• Steve H. Hanke
    05/04/2016 - 08:00
    Authored by Steve H. Hanke of The Johns Hopkins University. Follow him on Twitter @Steve_Hanke. A few weeks ago, the Monetary Authority of Singapore (MAS) sprang a surprise. It announced that a...

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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Sat, 02/04/2012 - 19:19 | 2127340 JW n FL
JW n FL's picture



it has been long enough.. time to re-cycle some of my older stuff.

Sat, 02/04/2012 - 19:53 | 2127379 SeattleBruce
SeattleBruce's picture

So, you trust the federal government/BLS's numbers, adjustments and readjustments (Census.........)?  You trust them when there's NO mechanism for accountability currently or to fight financial fraud, or even agreed upon logic for birth/death adjustments and adjustments to overal labor force involvement?  Come back and challenge when we've seen some perp walks for the financial meltdown, or even ONE perp walk.  "There are three kinds of lies: lies, damned lies, and statistics."

Sat, 02/04/2012 - 20:12 | 2127412 Central Bankster
Central Bankster's picture

The religion of money printing shall not be questioned, blasphemer!

Sat, 02/04/2012 - 15:36 | 2126949 Eireann go Brach
Eireann go Brach's picture

TD vs BLS, UFC vs midgets, ETrade baby vs Geitner, Flavor flav vs Obama. My money is on all the formers!

Sat, 02/04/2012 - 16:36 | 2127068 Tegrat
Tegrat's picture

Zerhohedge made the rush limbaugh show in the deceptive unemployment report. Like him or not 22 million now have the truth.


Sat, 02/04/2012 - 16:57 | 2127100 Atomizer
Atomizer's picture

Not the first time for Rush mentioning ZH. Again, ZH even made a live CNBC feed promo on Friday. Folks are waking up to the MSM lies.

You can either take the blue pill or red pill.

Sat, 02/04/2012 - 17:39 | 2127191 Cand-Hamz-Bitchez
Cand-Hamz-Bitchez's picture

I take the blue pill.  Then I have erections lasting for more than four hours.

It's a little bit.... awkward... but the ladies thank me.

Sat, 02/04/2012 - 18:40 | 2127292 Cand-Hamz-Bitchez
Cand-Hamz-Bitchez's picture

Nothing says sheep like some asshole going "Mega-dittos, Rush" at the beginning of every call...

Sat, 02/04/2012 - 18:58 | 2127317 francis_sawyer
francis_sawyer's picture

What do you expect from someone whose username is TARGET spelled backwards?

Sat, 02/04/2012 - 20:53 | 2127494 Cand-Hamz-Bitchez
Cand-Hamz-Bitchez's picture


Sun, 02/05/2012 - 01:57 | 2128038 caerus
caerus's picture

these numbers mean nothing...i for one eagerly anticipate the release of the new farmville data...virtual crops don't just grow themselves...

Sat, 02/04/2012 - 14:57 | 2126846 JeremyWS
JeremyWS's picture

Surely must be bullish?

Sat, 02/04/2012 - 15:00 | 2126857 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Calling....fuck I already forgot his name.....Bradberry? 

You know, that fucker that thinks Matt Drudge is Tyler Durden.

Sat, 02/04/2012 - 15:03 | 2126863 fonzannoon
fonzannoon's picture

Someone email this to Brianne Westbury quickly so she can understand things better.

Sat, 02/04/2012 - 15:07 | 2126873 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Yeah that guy.  Let's get him in here, I want to see him squirm.

Sat, 02/04/2012 - 15:17 | 2126864 TruthInSunshine
TruthInSunshine's picture

Aha! Awesome work, ZH.

This issue of yesterday's BLS U3 report has been pestering me for...well...ever since it was release yesterday morning.

I've been over and over this issue since yesterday afternoon, given Ritholtz's (and the douchebag known as Brian Wesbury) claims that the BLS January U3 report was both consistent and reliable.

To add some additional information here, as far as I've been able to discern thus far (and correct me if I'm wrong), but January 2012 was the first month that the BLS fully incorporated and 'worked off of' the recent census bureau 10 year revision to U.S. headcount, whereas the January distortion in a normal year merely reflects U.S. estimates for population adjustment for the preceding 12 months (or a time frame far less than a decade).

