Explaining Yesterday's Seasonally Adjusted Nonfarm Payroll "Beat"

Tyler Durden's picture

Since there still is confusion regarding yesterday's whopping "surge" in non-farm payrolls, which represented a 243K jump in the Establishment survey (of which 490K was temp jobs, same as in the Household Survey where temp jobs soared by a record 699K), yet only to arrive at an employment number last seen ten years ago, when the US population was about 30 million lower (think about that: 30 million increase in population and no change in the total employed), here is the final explanation of what happened yesterday.

As everyone knows by now, January is when the BLS imposes its annual seasonal adjustment revision (more on that in a second) for the previous January-December period. What this manifests itself most directly in, is the divergence between the Nonadjusted January number of the establishment survey of any given year and the Unadjusted number. And while the January adjustment is always substantial, it is the fact that the so-called beat was entirely based on assumptions that makes yesterday's NFP number so meaningless, and hardly the basis to assume that the US economy has taken off.

The chart below shows the adjusted and unadjusted employment survey data for total Nonfarm Employees. The annual January overadjustment is more than evident. Just as evident are the subsequent under-adjustments as seasonal data is lowered to account for volatility in the NSA data. What is very notable is that in January, absent BLS smoothing calculation, which are nowhere in the labor force, but solely in the mind of a few BLS employees, the real economy lost 2,689,000 jobs, while net of the adjustment, it actually gained 243,000 jobs: a delta of 2,932,000 jobs based solely on statistical assumptions in an excel spreadsheet!

So how does this data fit in specifically in the context of the just passed NFP whopper of a number? Simple. The chart below shows the January seasonal adjustment for the past 4 years, since 2009. The number of jobs added for "seasonal" purposes to the NFP number were as follows: 2009 - 2,006,000; 2010 - 1,970,000; 2011 - 2,129,000, and the all important 2012: 2,146,000. Once again, this is the number added to the NFP unrevised baseline to get a "final" number which is then blasted to the media. The chart below shows the historical January adjustment, to the NFP data, as well as the 2012 reported adjustment, and also what the statistical adjustment would be for the NFP number to have the NFP number come in line with expectations of a 140,000 beat.

Here is the kicker: the market mood yesterday would have been far more somber if instead of a seasonal fudge-factored statistical addition of 2,146,000 jobs, the BLS had decided on a number that is merely the simple average of the statistical adjustment of the past 3 years, which comes down to 2,035,000. In fact, had the BLS used this seasonal adjustment, the final NFP headline number (SA) would have been +132,000, or a miss of expectations of 8,000 (the Seasonal Adjustment number to get to consensus January expectations would have to be +2,043,000 to the NFP number). In other words, the difference between a + and - 2% move in the stock market is based on less than a 5% variation to the entire January seasonal adjustment, as had the BLS add just the simple average, the BLS report would have been a disappointing miss, and the market would have likely dropped (although with 5 momos in charge of the entire market, the thesis would have likely promptly shifted to "more QE coming" so who really knows). And now you know how the BLS' seasonal adjustment, which as Charles Biderman pointed out yesterday is guarded as secretly as Coke's recipe, defined the tone and the mood of the market for at least one month.

Finally, as to some newsletter and namesdropping blogs allegation that the Labor Force did not, in fact, increase by 1.2 million in January, we have one simple question: just how does one "refute" a statement with an assumption? Because last we checked, the BLS did not provide a smoothing breakdown of how it applied its seasonal adjustment for the "population control effects" which saw the population increase by 1.7 million in January and those not in the labor force rose by 1.2 million. Quite the contrary , what the BLS did provide is Table C: "December 2011-January 2012 changes in selected labor force measures, with adjustments for population control effects" which does show how on an apples to apples basis the adjustment factors did in fact impact the two key components in determining the unemployment rate: the amount of Americans employed, and those not in the labor force.

And while one can try to say it is inconceivable to say that the US population jumped by 1.7 million in one month, we reply that this is coming from the BLS whose admission of the "population control effect" adjustment merely confirms that it has been misrepresenting the actual labor force participation rate for at least a year. In other words, while one may pander to semantics, and believe that a data series is not a data series because of one's mastery of sophistry and assumptions, this is totally irrelevant: the end result is that in January, those "not in the labor force" did in fact rise by 1.2 million (whether compared to December or to 2011 - please, go ahead and check as many times as needed), and the labor force participation rate dropped to a new 30 year low of 63.7%, a number which incidentally only has to drop by 5% more percent for the BLS to report zero, or even a negative, unemployment rate

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Randall Cabot's picture

I think Biderman is a bit wacked. He bases his case on withholding tax data up until the end of December but Adler in another ZH article shows the graph right through January in which taxes clearly spike in that month until the last week:

Adler: "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."

