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Art Cashin Takes On Critics Of His Seasonal Adjustment Seasoning

Tyler Durden's picture




 

We have covered the topic of BLS seasonal adjustment to death and beyond, as well as the endless expansion of those dropping out like flies from the labor pool (did those not in the US labor force, one way or another, whether due to mistracking, statistical aberrations, or outright data manipulation, increase by 1.2 million in January? It did? Next question... or does the government now desperately need an apologist for its own upwardly biased data 'mismanagement'?). Yet some of the formerly relevant elements at the less than cutting edge of asset management-cum-blogging decided to call out Art Cashin for daring to point out just this glaringly obvious seasonal adjustment issue. Of course, Art does not need us rushing to his defense. He can do a good enough job on his own.

From UBS Financial Services

Seasoning The Seasonal Adjustment - My comments about the non-seasonally adjusted (USA) 1.8 drop in payrolls in 2012 brought in lots of reaction from some friends and, in particular, some from my most recent dinner. Basically, they all wondered if I had lost track of the importance of seasonal adjustments.

 

They reminded that during the yearend holidays millions of people are hired as everything from sales clerks to Santas. And, when the tinsel comes off the tree, are they not laid off? Some reminded that over the last 10 or 20 years, the first two months of every year have seen similar, or even larger, drops in NSA payrolls. Duh! Yes, I know.

 

My point - poorly made, I guess, was twofold. First, that as Lakshman Achuthan asserted, the severity of the great recession may have produced such severe numbers that they may have distorted the adjustments in the last few years. Secondly, I wanted to suggest that we may have a bit of an economic La Cage Aux Folles - what we think we see is not what we are actually looking at.

 

As the first quarter has progressed, the headline data has offered hope. Payrolls were said to rise over 200,000 in both January and February. Each week Initial Claims have steadily improved. But all of the cheer is in the adjustments. Those 1.8 million laid off Santas probably filed for unemployment but were adjusted away.

 

Seasonality is important, logical and necessary for perspective. But, sometimes the real world can look a little different. We won’t know if the image was distorted until months from now. It may be too early in the season for rose colored glasses. They’re more a summer thing - right?

 

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Thu, 03/22/2012 - 09:47 | 2280171 Ayn Rand
Ayn Rand's picture

Who would you believe more?   Somebody like Art who has seen a lot of ups and downs in his long life, or some 30 year old PHD who has read a lot of books?   Want real life or text book?   Your choice.

Thu, 03/22/2012 - 10:05 | 2280211 redpill
redpill's picture

There are lots of people with long lives that still drink the X12-ARIMA kool-aid, believe me. This isn't a matter of age or education, per say. What are lacking in modern economics are concepts such as logic and reason. Feeding numbers into a black box seasonal adjustment algorithm and blindly trusting the output is not science or art, it's idiocracy.

The fatal flaw of either seasonal or broader statistical household adjustment of any macro data set these days is that it inherently relies on the notion that today is similar to the past. Well, over the last two decades we've seen massive, incredible shifts in the largest economy in the world from one factor or another (although most paths lead right back to daddy Fed). NAR learned this bitter lesson in regards to their statistics on existing home sales. I doubt we'll ever get such an admission from the BLS. The fundamental assumption that this January would be similar to last January and the January before that, is not safe at all. We've seen huge flows of QE in the system, making all kinds of distortions, wild swings in the stock market, record lows in labor market participation, part-time underemployment surging as a percentage of earning, you name it. If anything it's a far safer bet to assume that this January would NOT be like last January or the January before that, or that the relationship between Decembers and Januarys is so consistent that you can measure a single-digit percentage change based upon it! We are in a time of flux, and now is the time to err on the side of using REAL DATA to measure activity, and not proclaiming that whatever X12-ARIMA barfs out is truth. That doesn't mean you ignore obvious seasonal trends, but it also doesn't mean you rely on massive birth/death adjustments, or accept that the same seasonal adjustment calculations are going to generate an accurate result, especially given the fact that so many of the variables can be easily fudged based on one motivation or another.

