Bank Of America Throws Up All Over Friday's Jobs Number

Tyler Durden's picture

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.

Booming or treading water?


The funny thing about economists is that they can look at the same set of data and draw completely different conclusions. This is partly because of different models and assumptions but also because of the wide range of data to analyze. Nowhere is this more true than in the labor market. There are a number of different indicators, including the unemployment rate, non-farm payrolls, initial jobless claims, the employment-to-population ratio, the diffusion index, and the list goes on.


In this piece, we examine the most popular indicators and summarize their message about the labor market and the overall economy. We focus on the February employment report, which showed a solid gain of 227,000 payrolls but an unchanged unemployment rate of 8.3%. Looking across the range of recent data, we argue that there are signs of true healing in the labor market. However, challenges persist which will make a more robust recovery difficult.


The magic rate

The most popularly cited labor market indicator is the unemployment rate. Normally, the level of the unemployment rate is a good measure of slack in the economy and the change in the unemployment rate is a good gauge of the speed of growth. Today, we see three reasons for caution in interpreting the unemployment statistics.


First, and most commonly observed, the unemployment rate is not only capturing changes in employment, but it is also measuring changes in labor force participation (Chart 5). The labor force participation rate measures the percent of the working-age population that is either working or searching for employment. There are two factors which determine the labor force participation rate:


demographics (such as baby boomers entering the early retirement years) and the health of the economy (perceptions of whether it is possible to find a job).

Since the recession began in December 2007, the labor force participation rate has declined over 2.0pp to 63.9%, of which 1.2pp was due to population shifts into age groups that tend to work less (Table 3). Since we cannot fight the aging process, the downward pressure from the aging population will continue.


But, we should expect at least part of the cyclical drop in the participation rate to reverse as the labor market heals. If the current pace of job creation persists and people start to perceive that there are greater job opportunities, discouraged workers will return to the labor force. This includes many young adults who went back to school rather than face a very tough job market. This means that as job growth picks up, so will the participation rate. That in turn means the drop in the unemployment rate will slow even when job growth accelerates.


Second, not all unemployment is the same. Most of the gain in unemployment comes from record high “long-term” unemployment. As Chart 6 shows, there are a record number of people who are unemployed for greater than six months. In contrast, the short-term unemployment rate has fallen sharply and returned to normal levels. This suggests labor misallocation – those with certain skill sets can find employment in short order while others can struggle with unemployment for some time.


Finally, the unemployment rate does not capture the quality of jobs. For example, it does not distinguish between full-time and part-time jobs. During the recession there was a big increase in part-time workers, which has remained high. These workers are counted as “employed” even though in reality they are half unemployed. In addition, it does not provide information about the quality of jobs in regards to compensation or skill set. This all matters because the standard inflation models use the unemployment rate as a way to determine the amount of slack in the economy, and hence wage pressure. It is therefore useful to control for these other factors when using slack models for inflation.


Bottom line: Don’t be surprised if the unemployment rate remains sticky even once job growth accelerates.


Warm payrolls


Also receiving the top billing among labor market statistics are non-farm payrolls. This measures net job creation: the number of jobs created less destroyed. It tends to be a volatile number and difficult to forecast. Nonetheless, it is one of the most influential indicators for the markets. There are two main problems with nonfarm payrolls.


First, there are significant revisions, both in the subsequent two months and also with annual benchmarks. To put this into context, the initial estimates showed job growth of 1.38 million least year; after revisions this was up to 1.82 million. This means that simply from monthly revisions, there were another 440,000 jobs created. Remember the September report which showed a payroll print of zero? That has since been revised to 85,000 job growth.


Second, there are often seasonal distortions. Poor weather conditions during the survey week, such as a snow storm, will make it difficult for people to report to work. If a non-salary worker does not receive compensation during the survey week, it will count as a job loss. The BLS attempts to control for normal seasonal swings, but sometimes that creates distortions by over-adjusting the data. This may be playing a role in the recent data given the abnormally mild winter. As Chart 7 shows, there were considerably fewer reports of people not reporting to work as a result of the weather this winter. The average from December through February this year was 170,000 workers compared to the historical average of 290,000 and clearly well below the last two years.


There are also quirks in the data unrelated to seasonal factors. For example, December payrolls were boosted by a spike in hiring of couriers and messengers as a result of online shopping during the holiday season. However, the BLS retroactively adjusted the seasonal factors and that spike has since been revised away. But, on the day of the release, this made it more challenging to interpret the report. Also, changes in hiring schedules in the public schools can create volatility in the data.