Adler surmises that there could have been a large amount of money in bonuses and sales commissions paid out in that time leading the BLS to interpret this, accidently or on purpose, as being from an increase in employment rather than from higher pay for some.








onebir's picture

"Adler surmises that there could have been a large amount of money in bonuses and sales commissions paid out in that time leading the BLS to interpret this, accidently or on purpose, as being from an increase in employment rather than from higher pay for some."

But Biderman berates the BLS uses a survey & not taking the real time withholding tax data into account (perhaps because they don't have a good way to disentangle employment, hours, bonuses etc)

Randall Cabot's picture

Biderman says the BLS doesn't use real time tax data to report real time wages and jobs to get an accurate count for a year but he also says nobody he knows has a clue as to how BLS comes up with the seasonal adjustments so Adler apparently believes that the BLS does see the tax figures and uses them in their estimation of the seasonal adjustments.

economics1996's picture

According to the BLS the CLFPR is 63.4% for January 2012, the lowest since February 1984, 28 years.  Sloppy.

TruthInSunshine's picture

Anyone who doesn't understand that is worse than 1979 through 1983 - WAY worse, is comatose.

Back then, an energy/oil crisis shocked the economy that was already reeling from high interest rates and inflation, and produced a cyclical downturn.

The plants/factories weren't relocated offshore, however, and the jobs were not automated, and when Volcker came in and broke the back of inflation by raising interest rates even higher, people and businesses regained their confidence and the displaced workers went right back to work at their old jobs (with higher pay).

The 12 million jobs lost in the last decade are never coming back, and once the FIRE economy that has corresponded with the crack up credit/debt leveraging cycle that is the primary reason the U.S. saw nominal GDP growth for the last 30 years fully breaks (and that process is already underway thanks to the tsunami of deleveraging that's also underway), the true extent of the structural damage to the American (and many other developed nations) economy will be all too evident to even the formerly comatose sheep.

As far as blame is concerned, Wall Street had a huge hand in bringing these problems about, as they purchased the political leadership of the U.S. (hello Barney Frank, Newt Gingrich, Bush, Obama, Cantor, Pelosi, et al), but they were far from the only force doing damage - unions, government bloat, welfare state mentality, a sense of privilege and divine entitlement, mortgage brokers and real estate gone wild, sell side anal-cysts in the financial sector, and instant gratification, loan devouring consumers all contributed.

Deep Capture, unchecked greed, a lack of leadership acting in the national best interest and cultural rot (Jerry Springer, Dancing with the Stars, iAnything, Jersey Shore, Real Housewives, epicly bad schools and parenting, Big Brother SNAP card dependence), and a ravenous, resource sucking Military-Industrial-Financial Complex fed by Crony Capitalism has firmly set this nation on a collision course with the mountain side.

For anyone wondering what the future course will look like, look to the past, and SSDD is the answer, which means debasement of living standards which serves as centrifugal force to reinforce all the above-mentioned problems besetting this (and other) developed nations - here are 2 simple charts that showsthe gameplan (gee, I wonder what the government and esteemed Federal Reserve will do to 'fix' things?):



Competitive Currency Devaluation (Part 1)
Thomas's picture

I think he is referring to Ritholtz as the blowhard blogger.

scatterbrains's picture

fuk the BLS I use a proprietory HQI (hooker quality index) gleaned from the nyc craigslist postings and judging by the quality of the women joining the hooker work force I can assure you that the economy is still falling off a cliff.

Mentaliusanything's picture

So Truth, Do you think all of those new participants they found from the census will now be adjusted for the US GNP. These twisters of facts cannot deny more people are around and that lowers the end result, substantially.

Oh thats right they swaped to GDP in 1991 so they can fiddly them offshore 

TruthInSunshine's picture

It's timely that you raised this point -and I should've posted this days ago (I would have, had I known about it), but here is the explanation from of the BLS's Betsey Stevenson as to why the numbers came out as they did:

"There was not a big increase in discouraged workers," economist Betsey Stevenson (Betsey Stevenson, the chief economist at the Department of Labor, who works directly under the Secretary of Labor*) commented on Twitter. "What happened was Census found a bunch of old people we had assumed died." [The Wall Street Journal, 2/3/12]


Okay, so Betsey Stevenson (Betsey Stevenson, the chief economist at the Department of Labor, who works directly under the Secretary of Labor*), is essentially saying a predominant majority of the people the 2010 Census 'discovered' were "old people [they] had [previously] assumed died."