For most of these macro sets, I find it helpful to look at them 3 or 4 ways, to see if there is some consistency in how the data behaves.  Don't blindly trust a seasonally adjusted number.  Look at the raw data year over year compared to the year over year trend from previous months.  Do a rolling quarter, or a rolling 12 months.  Include moving averages.  These aren't complicated concepts, and can illustrate the data trend far better than some fudged number that pretends to be able to roll up the entire universe of data and translate it into a single percentage change from the prior month.

Thu, 03/22/2012 - 10:35 | 2280254 hedgeless_horseman
hedgeless_horseman's picture

I can't believe Art doesn't like a little Galvin's Magic on his numbers.  Think how plain our government's cooking would be without it. 

Once you try it, you can never stop!

They love it in Argentina.

John M. (Jack) Galvin serves as Deputy Commissioner of the Bureau of Labor Statistics. From 1998 until September, 2011, Mr. Galvin served as Associate Commissioner for Employment and Unemployment Statistics, where he directed the Bureau's programs of national, State, and local information on the labor force, industry and occupational employment and wages, employment projections, and employment dynamics. Many of these programs are conducted in cooperation with the U.S. Census Bureau and with the State Employment Security Agencies.

 

Mr. Galvin served as Assistant Commissioner for Producer Price Indexes from 1994 to 1998, as Director of the BLS Quality and Information Management Staff from 1991 to 1994, and in a variety of positions in the Consumer Price Index program from 1978 to 1991.

 

Mr. Galvin holds a B.A. in Economics from the University of Illinois and an M.A. in Economics from George Washington University.

 

Mr. Galvin's office can be contacted at 202-691-6400.

 

http://www.bls.gov/bls/senior_staff/galvin.htm

You can call Jack to let him know how much you love his seasoning!

Thu, 03/22/2012 - 10:53 | 2280381 gmrpeabody
gmrpeabody's picture

"Those 1.8 million laid off Santas probably filed for unemployment but were adjusted away."

These people have long exhausted any unemployment benefits they mave have accrued. They are not counted as unemployed because they don't qualify for more unemployment benefits. Why, they aren't even considered to be in the workforce. They just vaporized.

Thu, 03/22/2012 - 11:15 | 2280450 redpill
redpill's picture

I'm VERY sorry I have no idea where those workers went.

 

/Corzine

Thu, 03/22/2012 - 13:17 | 2280864 lincolnsteffens
lincolnsteffens's picture

+++ I'd have given you 10 +s if you showed the bottle 2/3rds empty. Good show!

Thu, 03/22/2012 - 10:04 | 2280231 EscapeKey
EscapeKey's picture

I don't have a problem with people who have most of their knowledge from books.

What I have an issue with, is when all of those books are written in the same mindset, or financed by the same vested interests.

Becoming a master Keynesian economist is not just reading all pro-Keynes books. It's reading books disagreeing with Keynes' principles, weighing the evidence, and ending up thinking Keynes was right.

Personally, I think Keynes is a hardcore socialist in sheep's clothing. His theory is based on Marxist labour units.

Thu, 03/22/2012 - 10:10 | 2280263 jcaz
jcaz's picture

"His theory is based on Marxist labour units."

A fact that goes unspoken amonst the current Kool-Aid brigade.....

Thu, 03/22/2012 - 10:21 | 2280247 Shizzmoney
Shizzmoney's picture

First, that as Lakshman Achuthan asserted, the severity of the great recession may have produced such severe numbers that they may have distorted the adjustments in the last few years.

Exactly.  The gains are good, don't get me wrong, but they are NO WHERE near what we need to cut into deficits with tax income, as well as help the working class get back on their feet, pay down debt, and maybe even consume again minus the good ole Credit Card.

