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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Uber Vandal's picture

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

Change Dow to S&P, and once the Baltic Dry Index (BDI) drops below 600, we may very well hit that.

Much like how the BDI dropped to about 670 in Dec. 2008, and by March, 2009, the S&P hit about 670.

As of this Friday, Feb. 3, 2012, the BDI was 647, or an all time low in its 25 year history.

But, of course, the BDI is an outdated index that only matters when it is going up.

Element's picture

You've kicked arse yet again Tyler. 

A peek-a-boo behind the statistical curtain of eternal mysteries into the economic Holiest of Holies ... and what's in there? ... fuck-all.

Thanks for that.

disabledvet's picture

no. in fact i never read what is written here because i am blind. (how's my spelling btw?) having said that "i have heard Mr. Bond does read everything you right and he's a ordered a shit-sandwich to be delivered to the interpreter of the BLS." What? What? You want the truth????

slewie the pi-rat's picture

i'm w/ reese_bobby!  this is fuking awesome tyler! 

you had me at "...the divergence between the Nonadjusted January number of the establishment survey of any given year and the Unadjusted number."

so i put slices of "cutie" tangerines in my nostrils and wondered if i'd remember to listen to the game, tomorrow... i got thru the christmas candles...

ok!   look!  THE KICKER(!):  hahaha!  this is really xlnt!  5 momos!  biderman's coke secret!

..."population control effects"  L0L!!!  smooth!

tyler has risen to the challenge and kicked some assumptive/reporting ass, here, BiCheZ!

  • tyler >>> 1
  • bls > >>> 0
JW n FL's picture



Max Keiser interviews Dan Collins from thechinamoneyreport.com. He talks about the big news coming from China in the past few weeks, which is that the investment demand for gold and silver is going up.China's Yuan / Renminbi has 1,200% Leverage per Yuan / Renminbi as of last May. The U.S. Dollar has 120% Leverage. China looks good only because China services it's own debt load.. thru building empty City's.. 7 to 12 empty City's a year are built to service the China's Debt


Do you think this guy could say Thanks to Tyler or me for the numbers and exact quote?

Damn why not just clip and paste what I say all over the internet?

OOPS! they already do!! LOL!!


Signed, Christian Constitutionalist

P.S. dont forget! See Something? Say Something! http://www.dhs.gov/files/reportincidents/see-something-say-something.shtm

DHS Home Grown Christians Trying to Protect the Constitution are now Terrorists Propaganda



Waterfallsparkles's picture

Even Rick Santelli on CNBC quotes Zero Hedge and their numbers but at least he gives them cedit.  Although, there are times I have watched Mack Keizer and he also gives credit to Zero Hedge.

More and More people on Wall Street are following the Blog.  Zero Hedge moves the market more than CNBC at times.  Plus, they are a step ahead.  So, if you read Zero Hedge you can adjust your postions sometimes ahead of Wall Street.


Element's picture

From your last pdf link ... posted by FAS ... and good on 'em for bringing this slimmy US Govt Gestapo-esque shit and absurd over-reactions, into general public awareness:




(U) Scope
(U//FOUO) This product is one of a series of intelligence assessments published by the Extremism and Radicalization Branch to facilitate a greater understanding of the phenomenon of violent radicalization in the United States. The information is provided to federal, state, local, and tribal counterterrorism and law enforcement officials so they may effectively deter, prevent, preempt, or respond to terrorist attacks against the United States. Federal efforts to influence domestic public opinion must be conducted in an overt and transparent manner, clearly identifying United States Government sponsorship.


A "greater understanding of the phenomenon", ... or so they say.

And then they go one to say how they are going to crush it, using extremist radicalised anti-social violence, against US citizens.


And all passed-off as 'Law Enforcement' ... of course.

And not a word in the intro about why have given up on official means of redress, or the total break-down in the US Justice system? 

And it has this stamped all over it:


i.e. they could not get away with 'classifying' it, but you're still not supposed to see it, nor what they are cooking up.


EDIT: I noticed this definition within the foot notes:

* (U) Rightwing extremism in the United States can be broadly divided into those groups, movements, and adherents that are primarily hate-oriented (based on hatred of particular religious, racial or ethnic groups), and those that are mainly antigovernment, rejecting federal authority in favor of state or local authority, or rejecting government authority entirely. It may include groups and individuals that are dedicated to a single issue, such as opposition to abortion or immigration.


— (U//FOUO) Returning veterans possess combat skills and experience that are attractive to rightwing extremists. DHS/I&A is concerned that rightwing extremists will attempt to recruit and radicalize returning veterans in order to boost their violent capabilities.


Look out Ron Paul ... and zh ... and almost everyone else ... you radical right-wing extremists, you ... oh fuck it, you're all just terrorists anyway, so have no rights ... send in the drones!