And for a secondary perspective, here is TrimTabs:

TrimTabs’ Says Payrolls Grew So-So 149,000 in February, while BLS Reports Robust 227,000 New Jobs
Real-Time Withholding Tax Data Does Not Support Big Growth Estimates 
BLS’ Huge February Seasonal Adjustments (+1.53 Million Jobs) Likely Inflate Results


TrimTabs estimated that U.S. payrolls grew 149,000 in February, down from its revised January estimate of 181,000.  Meanwhile, the Bureau of Labor Statistics (BLS) reported the U.S. economy added a better than expected 227,000 jobs.  In addition, the BLS revised its January total up from 243,000 to a whopping 284,000 While TrimTabs’ results point to an economy stuck in slow growth mode, the BLS results point towards healthy acceleration of economic growth.


Obviously, the huge differences between the two estimates have us re-evaluating our model inputs. We did discover a problem with our January 2012 results due to the delay in implementation of the 2% payroll tax reduction in January 2011.  The delay resulted in an overwithholding of payroll taxes in January 2011 and a subsequent correction in withholding tax collections in February 2011.  In addition, we believe our November and December results were challenged by a larger than expected decline in seasonal bonuses.   We are in the process of revising our employment estimates from November 2011 through January 2012 and will report our results this coming Tuesday, March 13, 2011.


Despite the many challenges confronting the TrimTabs’ estimate, the BLS estimate also faces numerous difficulties this time of year.  Given these difficulties, we believe the BLS is likely overstating February job growth due faulty seasonal adjustments. 


The BLS’ February seasonal adjustment is the second largest of the year totaling +1.53 million jobs while the January seasonal adjustment is the largest of the year totaling +2.16 million jobs. To put these huge seasonal adjustments into perspective, labor turnover during any given month is about 4 million people hired or fired.  The size of the seasonal adjustments in January and February relative to the number of people hired or fired is a whopping 53% and 39%, respectively.


Looking forward, withholding tax data during the month of March will be much cleaner providing better view of growth in wages and salaries and employment because the volatility from the 2% payroll tax change in January and February 2011 will disappear from the data. Similarly, the BLS seasonal adjustments decline significantly in March and April reducing this source of error to their survey based results.


TrimTabs’ believes the anemic wage and salary and job growth results in February support the view that the economy remains stuck in slow growth mode due to numerous economic headwinds confronting the economy.  Those headwinds are sluggish real wage and salary growth barely higher than inflation, elevated unemployment, waning government support, reduced and expiring tax incentives, contracting state and local governments, elevated fuel prices, and a sluggish housing market.

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sIewie the pi-rat's picture

I posted this off topic link yesterday of the yachting class where we are sure there are numerous postiions available for the right kind of crew members


dedicated to the  0.1% (live stream cam of St. Barts Gustavia Harbor) (live cam don't work with internet explorer) (live yacht positions in Gustavia)


compare and contrast

a growing concern's picture

You're gonna have to break this one down for me.

Harlequin001's picture

basically the jobs number sucks...

But I think we already knew that...

Sudden Debt's picture

Over here in europe we take all those numbers with a bucket of salt because people who have been unemployed something get a job which they actually pay for to get their unemployment benefits back up to 100% and are fired 2 months later with all the needed paperwork. And if they don't want to pay for it, they take a job which they hate and will quit on a few months later also for the paperwork.

Michael's picture

The only way to create jobs in the US is to default on the national debt.

How does this work you ask?

When we default on the debt and become a deadbeat nation nobody will trade with us, so we have to make everything we want in our own country again, thus creating jobs for everyone.

Joseph Jones's picture

Michael, you're a crazy son of a biscuit eater, and I kinda of love ya! 

absente reo's picture

You've obviously never heard of the Theory of Comparative Advantage.

spiral_eyes's picture

If they're looking for more QE, all they need to know is that the U6 and employment-ratio numbers are stubbornly where they were in 2009. The +/- 27 week numbers are interesting, though. Still, I don't think more QE will make any difference whatever to these fundamental indicators. Why would it? The last 2 rounds didn't. 

I think I need to buy a gun's picture

i saw somewhere that harrisburg pa is now skipping payments, zero hedge anything on that? No one is paying their shit back,,,,we have new stadiums, new houses, granite countertops, suvs and the little guy who just wants to eat and save is getting crushed,,,,,,FUCK it all

WestVillageIdiot's picture

I don't read Mish much any more but I think he has covered the Harrisburg thing.  It is so funny that back in Minnesota they are now finalizing talks to fund a $950 million stadium for The Vikings. 

Hey, at least we have our priorities straight.  I'm sure the owners will never want to leave the stadium, in 10 years or so. 

Harlequin001's picture

I'm sure the owners will never be able to maintain it...

Bam_Man's picture

And according to the latest figures in 2011 Minnesota recorded a year-over-year jump of OVER 10% in Food Stamp usage. Glad to see that they are building a new $950 million football stadium too.