Listen, I understand that the CNBC heads look at Art, at this site, and think, "What a bunch of libertarian ball washers for the right."  But it's not; they compute facts (with a little right-wing commentary on the side; which really in the end, a smart reader can ignore and take at face value). 

Like take Henry Blogdett for example.  I like the guy alot.  He runs a smart site.  But his putting Lak on blast for his recession call back in September is a bit prudent.  It's only been 4 fucking months.  Let's wait til February of NEXT year, until we can start finding out if this economy is really back on track.  It's probably going to have to take 14 months of SOLID GDP and job growth to get back to actual recovery.  Right now, this ain't recovery....this is scoring a touchdown, and celebrating, when your team is down 42-14 in the 4th quarter.

As Mr. Wolf said in "Pulp Fiction" - "Welp, let's not start sucking each others dicks just yet" 

People like Art, Lak, etc.......don't say this shit lightly.  They do this, you know, for a fuckin' living.  They put themselves out there with the numbers they see.  And, as Sovereign Man pointed out, if you relied on "boots to the ground"
intel on the job market today, the mood you'd get would be, "Moving....but still shitty."

The numbers the government and left-leaning economists have been touting as "significant improvement".....does NOT reflect what people feel in the streets. 

Occupy is still a force.  Banks are still getting away with fiscal murder.  Lobbyists are still writing legislation.  Employers, enjoying low quitting rates by employees (because they know that jobs are scarce and it takes on avg 29 weeks to find a job.....but its down from 41-52 weeks!), are still treating this as a "buyer's market". 

Employers are requesting potential employees to piss in a cup, give their Facebook passwords, take off their pants and open their assholes for jobs that have shitty benefits, low-to-median pay that doesn't keep up with real inflation, and of course, a high turnover/volitle environment in these workplaces which reflect......drum roll please.....

......that the economy is still shitty.

The environment out there is shoddy, and the people looking at the real number know it.  The UE6 number reflect people dropping out of the workforce, and exhausting their UE rolls. Ron Paul, Bernie Sanders, and the people who actually work everyday and see oil prices at the pump rising, food rising, debt accruing....know it.  I even took a job and am getting underpaid by about 5-7K a year...but I had to.  I couldn't gamble in this market.

And, add to the fact we have an incumbent president....you SHOULD be skeptical that the numbers happen to be improving THIS year.  Hell, there is a reason the guy picked Missouri and Ohio State to go to the Final Four......and it ain't because he liked their point guard play.  Everything is done for votes; I can say this as progessive libertarian (who thankfully has never voted in his life). 

It happened under Bush when him and his Goldman buddy Treasurer Paulson kept saying, "Everything is OK!  No recession!" in 2004 and 2006 when ZH and others were pointing to potential sub-prime problem.  Then the shitstorm of 2008 happened.  And we still haven't fully recovered. 

There is a reason America loves Tim Tebow.  They enjoy mediocrity....TPTB have convinced the masses to celebrate it.  People see him carve up prevent defenses, or defense that continue to send kitchen sink blitzes leaving one-on-one coverage instead of making a mediocre passer have to see the field, and make reads. 

It was a nice run.  he won some games, got Denver into the playoffs, even won a playoff game (vs a banged up PIT team). 

But what happened when he had to face a real team, with a real QB?  The cards got shown face up, and it was all a bluff, and his team got blown the fuck out. 

Read 'em and weap.  At some point, you got to win showdowns.  And covering the spread an't gonna get us out of our problems. 

Thu, 03/22/2012 - 10:50 | 2280378 AbelCatalyst
AbelCatalyst's picture

Einstein said keep things as simple as possible, but no simpler.  The only problem is simplicty does not provide the cover the government needs.  Look at the tax code - a simple graduated flat tax would remove all the power from our friends in D.C.

The simple answer to seasonal adjustments is Year-over-Year comparisons.  This would remove the need for seasonal adjustments.  No way to manipulate the data.  No more power for the BLS.  