It's HILARIOUS in a sad way. And it's convenient, too, if their goal were to use statistics to minimize the reported rate of U3 ("Nawww, never, Ritholtz would doubt claim...never, ever...").

You see, it's a "bunch of old people" that they discovered, who are presumably too old to be counted for purposes of measuring the unemployment rate anyways.

That group of 'newly discovered people' did not include many "working aged, but unemployed people." No. /sarc

So it's all good.



*U.S. Department of Labor: Biography of Chief Economist Betsey Stevenson

Disenchanted's picture

"Deep Capture"


which reminded me of this:


Deep Capture Blog


Deep Capture | The Story of Deep Capture | Deep Capture Blog

A story of greed and corrupt journalists, regulators, hedge funds, and investment banks. Stock market manipulation. Naked short selling.
What was the prevailing opinion here @ zerohedge when the Patrick Byrne/Overstock.com story first came out?



Disenchanted's picture



had said: "Deep Capture"


Here's a not so brief excerpt from that second link(The Story of Deep Capture) for those who may have never read it:


Cramer, who is a sociopath, owns TheStreet.com with Marty Peretz, who is an aristocrat. Peretz is also the former editor of the New Republic magazine. He dabbles in high finance and Harvard professing, which has resulted in his entrusting a large portion of his family fortune to a close-knit group of hedge fund managers, several of whom were his students. For example, Cramer was his student. Then Cramer was destitute. He lived in a car with a loaded gun hidden under the seat. Eventually, though, Peretz gave Cramer some money to start a hedge fund, which Cramer managed with celebrated ruthlessness until he resolved to seek spiritual enlightenment as a TV news host.


Cramer had originally planned to run his hedge fund out of the offices of Ivan Boesky. Shortly before he was to move in, however, the feds busted Boesky for insider trading, making him one of the most famous criminals of the 1980s. (This is not necessarily to suggest that Boesky is the “Sith Lord” mentioned in Patrick’s “Miscreants Ball” presentation. Some people have wagered that Patrick was referring to Michael Milken, a business colleague of Boesky known as the “junk bond king,” who also went to prison in the 1980s. Patrick has since modified the analogy, saying that the crime has multiple masterminds – “like Al Qaeda”).


When Boesky went to prison, Cramer worked instead with hedge fund manager Michael Steinhardt. The media portrays Steinhardt as a financial wizard, a deep thinker and an all-around swell guy. The truth is, he’s a thug who perfected the concept of trading on privileged information, and pounded it into the heads of his employees. “What’s your edge!?” he’d shout, pacing his trading room floor. “What’s your fucking edge!?” After one of Steinhardt’s tirades, a top employee (and the godfather to Steinhardt’s children) had a heart attack. It is said that Steinhardt showed no remorse.


Indeed, Steinhardt has one of the most fearsome reputations on Wall Street. Which is perhaps unsurprising given that Steinhardt’s father, Sol “Red” Steinhardt, was a mobster once described by a Manhattan district attorney as the biggest Mafia fence in America. Steinhardt Sr. worked for the Genovese organized crime family, with goons like Meyer Lansky and Vinnie “Blue Eyes” Alo, before he was sentenced to a number of years in Sing-Sing prison.


By Steinhardt Jr.’s own account, the principal partners in his first hedge fund were the Genovese Mafia, Ivan Boesky, Marty Peretz (the aristocrat who funded Cramer), and a man named Marc Rich. Rich is closely connected to Ronald Greenwald, described in the authoritative book Red Mafiya as the man who, along with the Genovese family, brought the Russian Mob to America.


In 1983, Rich was indicted for trading illegally with Iran while Islamic revolutionaries were holding the American embassy hostage in Tehran. Along with his associate, “Pinky” Green, he fled to Switzerland. In 2001, Steinhardt, a big-time operator in Democratic circles, convinced Bill Clinton to give Rich a scandalous presidential pardon, but Rich remains in Switzerland to avoid paying his tax bill.


In the early 1990s, Steinhardt shut down his hedge fund after he was implicated in a scheme to corner the U.S. treasuries market – a horrendous infraction with serious implications for the U.S. economy.


So this is a rough crowd. Says one Wall Street trader: “It was the day the bad guys came to town — when Steinhardt and his people arrived.”