I can't even imagine why a returning veteran might have some issues with the ultra-extreme, ultra-violent, ultra-ideologically-radicalised, ultra-lying, ultra-corrupt, ultra-thieving Washington circus, that pretends to be a representative democracy ... so you veterans must be watched most closely for signs of treachery ... for you pose a threat to national sickurity. 

You know the system is done for when they're this worried about domestic insurrection(s). 

DHS/I&A assesses this trend is likely to accelerate if the economy is perceived to worsen.



i.e. it's all about perception control bitchez ... the stats must be tinkered with.

Reese Bobby's picture

Never utter my name again you genetic mistake of a rotten scum-bag. YMSD.

Cand-Hamz-Bitchez's picture

Why, are you like, the Candyman or something?!

Oh no!!

Atomizer's picture

Hello Harry Wanker. You posted that bullshit on MW yesterday.

fonzannoon's picture

Does this post in itself not qualify as a response?

Hello? Is this thing on?

francis_sawyer's picture

Just a douchebag from 'Fuzzmaster 2000's' blog probably trying to stir up page hits now that the whole site is down to a couple of schoolteachers & Doug Kass...

Cand-Hamz-Bitchez's picture

That Doug Kass sure is dreamy.  Sometimes I like to pretend his surname doesn't start with a K.  Rawr...

francis_sawyer's picture

as soon as you pass muster with the "IN" crowd... They'll let you call him "Doug-a-Doodle"...

Cand-Hamz-Bitchez's picture

If that doesn't make me horny I don't know <i>what</i> does!

francis_sawyer's picture

Well... speaking of 'tools', there's a button you can use to italicize things whereby you are spared having to construct HTML tags...

Cand-Hamz-Bitchez's picture

And my HTML tags don't work!!

What is this???  Russia?

Non Passaran's picture

Click on Disable rich text and they will. If you are outside of Russia.

TruthInSunshine's picture

Future Tense - Ritholtz is just plain wrong.

If he has any deceny, he'll basically come forward with a public mea culpa.

The January 2012 BLS U3 report was probably the most flawed one in decades.

It essentially dumped 10 years worth of U.S. population/demographic revisions into a single month, which was the baseline aggregate number that the BLS started from in computing its reported U3 figure.

December to January % changes in reported U3 are inherently flawed and seriously misleading. This year's was infinitely more so (or, at least 1000% more so).

SDRII's picture

Ritholtz financial "analysis" is like opting for brain surgery from a  mechanic. Stick to recommending Itunes Barry

francis_sawyer's picture

I kno right?... At least ROBOT TRADER has the decency to make a post 'the day after' a stock moved... It takes the other guy a whole fucking week before he makes an announcement that they miraculously 'trimmed their positions' a few days before a meltdown...

lizzy36's picture

He is like others, revisionist history serves him best.

Unless his PnL in in real time, i trust him as much as i trust a religious guru selling me his wisdom and truth. 

Attacking ZH is what gets him page clicks. Disagree with him and he tosses you. Last I checked if one position doesn't stand the test of critics, it is not worth the toliet paper his are written on.

francis_sawyer's picture

Attacking ZH is what gets him page clicks. Disagree with him and he tosses you...

That sums it all up right there... (& of course, he cherishes his party invitations during the Hamptons summer season)...

francis_sawyer's picture

If he has any deceny, he'll basically come forward with a public mea culpa.

That arrogant prick? Good luck with that...

Cult_of_Reason's picture

Ritholt is an arrogant and clueless cacasodo (an arrogant asshole that thinks his feces doesn't stink).

Cand-Hamz-Bitchez's picture

So why didn't you just type "Ritholt is an arrogant and clueless asshole that thinks his feces doesn't stink?"

Why'd you have to bring in calling him it in Spanish?  Are you the fucking Rosetta Stone, or what?



francis_sawyer's picture

I'm just taking a wild guess, but it might have been for the benefit of the mother who abandoned you at birth...

Juanita CandIDA-HamzAPATA-Bitchez-Ramirez

Cand-Hamz-Bitchez's picture

My mother doesn't post here.  She cleans the rooms at the Holiday Inn Express for 8.25 an hour.

Cult_of_Reason's picture

First, I am not the fucking or not-fucking Rosetta Stone.

Second, Ritholtz is an arrogant and clueless cacasodo.

Third, it is not Spanish, it is in Italian (from the verb cacare [defecate] and adjective sodo [hard]).

Fourth, English is a very poor language that does not allow accurately to describe different types of assholes in one word – asshole word does not accurately describe an individual who is not only an asshole but also an arrogant with inflated self esteem smart-ass (the one who thinks he defecates wisdom – cacasenno).

Fifth, Ritholtz is an arrogant and clueless cacasodo.

Sixth, Ritholtz is a hardcore liberal ideologue with stupendous faith in the government who is disguising himself as a libertarian.

Seventh, Ritholtz is a morbitly obese individual who is excessively obsessed with his below average size pennis (piccolo cazzone coglione).

