under the tutelage of the Fed?

http://www.businessweek.com/news/2012-10-02/aig-says-oversight-panel-wei...

No Debt Backstop this time

http://www.businessweek.com/news/2012-10-01/general-electric-parent-issu...

But a massive user of the "liquidity" guarantee program

"The program has been a boon to the company since it was approved to take part in November. GE Capital has issued $51 billion in long-term debt with government backing, which has helped the company fund its 2009 target of $45 billion in debt issuance and about a third of its 2010 goal."

http://www.businessweek.com/news/2012-10-01/general-electric-parent-issu...

Loophole Helps GE Benefit From Bank Rescue Program

http://www.washingtonpost.com/wp-dyn/content/article/2009/06/28/AR200906...

 

 

 

 

 

 

 

 

Sun, 10/07/2012 - 17:59 | 2865411 LMAOLORI
LMAOLORI's picture

 

 

No Debt Stop I'm not too sure about that Immelt's got friends in high places

10/5/2012

 

GE Capital Said to Near Systemic-Risk

snip

 

General Electric Co. (GE)’s finance arm is in the final stage of a regulatory review to determine if it needs extra scrutiny because of the risk that its potential failure would pose to the U.S. economy, two people with direct knowledge of the matter said.

GE Capital Corp. joins American International Group Inc. (AIG) as the only two non-banks that the Financial Stability Oversight Council has voted to advance to a third round of evaluations for possible designation as systemically important financial institutions

 

No taxes, no problem Obama stands by GE's Immelt

 

 

 

 

Sun, 10/07/2012 - 15:08 | 2865356 OpenEyes
OpenEyes's picture

I was just saying pretty much the same thing yesterday on the golf course.  The two guys I was playing with started talking about the unemployement rate dropping and I interjected that those BLS numbers were in dispute and have been for at least 4 years.  One of the guys was aware, the other was not.  As the conversation and the round of golf moved along we eventually began to discuss what would be a better measre and I said that it seemed to me the only sensible measure (and the one that would be the most difficult to skew or bias) was the total number of tax-paying jobs as a percentage of the total working-age population.  

 

Sun, 10/07/2012 - 15:26 | 2865388 Tedster
Tedster's picture

John Williams, who runs http://www.shadowstats.com estimates the actual unemployment rate at 22%; your method seems a good one.

Can military members count as "employed" at one level? How about Federal employees in general? By this there is no offense intended, it's just the fact that any income taxes they pay are merely moved from one accounting fiction to another.

Sun, 10/07/2012 - 15:13 | 2865363 FleaMarketPete
FleaMarketPete's picture

First World of Warcraft gets hacked and now Gallup drops this bomb on me.  I'm at my wit's end......

 

http://wow.joystiq.com/2012/10/07/reports-entire-cities-dead-on-certain-...

Sun, 10/07/2012 - 16:18 | 2865530 Ralph Spoilsport
Ralph Spoilsport's picture

I was talking to my son about this earlier. He's pretty upset because he and his friends got annihilated.

Sun, 10/07/2012 - 20:32 | 2866282 mjcOH1
Sun, 10/07/2012 - 15:15 | 2865367 LouisDega
LouisDega's picture

You lost me at chart #3. Im color blind.

Sun, 10/07/2012 - 15:20 | 2865378 Everybodys All ...
Everybodys All American's picture

The funny thing about this unemployment number is that everyone predicted the lies would get bolder in order to get the number below 8%. The household survey number is the most absurd indicator you'll ever need for evidence. The best number in 29 years. I might have been born lately but it wasn't yesterday.

Sun, 10/07/2012 - 15:32 | 2865395 Silvertrader
Silvertrader's picture

F*ck jobs!! Who want's a job if you can trade for a living!

Sun, 10/07/2012 - 15:33 | 2865396 Atomizer
Atomizer's picture

Everyone gets a massage happy ending

Sun, 10/07/2012 - 15:37 | 2865404 Mark123
Mark123's picture

The whole situation is absurd beyond belief....

 

The government is borrowing at least $100 billion EACH month, the government is backing almost 100% of the mortgage market (i.e. all risk of default to be borne by the few real taxpayers left), the government is allowing corporations to "mark assets to model" (i.e. loan losses are not recognized), unfunded liabilities continue to accrue at an astronomical rate, and the good old Fed is forcing interest rates to zero for the big investment banks (with government approval and implicit guarantees should any of them lose any real money).

 

If anyone still believes that GDP, employment, consumer confidence, stock markets, price of oil, etc reflect anything even remotely related to the real economic health of this once great nation....I have a bridge to sell you.

 

Screw all the crooks and the half-wits who support them and vote for either official political party.  Your greed and stupidity have left our children with a sordid future.