One of Steinhardt’s people is Jim Cramer. Another is Cramer’s wife, who was known as the “Trading Goddess” when she worked as Steinhardt’s head trader. Maria Bartiromo, a CNBC anchor known as the “Money Honey,” is married to the top partner in Steinhardt’s newest hedge fund. (A former employee of Cramer’s hedge fund has written that Cramer often fed tips to the Money Honey, trading ahead of her stories, and it is rumored that she recruited him to CNBC.)


And then there is David Rocker, the short-selling hedge fund manager believed to be scheming, along with Cramer and Herb, with Gradient Analytics, the financial research shop under SEC investigation in 2006.


Cramer says he’s met Rocker only once – apparently while squeezing the grapefruit at some grocery store. But the truth is, Cramer knows Rocker well. Rocker is a former employee of Steinhardt’s hedge fund. He worked there at the same time as the Trading Goddess.


And, until recently, Rocker was the largest outside shareholder in Cramer’s website, TheStreet.com. Cramer sometimes quotes the hedge fund manager on his television show, and once interviewed him live. Rocker is also a regular writer for TheStreet.com, where he bashes stocks that Cramer subsequently also bashes in multiple stories on both the website and CNBC.


In February 2006, the SEC is investigating Gradient Analytics for disseminating false information about public companies. The agency has affidavits from former employees who say that Gradient’s “independent research” is produced by recent University of Arizona graduates who know little to nothing about finance and essentially take dictation from hedge fund managers, including David Rocker.


One of these employees says that Herb conspired with Rocker to hold his negative stories (premised on Gradient’s false information) until Rocker could establish short positions. This is called front-running – a jailable offense. It is reasonable to suspect that Rocker had similar relationships with TheStreet.com (of which he has owned a substantial portion) and other media.


Not long before Cramer announced his SEC subpoenas, Rocker sold all of his shares in TheStreet.com. Cramer sold around $2 million of his own shares. If Cramer knew about the SEC investigation before he sold his shares, which was almost certainly the case, he was trading on insider information – another jailable offense.


But Cramer don’t know nothin’ about nothin’. And Herb thinks the SEC investigation is an outrage. So Herb and Cramer have commandeered CNBC. They are live on CNBC. Herb has jabbered something about a conspiracy – a conspiracy to get Herb.


And now Cramer is going to show us something.


He’s pulled out a big, red magic marker. Veins are popping, rope-like, from his bald cranium. And he’s snarling. Cramer is actually snarling while he uses the big red magic marker to scribble something on a piece of paper.


He holds the paper up to the camera.


It’s…it’s his government subpoena…Cramer has vandalized his government subpoena! On live TV… in big red letters…


It says, “BULL!”


scatterbrains's picture

Or maybe those with privy information know that the politicians are going to let the tax breaks laps and decided to front load bonuses in the 2011 tax year causing a last minute spike in reciepts.

Do we know for sure that there's going to be an extension on income tax rates?


qqqqtrader's picture

I'll prolly get beat up for this, but... Actually tax income has been rising about the same time unemployment started declining using NSA numbers, and a 12 month MA.


...about the SA population and employed/unemployed ratio/rate, that's a mess I may not dive into.

oh, DEC-11 tax receipts was $162,271,000,000,


and for JAN-12 $158,745,000,000, which is less



Tyler Durden's picture

Did you even read the post you are commenting to?

Reese Bobby's picture

There is a difference between reading and comprehending.


Obviously 2012 will be the year of cooked data.  I am content with that as gold will get donked at times and I want to own more.

Cand-Hamz-Bitchez's picture

Back up the truck bitchez!

I wuv my precious goled!  At 1500, backed up the truck!  At 1900, I backed up the truck!  And now at 1750, I'm backing up the truck!!!!!

Here's some reasons why:
It's shiny!
It's a metal!
When the U.S. becomes Zimbabwe, I'll have more goled than you bitchez!

Sometimes when I'm all alone late at night, I like to pull out a little goled, and well, you know... with it.

Sam Clemons's picture

Sometimes when I'm all alone late at night, I like to pull up my fiat digits on my online bank account and well, you know... with it.

economics1996's picture

Sometimes late at night I pull out a tube of K-Y and well, you know...with it.

Future Tense's picture

I only read the first half and it made me think of the article.  Sorry, you are the greatest.

hack3434's picture

This is all you need to know about Barry and how he perceives the world...Where is the Bubble - Gold or Credit? Also If you've read his stuff long enoguh, you will notice that he hops around depending on how the market is doing.  