The Powers That Be need complexity to survive.  The Status Quo uses the tools of complexity and fear to maintain control - how many times have we heard the world would end if bankers were not given Trillions in printed money?  Fear mongering used to extract resources and control people is the age-old practice of those in power.  Once you know it's all about fear and complexity it's easy to see through the BS.  

Only problem is every complex society that has ever existed has not ended well.  Hunker down ZH'ers things are beginning to unwind and keep in mind that the darkest hour precedes the dawn.   

Thu, 03/22/2012 - 15:00 | 2281331 Dburn
Dburn's picture

The Tax Code should be renamed The Congressional Favor Book.

Thu, 03/22/2012 - 09:49 | 2280174 asteroids
asteroids's picture

People on food stamps are not seasonal. They are constantly hungy. Focusing on made up numbers that are now being igored iis intellectually dishonest. Call it bullshit, ignore it, and move on. The sooner we concentrate on tax receipts, employment rate, and food stamps, the better.

Thu, 03/22/2012 - 09:47 | 2280175 gjp
gjp's picture

relatively bad news (counts for nothing), overseas markets down 1% or more, commodities getting the beat down, and US markets down less than 0.5% and climbing quickly ... will be green by 10 am probably

SBUX making another new high as the outlook for overpriced coffee has never been better

Thu, 03/22/2012 - 09:56 | 2280212 Dr. Engali
Dr. Engali's picture

Is this the new unbanned Robo in disguise?

Thu, 03/22/2012 - 10:00 | 2280229 gjp
gjp's picture

No, wouldn't want to be that - I'm thoroughly disgusted with the teflon nature of US markets, and especially US consumer stocks, when American overconsumption is such a big part of the global problem.

Thu, 03/22/2012 - 10:02 | 2280234 Dr. Engali
Dr. Engali's picture

I know you're not fibbing. Robo never responded :->

Thu, 03/22/2012 - 10:56 | 2280181 Eireann go Brach
Eireann go Brach's picture

Good for old art, Even though he is so old he cannot fart, Taking on the BLS and all, Showing them that they soon will fall, Soon he will look at Obama and laugh, because we all know he is nothing but an infant giraffe ....

Thu, 03/22/2012 - 11:31 | 2280514 Jason_1sandal
Jason_1sandal's picture

puppet ??

Thu, 03/22/2012 - 09:48 | 2280183 101 years and c...
101 years and counting's picture

it is summer here in IL:)

Thu, 03/22/2012 - 09:57 | 2280220 5880
5880's picture

Amen,

I've had the sticks out 3 times already!

Thu, 03/22/2012 - 10:26 | 2280313 hedgeless_horseman
hedgeless_horseman's picture

 

 

Only 3 times?  That WAS a short season at Chestnut Mountain.  Oh, you probably mean golf.

Thu, 03/22/2012 - 09:50 | 2280189 Ted Baker
Ted Baker's picture

HEARD ON THE STREET:-

JEFFREIES AND THE FINACIALS IN THE US BACK ON THE CHOPPING BLOCK AND THEIR EXPOSURE TO EUROPEAN DEBT CRISIS - CAN THERE BE THAT GOLDMAN CLIENTS M-C AS THEY ARE COMMONLY KNOWN TODAY (M FOR MUPPETS OF COURSE) ARE BUYING OR SHORTING FINANCIALS AFTER GOLDMAN RECOMMENDATION?

Thu, 03/22/2012 - 10:10 | 2280258 Awakened Sheeple
Awakened Sheeple's picture

We hoped the bulls were out of luck
But your inside info sucked
You're claims are doomer porn
But your welcome has worn
So please just STFU!

Thu, 03/22/2012 - 10:25 | 2280311 LongSoupLine
LongSoupLine's picture

...and you scream all the time too.

Thu, 03/22/2012 - 11:11 | 2280442 Awakened Sheeple
Awakened Sheeple's picture

Could you elaborate?

Thu, 03/22/2012 - 12:25 | 2280658 NotApplicable
NotApplicable's picture

Ted Baker, ALL CAPS.