Sun, 10/07/2012 - 15:38 | 2865405 Tsunami Wave
Tsunami Wave's picture

I've been following Gallup for a while to see what their polled unemployment rate is, and it's currently at 7.6%.  I find that confusing because I believe nationwide unemployment is much higher..

Sun, 10/07/2012 - 15:43 | 2865420 Atlantis Consigliore
Atlantis Consigliore's picture

U-6 Unemployment Data at  15%    

Silent video on unemployment;

"Guess whos not coming to dinner " Ad (Obumbler is on tv in backround silent on Letterman and the View as eye candy"

http://youtu.be/m_1ZT1hwpng

Sun, 10/07/2012 - 15:45 | 2865422 ebworthen
ebworthen's picture

45.1% Payroll to Population isn't going to pay down the FED bubble "debt for bankers" nor get us out of this depression anymore than working at Chipotle or Starbucks is going to let a college graduate pay off student loans, much less buy a car or a house.

Sun, 10/07/2012 - 20:43 | 2866303 ItsDanger
ItsDanger's picture

If the above is true, expect annual tuition inflation of 12%+.

Sun, 10/07/2012 - 15:45 | 2865424 Atomizer
Atomizer's picture

Just like the ocean tide, government inflows/outflows

Sun, 10/07/2012 - 15:48 | 2865425 Insideher Trading
Insideher Trading's picture

I personally enjoy the government's juvenile attempts at prestidigitation.

I know the truth, and people who are active in seeking the truth know the truth but I have to shamefully admit that I enjoy the Washington shenanigans. It's even more enjoyable watching shit-for-brains people akin to little baby birds swallowing the regurgitated government fed propaganda day in and day out.

Every time I think it's impossible to shock me, DC is right there with a  soft, fresh, and warm surprise.

Sun, 10/07/2012 - 16:57 | 2865860 hawk nation
hawk nation's picture

My hope is this move is so outragious the sheep will finally figure it out

Sun, 10/07/2012 - 19:29 | 2866189 SeattleBruce
SeattleBruce's picture

Believe it or not, as outrageous as 7.8% is, it's not dramatic enough.  Wait til prices are rising daily on food and necessities - that should do it...

Sun, 10/07/2012 - 15:57 | 2865438 Yen Cross
Yen Cross's picture

The BLS get's it's statistics from, "Chuck E. Cheeze, and the U.S. census bureau" . Lot's of part time churn!

Sun, 10/07/2012 - 16:10 | 2865468 midtowng
midtowng's picture

My opinion is that last months employment numbers weren't anymore rigged than any other month. The only reason you are hearing more about it is because it is election season.

To be fair, they are all rigged a little.

Sun, 10/07/2012 - 16:10 | 2865469 wonderatitall
wonderatitall's picture

they called all of obamas illegal family hiding in the whitehouse.

Sun, 10/07/2012 - 16:14 | 2865474 Urban Redneck
Urban Redneck's picture

How many people are paying payroll taxes?  If they aren't paying then they don't have a job.  Much simpler than calling 30,000 people to get the numerator.  Gallup is just pushing needless product.

Sun, 10/07/2012 - 20:20 | 2866268 Curt W
Curt W's picture

Self-employed people may file Quarterly or just once a year depending on the income level.

Mon, 10/08/2012 - 15:58 | 2869000 Argonaught
Argonaught's picture

Right.  But they are still paying...so they can be counted (should someone undertake the minimal modelling effort).  The only ones who would not be counted are illegals and tax cheats (not that there's anything wrong with that).

Sun, 10/07/2012 - 16:16 | 2865481 El
El's picture

Out of curiosity, has anyone here ever received one of those survey phone calls?

On a side note, I wonder if their "pool" of recipients is getting smaller due to folks getting rid of their landlines.

Sun, 10/07/2012 - 20:16 | 2866260 Curt W
Curt W's picture

I am 51yo and have never been called,

I have asked at least 40 other people your question over the last year.

Not one said yes, in fact most had no idea they called people about this.

Mon, 10/08/2012 - 04:44 | 2867013 FerretBrain
FerretBrain's picture

Not ever!  I think your sugestion on landlines is quite possibly on the mark.

Sun, 10/07/2012 - 16:20 | 2865554 slaughterer
slaughterer's picture

NFLX to $120, nuff said.  /sarc

Sun, 10/07/2012 - 16:20 | 2865563 Itch
Itch's picture

This is something that unnerves me about American republicans, so much of the base is willing to jump to the wildest conclusions, and so many of the leading figures are willing to stir up bare faced lies at the drop of a hat to stoke the suspicions. This is inexcusable, its just wild and dangerous backward behaviour and anyone caught red handed should have big questions to answer from the general voting public.