Panem et Circenses

WestVillageIdiot's picture

It's a good thing the more-nutritional iPad 4 will soon be coming to stores.  That should fix everything.  "Go team!"

Central Bankster's picture

We've got a shitload of useless welfare queens in Minneapolis.

SilverCoinLover's picture

Yes, I'll bet you do, and how many of them were needlessly imported from Somalia?

If we really want to reduce the unemployment rate, we need to do it by not just only increasing the number of jobs, but also by reducing the number of people looking for jobs, and the only way that can be done is with an immigration moratorium.

But that's a PC thoughtcrime to the power elite, as well as to many average Joe's, we can't do that because it would be racist! So we better get used to high unemployment rates for many years to come.


Central Bankster's picture

Wait, so you're saying the supply and demand for labor affect labor wages?  ;) 

Gully Foyle's picture


Oh fuck off! Instead of blaming immigrants, who mainly take shitty jobs no one else wants ( It isn't like you are bitching about Canadian actors taking all the good highpaying entertainment jobs is it?), the reality is assholes like you allowed the selling of the US and its jobs.

No one paid attention when the farmers were suffering. No one paid attention when the factory workers were losing jobs. Now that it hits the white collar workers everyone is up in arms.

Well boo fucking hoo. I watched all that happen and it wasn't the goddamned Mexicans or Somalis who caused the problem. It was rich white fuckers screwing the people they considered lesser all for a fucking buck!

WestVillageIdiot's picture

Actually, Minnesota has long seen an influx of welfare recipients coming from Milwaukee and Chicago for the better benefits that were availble. 

SilverCoinLover's picture

Whoa! Calm down there Gully, I actually agree with you somewhat. I have never been in favor of outsourcing, if that's what you meant by the selling of the US and it's jobs. I'm aware that the farmers and factory workers have suffered. I am not rich. I agree that immigrants didn't cause the problem.

But I'm also worried about the numbers, for decades about 70% of US population growth has been due to immigration, and now we can't seem to create enough jobs to keep up with this oversupply. I've read that we need to create 250,000 new jobs every month, forever, just to keep up with working age population growth and to keep the unemployment rate steady at 8%! Like everyone else I want that rate to fall, so I just want all options to be considered, even the politically incorrect ones.

rancher from South Dakota's picture

hows about we try that goll darned capitalism....???  you know quit paying people to do nothing ....(entitlements, foodstamps, et-al)  and all the doo gooding central planning and save our currency and let the productive in our society start allocating assets>???  ie hiring people for the necassary bucks it whould then take to eat......Its healthy societies you must work to eat.....when you don't have to eventually everyone starves


Dr.Engineer's picture

I am an immigrant. I have a Ph.D.  I create jobs. I know of many other non-Americans who have advanced education that are creating jobs.

It is the quality of the immigrant.

Shut up.

j0nx's picture

To all you assholes who espouse immigrants/immigration (legal or illegal) in the middle of a depression when Americans are out of work: go FUCK yourselves. Traitors. That is all.

absente reo's picture

LOL, Fact is, the US is a nation of immigrants.  You conveniently choose to overlook this.

Questan1913's picture

Gully Foyle

The language is rather colorful, but of course he IS right.  Fourteen down arrows?........ all from the "it doesn't affect me" crowd?  It affects you, now, and the major downturn hasn't even started yet. 

"IT DOESN'T AFFECT ME" is the establishment inculcated neurosis that will insure the destruction of the ignorant, befuddled individuals who are its victims and have no understanding that when one group is under economic attack from another, one that is highly organized and obsesively driven to accrue MORE at the other groups expense, that other group better start to form into something cohesive and organized or it is inviting its own destruction.  That is where we are today.  The middle class has been brilliantly atomized while the tiny "elite" class is tightly organized and promoting its agenda, as one.  Televisions main purpose is to atomize the watchers and at the same time confer omnipotence on those behind the screen.  Simply brilliant.  It IS a conspiracy, but only of mutual self interest.  And for many of those who are plugged in, just seeing the word CONSPIRACY triggers a deeply implanted aversion response, as intended by those who control the media, education, the culture, and above all else THE MONEY.   

Troll Magnet's picture

yeah but that pales in comparison to all the useless welfare queens on capitol hill and wall street.

Stuck on Zero's picture

Is that new stadium called the Circus Maximus by any chance?  is it going to compete with the gambling casinos for customers?

dhengineer's picture

That's how they want to pay for it, at least in part. Seriously.

Dermasolarapaterraphatrima's picture

I am happy to report on my new part time 'shovel-ready' job:

That's me in the blue slicker......

ebworthen's picture


Mutiny on the Bounty! (Bounties?)