Thu, 03/22/2012 - 09:54 | 2280199 ebworthen
ebworthen's picture

Geithner in drag image flashing in my brain.

 "...an economic La Cage Aux Folles -"

Yes Art, YES.

Thu, 03/22/2012 - 09:54 | 2280204 SheepDog-One
SheepDog-One's picture

OK so they can phony the markets up, they can put out phony numbers, but thats all just smokescreen...what is their plan and when is it going down? Thats all I care about, all the rest is just window dressing and no ones believing it anymore.

Thu, 03/22/2012 - 09:56 | 2280207 barliman
barliman's picture

 

"Art, Art, Art ..."

"What are we going to do with you, bubie?"

"Every time you mention reality we've got to hire a some new shiksa with tight clothes and big ... 'assets' to distract people."

Poor Art, he was born outside the Matrix like Rick Santelli.  They are not equipped with the Automatic Neural Update System probe that Liesman and Pisani have.

/s

barliman

Thu, 03/22/2012 - 09:59 | 2280225 Paul Thomason
Paul Thomason's picture

Here's a perspective - real numbers (seasonally unadjusted) indicate huge real jobs losses this year - read the article here '1.8 Million Job Lost So Far In 2012!'

Thu, 03/22/2012 - 10:03 | 2280240 scatterbrains
scatterbrains's picture

anyone trade on fractals ?  Yea I know I know...

 

 

http://fiatflaws.blogspot.com/2012/03/spy-fractal.html

Thu, 03/22/2012 - 10:18 | 2280283 fuu
fuu's picture

Totally OT but what is the slider at the end of each article all about?

Thu, 03/22/2012 - 10:54 | 2280384 ebworthen
ebworthen's picture

Do you mean the "rating" scale or is there a small sandwich involved somewhere that I will gladly pay you Tuesday for?

Thu, 03/22/2012 - 11:05 | 2280415 fuu
fuu's picture

No steamed burgers.

http://i42.tinypic.com/tar59g.png

The thing between the RSS feed icon and the googleshare icon.

Thu, 03/22/2012 - 12:05 | 2280609 ebworthen
ebworthen's picture

Weird.

I don't see that anywhere, but I'm using Internet Exploder 9 and Windoze 7 Confessional 64-Bit (64 ways to cause a problem).

 

Thu, 03/22/2012 - 12:26 | 2280659 fuu
fuu's picture

Windows 7 IE 8 here.

It shows on the front page for me as well.

http://i39.tinypic.com/seom5k.png

Thu, 03/22/2012 - 13:13 | 2280852 Nobody For President
Nobody For President's picture

XP Pro and Chrome = No slider.

XP Pro and Firefox - No slider

Thu, 03/22/2012 - 10:27 | 2280317 ElvisDog
ElvisDog's picture

Seasonal adjustment is crap. Totally unneccesary. If employment numbers were compared against the same month from the previous year, there would be no need for seasonal adjustments and raw data could be used. But then there would be no room for meeting those monthly 200K employment gain targets....

Thu, 03/22/2012 - 10:43 | 2280359 aerial view
aerial view's picture

The majority of data released by our masters is distorted, manipulated and inaccurate. Honest, transparent and easily understood information is the exception as the slide into the abyss accelerates. Most people just don't want to wake up and deal with what is happening-until it is too late!

Thu, 03/22/2012 - 10:48 | 2280362 Burgess Shale
Burgess Shale's picture

Here's the post from Ritholtz's Big Picture, 2 days ago.  It mentions both Cashin and Zero Hedge.

http://www.ritholtz.com/blog/2012/03/fun-with-numbers-redux/

Thu, 03/22/2012 - 13:24 | 2280906 ClevelandJanelle6
ClevelandJanelle6's picture

my neighbor's aunt makes $67 hourly on the laptop. She has been fired from work for ten months but last month her check was $20142 just working on the laptop for a few hours. Here's the site to read more ....  http://lazycash9.com

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