In other words, the December to January % change in U3 as reported by the BLS is statistical noise, and hardly worthy of any significant extrapolation about the employment situation, but the January 2012 BLS U3 report was uniquely flawed even by normal BLS standards, as it incorporated 10 years worth of U.S. population adjustment into just one month of foundational numbers that they calculated U3 from, rendering it even more worthless.


Getting It Wrong on the BLS Employment Report

Submitted by Robert Oak

The Economic Populist


"The December to January unemployment statistics are often reported wrong in the press. We're sorry, god love ya, but these articles are plain incorrect. People like to compare the month to month change in population, the number of people no longer considered part of the labor force and other data. The grave mistake made by so many in the press and elsewhere is not realizing annual population adjustments are placed in the January data, not distributed evenly across the entire year, or backwards applied and that's why one cannot compare these two months. Below is a graph of non-institutional population monthly change. This is the number from where all other unemployment statistics are derived. It represents people 16 and older, not locked up somewhere, in a medical facility or in the military.



[check out the January 2012 spike - it is MASSIVE]

See those huge three spikes in the above graph? [click on link above] That's when the latest Census, taken every 10 years, has been incorporated into the data series. What happens is almost a do over, starting with the next year and you see a huge discontinuity in the data when the Census has been incorporated into the non-institutional population statistic. Believe me, we did not get a streaming horde of illegal aliens in one month, nor did everyone decide to give spontaneous birth. Those spikes simply represent the tacking on of population controls to reflect the latest Census.



Above is a close up to show the spike in non-institutional civilian population. [click on link above] See how even the monthly change is except between December and January? That's where the yearly population adjustments are placed in the data series. The adjustments are literally just plopped into the month of January and this is why it is statistically invalid to compare December to January monthly changes. You simply cannot compare a change of a month, when one of those month's includes a year of population adjustments.


To wit, is the current unemployment rate of 8.3% valid? Well, if you like the definitions used by the BLS, it is statistically consistent. Did 1.25 million drop out of the labor force all of a sudden? No, this has everything to do with the Census population levels. Basically there are more people and like many population numbers increasing by proportion with the Census 2010, so did the number of people not in the labor force."


Sat, 02/04/2012 - 15:39 | 2126962 francis_sawyer
francis_sawyer's picture

claims that the BLS January U3 report was both consistent and reliable.

He's just another fucking shill for "O's" Administration at this point (no different than LIESMan)...

His whole damn fund is populated with public unions who sink or swim with the current Administrations policies... IOW ~ he's talking his book...

Sat, 02/04/2012 - 17:40 | 2127195 Cand-Hamz-Bitchez
Cand-Hamz-Bitchez's picture

My employer hired 50+ people in January, all at salaries north of 50k.

Those people must have been imaginary.  I'm not training some of them now.

Sat, 02/04/2012 - 18:07 | 2127238 hannah
hannah's picture

my employer hired 240,000 so we accounted for the entire beat on nfp....!

Sat, 02/04/2012 - 18:29 | 2127276 Cand-Hamz-Bitchez
Cand-Hamz-Bitchez's picture

We have added roughly 350 American jobs over the last year.

Those are all imaginary, right?

Sat, 02/04/2012 - 19:50 | 2127376 TruthInSunshine
TruthInSunshine's picture

Well, I stand corrected everyone, and we have affirmation of the credibility of Friday's NFP Report as presented by the BLS.

cand-spam's employer hired more people.

Sat, 02/04/2012 - 20:17 | 2127428 Cand-Hamz-Bitchez
Cand-Hamz-Bitchez's picture

I guess that's hard to believe since you don't have a job and post on the internet all day about how every report is a lie?

If you had a job, you would notice:

1. The increasing number of commuters on the road
2. The difficulty to find a parking spot after you arrive at the office
3. The number of new cars on the road over the past year
4. How difficult it is to get reservations at posh restaurants for lunch, compared to how it was a year ago.


Sat, 02/04/2012 - 20:30 | 2127451 WolfePaq
WolfePaq's picture

Irrelevant annecdotal bs you moron troll- there are for lease signs in every office bulding, every strip center and every subdivision, how's that for annecdotal evidence? levels matter you shyster. The governator came in for a photo op, you just exposed your troll dependency on TPTB.