Eighth, did I mention that Ritholtz is an arrogant and clueless cacasodo?

GFKjunior's picture

I read the comments on that article and could not help but laughing out loud.

So lost in their labels and ideology with sentences like " the only " the only crusader side is new keynesian/neoclassical/supply sider element"

 Sure buddy, it's all a matter of having a PHD from the "proper" school.



GeneMarchbanks's picture

Is Barry i) trying to get some exposure ii) getting a payday to spew garbage or iii) a Newt fan.

Everybodys All American's picture

Barry Ritholz is one of the biggest asses on the net. Try posting on his blog something he doesn't agree with and you will find that he simply deletes it. Ritholz is the typical perma bull that Wall St. has always been and you will find no help from him when things all of a sudden go south.

resurger's picture

I can imagine the amount of Hate he has for the ZH's...

SeattleBruce's picture

"So don't go"

What are you, a valley girl? 

qussl3's picture

Ritholthz has devolved into a click hungry shadow of his former self, read the blog for a while before it turned into a social engineering Pavlov pokefest.

Hoped he would be better on twitter - good lord was I wrong.

uno's picture

vast majority of Barry's site just copies articles from various sources, NYT, infographics etc.  When he started I hoped he would expose the Wall Street banksters, but he just sold out when CNBS put him on air.  CNBS puts him on a lot, what does that tell you.  He also has a hard core Democratic party bias even though he swears he doesn't.

Cursive's picture


Yeah, the dumbass was pimping for Obama. Ritholtz actually believed the Obama hype. He has a vested interest in the Obama administration. Of course, if/when Obama is ousted, Ritholtz will break his ankle jumping off of the bandwagon. Oh, and he's also desperately trying to pull clicks by picking a fight with the Internets 800 pound gorilla with a chainsaw for a penis.

Cand-Hamz-Bitchez's picture

Translation: "First he poked me on his site, then he poked me on twitter, and I was disappointed.  He had a little boat and no motion in the ocean."

resurger's picture

"At the very least, a reputable financial news organization like CNBC needs to set the record straight on data like this as while Mr. Santelli is entitled to his own opinion, he is not entitled to his own facts, and the fact is 1 million people did not drop out of the labor force in January 2012."

Remind's me of my boss, He becomes so fucking happy when he's on CNBC! He think's hes one of the Elites


lizzy36's picture

Fat barry can go fuck the third duck that he didn't stuff in his cake-hole yesterday.

JW n FL's picture



You are SOOOOOOOOOOOO!! Sexy! when you talk dirty!

JW n FL's picture




Future Tense

Ritholz posted this article yesterday calling out Zero Hedge and Rick Santelli on their jobs data. Any response Tyler or anyone else?



The Cost of Un-Employment in America


Unemployment costs (roughly) $1 Billion Dollars Per Month for every 10% of the Population Un-Employed that is Collecting Benefits. (I am not going into the real costs such as loss of taxes collected and so on for this little shared Nugget of info)



So, $1 Billion multiplied by 12 months is $12 Billion dollars in expenses.

Now the Real Number of Un-Employed is around 20%, so we will double the $12 Billion Dollar Number which is $24 Billion Dollars a Year to keep people from Starving in America! Or from another house going into foreclosure.



So! We have an expense of $24 Billion a Year to Cover 20% Un-Employment Benefits.

That sounds like a LOT! Of Money and they way they talk about it on the News, 24 hours a day and 7 days a week! You would think it is Bankrupting the Country.


Now time for the WAKE UP MATH!


The First (NOT! LAST!!) Bailout for Wall Street was $700 Billion.. it was called TARP! The American People were to be paid 8% on the money loaned to Wall Street.



Now.. the question is.. how many times can we divide $24 Billion into $700 Billion to figure out how much Coverage the (1 st) First Bail Out for wall Street / The Banks would Provide for the American People in trouble due to Wall Street Fucking Up the Economy in the First Place?

700 divided by 24 =’s 29 and change..

So! The (1 st) First Bail Out for wall Street / The Banks would provide 29 Years of Un-Employment Benefits for the same amount of Money Given Wall Street.

29 Years of Un-Employment Benefits for 20% of the Workers in America.

The next time you hear some Bullshit, ALL! Day!! and ALL! Night!! Long about how the Workers who got screwed over by Wall Street are costing the Country HUGE amounts of Money..

Please Remember that Wall Street has Collected Trillions.. and is Collecting Trillions More Every Year.


A Trillion dollars.. would cover! ALL! Working Americans with Un-Employment Benefits for 8.33 years.





Think about that.. and now think about how Wall Street gets Trillions Every Year while America (the entire Country) does NOT! have enough money to repair our road ways or start our Shovel Ready Public Works Projects.





http://www.ritholtz.com/blog <----- can Fuck the Fuck Off!

SillySalesmanQuestion's picture

+ 1 JW

Good to see you back...