Why weren’t people calling for a new method of calculating the numbers when they were bad; if that last number had of been terrible none of this palaver would be playing out. Republicans would have been rubbing their hands with glee at Obamas misfortune, and hence gleeful at the demise of the country. There would be no need for new methodology in that alternate reality; what has been directly implied by Romney himself is that methods were actually different before Obamas term…here he has crossed the line. These are bare faced lies, and if people are willingly cheering on bare faced lies, I fear for the US. Do all Republican candidates get elected on waves of paranoia, suspicion, fear and xenophobia?

The idea/lie that the BLS are conspiring with the dems is just fucking gibberish, it makes Americans look like a bunch of fools. Fringe blogs, maybe, but leading figures in the GOP and now Romney himself going for barefaced bullshit? Vote Romney if you want a tax cut, but that’s all you’ll be getting with the man, that and a shit load of consequences.

Sun, 10/07/2012 - 16:28 | 2865761 Ralph Spoilsport
Ralph Spoilsport's picture

Have you been paying attention at all to the articles and comments on ZH? If the answer is Yes, are you a troll?

Sun, 10/07/2012 - 21:20 | 2866380 Oldwood
Oldwood's picture

Why shouldn't they lie and cheat. They have been caught numerous times and have yet been held to account. Their attitude is "sue me". The whole system has run off the tracks and the only truth left is that the biggest lie rules. And all of us greedy conservatives are burning our businesses to the ground just to spite Obama. You really got to come up with a new conspiracy to excuse The Obama Disaster.

Sun, 10/07/2012 - 16:43 | 2865794 shuckster
shuckster's picture

The population number of 313 million is inaccurate 

Estimates are that the population of undocumented immigrants in the United States has reached as high as 120 million (considerably higher than the official number of 30 million). Using this number, the P2P ratio would be about 32%

Sun, 10/07/2012 - 16:39 | 2865801 OC Money Man
OC Money Man's picture

President “Houdini’s” miraculous creation of 873,000 jobs in the month of September magically drove down the national unemployment rate from 8.1% to 7.8%, just as absentee voting begins.  The trick left Republicans and economists equally befuddled, since the last time a similar monthly jobs increase appeared was June of 1983 when the economy was growing at an astronomical 9.3% annual rate.  But looking behind Barack the Great’s smoke and mirrors reveals that the President’s highly controversial July suspension of the “workfare” requirements that welfare recipients must actually do real work to be counted as employed seems to have dramatically reduced the U.S. Labor Department’s unemployment rate.  

PRESIDENT HOUDINI THE EMPLOYMENT MAGICIAN

http://www.chrissstreetandcompany.com/2012/10/president-houdini-employme...

Sun, 10/07/2012 - 18:33 | 2866096 chump666
chump666's picture

It was actually embarrassing when those figures were released.

 

Sun, 10/07/2012 - 19:08 | 2866157 Muppet
Muppet's picture

Substantial jobs improvement means QE3 ends, right?    QE3 was all about jobs.   Problem solved.

Sun, 10/07/2012 - 20:08 | 2866247 Curt W
Curt W's picture

New question asked in Household survey.

Did you sell more than one item on E-Bay or Craiglist?

If the answer is yes,

You have a part-time job in retail.

Sun, 10/07/2012 - 21:11 | 2866356 analyzer_66
analyzer_66's picture

mhm, 2nd new question:

Did you host a yard, garage or estate sale this year ?

Same treatment on survey if the answer is yes.

Sun, 10/07/2012 - 20:31 | 2866281 Westcoastliberal
Westcoastliberal's picture

The problem we face today is the government issues numbers solely for their PR value.  There is no credibility in government, and I have trouble believing big corp financial reports as well.  It's all done for PR and they get away with it because we live in an age when the rule of law is dead.  Stick a fork in the USA, it's done.

Sun, 10/07/2012 - 21:14 | 2866363 analyzer_66
analyzer_66's picture

the avoidance of marked to market accounting is responsible chiefly, for ending the rule of law

Sun, 10/07/2012 - 20:34 | 2866287 mendigo
mendigo's picture

The unemployment rate is inherently a fuzzy number - perfect fodder to make support any position.
The real issue is standard of living - that has been a tabogan ride to hell for last 20 years obscured by the cheap labor we have outsourced to as we gut our own employment base. That's going hurt real good.

Sun, 10/07/2012 - 20:42 | 2866298 ItsDanger
ItsDanger's picture

FYI, the 45.1% rate is fairly close to Greece's 40% rate pre-debt crisis. 

Mon, 10/08/2012 - 06:21 | 2867058 Grand Supercycle
Grand Supercycle's picture

WILE E.COYOTE overdue sell off...

Has taken longer than expected but SPX & GOLD etc daily chart
bearish topping process strengthens further.

http://www.zerohedge.com/news/2012-12-24/market-analysis

http://trader618.com

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