Sat, 02/04/2012 - 20:40 | 2127476 Cand-Hamz-Bitchez
Cand-Hamz-Bitchez's picture

We are looking potentially to expand into another office building, like we did in 2010, because there is not enough space in our current office building.

I work in one of the largest office developments in my city (the whole place was built specifically for tech companies), and do not see the "for lease" signs you speak of. 
At strip malls in the suburbs, yes.  Only in less affluent areas though.

If you can't find a job:
1. Get some skills
2. Find an industry that uses those skills
3. Secure a job and move to where the job is.

There, I helped a fellow man out, even after he called me a moron.

It's my good deed for the day.


Sat, 02/04/2012 - 20:28 | 2127452 WolfePaq
WolfePaq's picture

Irrelevant annecdotal bs you moron troll- there are for lease signs in every office bulding, every strip center and every subdivision, how's that for annecdotal evidence? levels matter you shyster. The governator came in for a photo op, you just exposed your troll dependency on TPTB.

Sat, 02/04/2012 - 20:41 | 2127477 Cand-Hamz-Bitchez
Cand-Hamz-Bitchez's picture

I can post twice too.

Sun, 02/05/2012 - 16:37 | 2129212 IrritableBowels
IrritableBowels's picture

You apparently realized you can up-vote yourself too.

Sun, 02/05/2012 - 00:56 | 2127943 francis_sawyer
francis_sawyer's picture

If you had a job, you would notice:

1. The increasing number of commuters on the road
2. The difficulty to find a parking spot after you arrive at the office
3. The number of new cars on the road over the past year


Try again dipshit... (maybe if you DIDN'T have a job, your head wouldn't be so far up your bosses ass)... The average age of a car in the US just hit an all time record... The only remotely positive spin on the article was a little 'hopium', (because it was published by yet another shill rag), things might be getting better and the numbers MAY change... due to,,, drumroll... CHANNEL STUFFING (which has been discussed oftentimes on this blog)...


Sat, 02/04/2012 - 22:35 | 2127673 SeattleBruce
SeattleBruce's picture

"We have added roughly 350 American jobs over the last year.

Those are all imaginary, right?"

Do you know how many millions of people are out of work, and how many companies, cities and states are doing the exact opposite of your firm?  Does it help to put your head in the sand?



Sat, 02/04/2012 - 18:34 | 2127282 francis_sawyer
francis_sawyer's picture

My employer hired 50+ people in January, all at salaries north of 50k.

Oh... So you work for the government then... It's all making sense now...

(so now it's up to 350... 2nd post)... Well then it's gotta be the BLS...

Sat, 02/04/2012 - 20:07 | 2127404 Cand-Hamz-Bitchez
Cand-Hamz-Bitchez's picture

I work in tech, for a software company.  We design accounting compliance software.

Read the posts closer, idiot.

50 people last month, 350 people over the last year.

Sat, 02/04/2012 - 23:17 | 2127762 Fred Hayek
Fred Hayek's picture

Good for you. Seriously. I don't wish you ill in any way.
But, so what, really? In the bigger picture, so what?
In a nation of 310 million people you'll have pockets of terrible conditions even in booming economic conditions and pockets of dynamic growth in what overall are lousy conditions.

Sat, 02/04/2012 - 23:18 | 2127766 SeattleBruce
SeattleBruce's picture

"Read the posts closer, idiot."

Really?  You're going to fault someone for not reading your posts closer...bwaaaaaaahahaha...

Sat, 02/04/2012 - 23:20 | 2127774 SeattleBruce
SeattleBruce's picture

"We design accounting compliance software."


Does your software allow for the FASB loose rules regarding what was formerly known as mark to market...that has allowed insolvent banks to foist trillion dollar heists on the American people - and what pray tell, are you doing about that, HUH?!

Sun, 02/05/2012 - 01:08 | 2127967 francis_sawyer
francis_sawyer's picture

"accounting compliance software"

Oh... Fancy that... So I presume you contract out for the BLS & Diebold... Good work if you can get it... Congrats!... Funny though ~ aren't you that same dude who, a few comments above, couldn't even get an italics HTML tag to work properly? How, exactly, did you slip through the hiring net? I have my suspicions...

You must be as proud of your work as ol Zio here...


Sat, 02/04/2012 - 19:31 | 2127353 Terminus C
Terminus C's picture

Who is your employer troll?