King_of_simpletons's picture

There are vested interests that want people to come back and play the casino a.k.a Stock Market and are upset that too many people have moved to cash and safer investments.  The media (Lou Dobbs included) says economy is doing great, as they have been instructed to propagate, by their Wall Street bosses and DC - to maintain a positive tone always. If the die hard fan reacts to this propaganda, the squid and the den of vipers can jump in and suck Main street dry.

Cand-Hamz-Bitchez's picture

It's all a massive illuminati-Rothschild conspiracy, propagated by the lamestream media to drive down the prices of silver, so that they can buy all the silver!

Every time silver tanks, you can thank a squid~!

Those nasty squids.  I tried to fry them up and eat them, but they gave me heartburn! 

Here's what you do.  You take all your money out of the bank.  You buy gold with it.  Then you "hold physical" forever!  Put those things together with some beans and bullets, and wha-BAM!!

While 99.99999% of the Earth dies, you'll be safe under the porch with the three b's.  I know it seems crazy now, but just you wait!  The world will end, and you'll be the one with all the gold!  He who has the most gold wins, I like to say!

Reese Bobby's picture

I will respect your satire if you promise to post here after your money disappears at whatever retard-o-trade brokerage firm you use.

Cand-Hamz-Bitchez's picture

I will respect your satire if you promise to post here after your money disappears purchasing gold and you find it was merely a bubble, like dot com stocks and housing.

Sam Clemons's picture

His comment wasn't satire.

But since you asked.
Exhibit A:

Exhibit B:
Note the MZM (broad credit measure) increase of 1200%

Exhibit C:
Note the real economy's energy usage increase of 25% since 1980. 

What is the bubble?

Cand-Hamz-Bitchez's picture

Uh huh!  His post was like... SO a satire!  OMG!!  Lolcatz!!

Because past results DO indicate future performance!

Got it.

Sam Clemons's picture

I'm no Bible man, but I do believe there is nothing new under the sun.

Central Bankster's picture

So would you say those who held stocks/bonds in 1920s Germany did better than those who purchased gold coins?  Just curious.

Cand-Hamz-Bitchez's picture

Did the economy in Germany improve after the 1920s? (yes)

Did everybody starve, lose everything, and die in the streets? (no, the economy was stronger than most of the world's in the 1930s)

Or did Germany grow into one of the best economies in the world, despite being leveled completely twice, AND having its currency hyperinflate? (Life goes on, sucka)

Do you think that the people who bought gold at artificially high levels were able to convert that gold into a high amount of Reichmarks? (no,)

robobbob's picture

anyone holding weimar bonds got wiped out. as did those holding cash, or stocks of run of the mill companies

companies who could sit tight and could float their price structures with inflation did ok.

anyone who strategically traded their gold for assets at firesale prices made out like kings.

....and are you saying that the nazi miracle economic recovery based on a fascist police state, price and capital controls, massive military expeditures, bought with fraudulent, irredeemable bonds is a good model to follow? sorry, I would prefer eating spam and counting shiny metal than a rifle butt to the face followed by a free "shower".

Problem Is's picture

You fuckin' new guys... :)

Mr Lennon Hendrix's picture

Aren't we supposed to make 'em stand on the porch for a few days or sumpin'?

francis_sawyer's picture

...with their dicks hanging out (if they stretch that far)...

Reese Bobby's picture

Shut your cake hole you useless virgin dim-wit.  If this were a jail you would be wearing lipstick and sucking cock like a $5 whore. :(

Cand-Hamz-Bitchez's picture

Sounds like you made the best of your time in the pen!

economics1996's picture

Efficient allocation of resources.

Cand-Hamz-Bitchez's picture

People could've given him five bucks, or given him a pack of Newports 1/20th at a time for the same price and gotten 20 bjs.

Those were the people turning lemons into lemonade!  Well, besides our friend above of course.

slewie the pi-rat's picture

i haven't

yet.  i hope to later tho.  trust me!


trolololling for gold and silver currencies in more states, BiCheZ!

States seek currencies made of silver and gold | Gold Anti-Trust Action Committee

carry on!

Yen Cross's picture

 Good on ya! Mr. Grumpy  just watch next week. BOGUS #'s are hard to trade against S/T. The truth will reveal.

GeneMarchbanks's picture

'Good on ya!'

Do you by chance consume vegemite?

Yen Cross's picture

Keep the Great posts coming! I like you ,Mr. March Banks.

knukles's picture

Gracefully done, Mr. Durden.

Cand-Hamz-Bitchez's picture

"Becuz I ain't have no job, ain't nobody is be getting jobz!"

Of course, I'm still waiting for the Dow 500 predictions I see here weekly.

francis_sawyer's picture

You must think you're at the Prechter blog...