Future Tense's picture

At 2.5% running CPI and an 8.3% unemployment rate, the Fed is losing both battles.  I'm thinking they would rather have 4% inflation and try and lower the real unemployment rate, which is closer to 20%, as reported by Tyler and Gallup earlier in the week.  Bring on QE3.

WestVillageIdiot's picture

I was at the grocery store earlier today.  Holy cow.  I know grocery prices are higher here but the rate at which prices are going up is just incredible.  I went to buy a pound of sharp cheddar and gave the cashier a Krugerrand.  I waited for my change.  He interrupted my daydream by saying, "I need another Krugerrand". 

The little guy has to be getting killed right now.  Between food and gas prices it must feel like a pincer movement.  Of course it is time for the little guy to pull his head out of his a$$ and face reality. 

sun tzu's picture

Between food and gas prices it must feel like a pincer movement.

The fascists are in charge

Withdrawn Sanction's picture

Filled up today, $4.01/gallon for regular.  Hasn't been over $4 here since Aug 2008 (hmmm, is that a correlation that might be useful???).  Didn't notice until I was done, the pump had been rejected by the state inspector from the Dept of Weights and Measures (and yet the station was still operating...).  So not only did I pay a high price, I probably got hosed on quantity too...nice.

Iwanttoknow's picture

WS,The pump owner learnt capitalism from wall street.

Wakanda's picture

B of A is shitting bricks as they find that the folks they shafted the last few years are spending their money on guns.  Better get Ben to hit cntrl-p and get those hungry mobs employed or fed or something!

WestVillageIdiot's picture

Anybody else notice that this Michelle Meyer has a face that belongs on radio?  It is scary that this is a professional photograph and she still looks like that.  How many guys will chew off an arm when they wake up next to that? 

i-dog's picture

Yep. Beaten senseless with the ugly stick.

WestVillageIdiot's picture

She was beaten with the ugly stick and they batted around the order. 

I am Jobe's picture

Is there an IAPP for that is what sheeples want to know, The IAPP econ bitchezz.z Fuck the inbred POS sheeples

Seasmoke's picture

i am sure there is a hooknose out there that will have no problem overlooking that

Goldtoothchimp09's picture

SENIOR Economist - age 29 - pure and utter bullshit propaganda -- so... Rookie Propagandist is more like it

spiral_eyes's picture

Bleh, age don't mean shit. Older age often means more time vegetated away in front of junk TV. Good work is good work, though the truth about Michelle Meyer's work is, as you rightly say, that it's just bloated propaganda.

WestVillageIdiot's picture

I agree on both of your points.  Age is not a good indicator.  Look at Greenspan.  Look at Summers, Geithner, Bernanke, Rubin, etc..  They are older.  That doesn't mean much.  It just means that the system has had longer to strip away any semblance of common sense or humanity from them.  Age is not a virtue when your profession is lying. 

A four year old would be a better analyst than 99.9% of those we see on CNBC.  A child sees through this bullshit better than anything we see on Squawk Box. 

DavidC's picture

That's more like it.

Yes, I agree with you - I work alongside a twenty-odd year old physics graduate who is wise well beyond his years. He now looks at Zero Hedge all the time as well!


DavidC's picture

Speaking as someone who has a face for radio,

1 - she does NOT have a face that belongs on radio and

2 - if that REALLY is the best you can offer as a comment on ZeroHedge, where there are more serious things to discuss, then it's time for you to leave.

David(hit with the ugly stick)C

WestVillageIdiot's picture

Would you please post all of your rules for posting on Zero Hedge?  It would make things simpler. 

You should really change your name to Comment Nazi. 

DavidC's picture

One, I did not post a rule, I expressed an opinion on what I thought was an irrelevant and unnecessary comment by you.

Two, you made me smile by suggesting I should change my name to Comment Nazi. Why? On what evidence? Because I find your commenting on a person's appearance over what they have to say to be childish?

I stand by my previous comment/opinion - if you really can't think of better things to discuss than a person's appearance then you shouldn't be posting comments on Zero Hedge.


WestVillageIdiot's picture

So the appearance of the fluffers on CNBC, MSNBC, CNN or Fox News is no longer fodder for ZHers?  You get to decree that?

I saw the context of this person's position and could assure you that her appearance was of more relevance than her thoughts.  Just like when I hear that Bernanke or Obama has said something.  I do not listen to a word they say.  The same can be said of this Michelle Meyer.  I don't care what she has to say but man is she ugly. 

"Marry a pretty girl and you will have trouble."  Not a problem with Michelle. 


Have a good day, David.  By the way, Michelle Cabrera has a beard and Becky Quick has a face like a bird.