Sat, 02/04/2012 - 20:08 | 2127406 Cand-Hamz-Bitchez
Cand-Hamz-Bitchez's picture

Maybe I can tell you who my wife and children are after that!

If you were an internet troll, would you tell people who your employer was?

I can assure you that I speak 100% the truth about our hirings.  Even the governor came by for a photo op.

Sat, 02/04/2012 - 21:30 | 2127547 Hulk
Hulk's picture

Because he had no other choice...

Sat, 02/04/2012 - 23:06 | 2127733 Chump
Chump's picture

Your employer hired 50 people and that warranted a photo op with the governor?  And this is good anecdotal evidence of a stengthening economy?  "Sheep" is such an overused word, especially here, but you are such a shining example.

 But anyway, don't let me keep you from posting dozens of worthless, juvenile comments and generally being an ass.  Apparently it's important to you.

Sun, 02/05/2012 - 06:17 | 2128191 Seer
Seer's picture

Hm... I wonder whether This is the "employer":


Sat, 02/04/2012 - 23:25 | 2127793 SeattleBruce
SeattleBruce's picture

What a maroon - bragging about your accounting software when a quarter of the US is un and underemployed.  What's that 350 against the 6 million jobs that are down the tubes?  You should be furious, but apparently you're happy as a clam - idiot.

Sun, 02/05/2012 - 01:05 | 2127977 francis_sawyer
francis_sawyer's picture

What a ta-ra-ra-GOON-de-ay

Sat, 02/04/2012 - 15:05 | 2126869 fonzannoon
fonzannoon's picture

Hey can someone put their 2 cents in on this....So if they want to go ahead and hype up the job numbers which ramps up the stock market which in turn should continue to spark a selloff in treasuries which the Fed is buying 91% of the 30yr...what happens when the twist ends and "price discovery" starts to take place? How do they keep the lid on rates? Do they let the long end of the curve run? Do they do QE3 with the dow at 13.5k and running and everyone cheering about the recovery? What gives?

Sat, 02/04/2012 - 15:13 | 2126891 Conrad Murray
Conrad Murray's picture

"But then finally the masses wake up. They become suddenly aware of the fact that inflation is a deliberate policy and will go on endlessly. A breakdown occurs. The crack-up boom appears" - Mises

Sat, 02/04/2012 - 15:15 | 2126897 fonzannoon
fonzannoon's picture

come on...please be serious Conrad. Does the market miraculously tank causing the retail guy to load up on treasuries bailing out Ben?

The masses wake up....funny

Sat, 02/04/2012 - 15:38 | 2126959 Conrad Murray
Conrad Murray's picture

There is no retail guy. The idiot boomers are cashing out and (thankfully)dying off, and since they've already raped the future of the economy/country in order to live like vegetables for an extra 10 years on the dole, their children won't be cashing in.

Also, white babies are a minority in the US as of last year. That means less investment in the future, as brown and black people do not have money to invest. - http://www.pewsocialtrends.org/2011/07/26/wealth-gaps-rise-to-record-hig...

The Fed will print whatever it wants to buy whatever it wants in markets so distorted they're meaningless while more countries say "fuck the dollar". The 0.00001% will continue to send money back and forth to each other while everyone else gets poorer. Until the game ends anyhow.

Sat, 02/04/2012 - 15:42 | 2126967 GeneMarchbanks
GeneMarchbanks's picture

That is bats, vegetables do not live.

Sat, 02/04/2012 - 18:11 | 2127245 Yen Cross
Yen Cross's picture

Correct! Guano aka Bat Shit! The bats that be, need to re-adjust the radar!

Sat, 02/04/2012 - 15:48 | 2126980 fonzannoon
fonzannoon's picture

With all due respect the idiot boomers are working later on in life and since most of them can't move their 401(k) until they leave service they are doing the "prudent" thing and allocating the majority of their substantial balances into the "safer" bond funds and stable value funds in order to preserve their principal as they have been instructed to.

As for your point about race or color I have no comment and your 3rd point about the fed I pretty much agree with.

Sat, 02/04/2012 - 16:02 | 2127007 fonzannoon
fonzannoon's picture

I see someone junked me but obviously could not refute what I said. Good for you silent stupid guy.

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