A "Quality Assessment" Of US Jobs Reveals The Ugliest Picture Yet

Tyler Durden's picture

Over the past week we have repeatedly exposed the BLS' shennanigans to both keep the headline unemployment rate suppressed and to generate an upward bias in the market courtesy of a "bigger than expected beat" of expectations. Granted, various semantics experts continue to scratch their heads in attempting to explain a collapsing labor force when even Goldman's Sven Jari Stehn just predicted that it will drop to 63.1% by the end of 2012 (and 62.5% by the end of 2015). Funny then that the US will have no unemployment left when the participation rate drops to 58.5%. And no, the "population soared argument based on revised data" doesn't quite cut it when the bulk of said surge not only did not get a job, but was not even counted toward the labor force. Yet what the biggest flaw with all these arguments that vainly (and veinly) attempt to defend the US economy as if it is growing, is that they focus exclusively on the quantity of jobs, doctored or not, and completely ignore the quality. We have decided to step in and fill this void.

By now, most of our readers know that every incremental dollar of public debt leads to less than one dollar of GDP growth, courtesy of the debt/GDP ratio having surpassed 100% a month ago. Yet what most don't know is that the marginal utility of public debt is not the only thing that may have peaked: as of January 31, 2012, the date of the most recent BLS jobs report, it appears that the "marginal utility" of job formation (if such a concept existed) also turned negative. And since it doesn't exist, yet, allows us to explain.

While the BLS is the best, if massively seasonally adjusted, tracker of job quantity, the only true indicator of job quality is the FMS's Daily Treasury Statement, which tracks and updates how much government revenue is generated any given day courtesy of withheld income and employment taxes. So to avoid any potential semantic confusion, we will stick to numbers and bullets: hopefully even the most dedicated newsletter sellers and "asset managers" can follow those without losing much in translation.

  • In the fiscal year 2011 and 2012 (starting October 1) and continuing through the date of the most recent BLS update or January 31, there have been 87 official work days. This is the period which we will define as YTD (fiscal year to date period) for 2012, and will use its matched equivalent for 2011 for comparative purposes.
  • In the 2012 YTD period, the US Treasury recorded personal income withholding tax revenue of  $592.676 billion (source)
  • In the comparable period for 2011, beginning October 1, 2010 and continuing through January 31, 2011, withholding taxes were $592.984 billion (source)
  • In other words, the US Treasury collected $310 million more in tax withholdings in the first 4 months of fiscal 2011 than in the first 4 months of fiscal 2012.

Presented visually - the black bar shows the cumulative divergence between the fiscal 2011 and 2012 data series. Below zero, such as that on January 31, is bad.

  • Based on establishment survey data, the US started fiscal year 2011 (Sept 30, 2010) with 129,885,000 employed (source)
  • Based on establishment survey data, the US started fiscal year 2012 (Sept 30, 2011) with 131,694,000 employed (source)
  • Based on establishment survey data, at January 31, 2011, the US had 130,456,000 employed (source)
  • Based on establishment survey data, at January 31, 2012, the US had 132,409,000 employed (source)
  • Said otherwise, in the first 4 months of fiscal 2011 the US "created" 571,000 jobs; in the first 4 months of 2012, the US "created" 715,000 jobs. 
  • More importantly, between January 31, 2011 and January 31, 2012 the US added 1,953,000 jobs.

And yet...

  • Over the same period, as shown above tax withholdings are actually trending lower in 2012 compared to 2011!

But that's not the kicker. This is:

  • The 130.456MM workers "employed" at January 31, 2011 created a total of $592.985MM in withholdings, or on average of $4,545.48 per worker over the first 4 months of the fiscal year 2011.
  • The 132.409MM workers "employed" at January 31, 2012 created a total of $592.675MM in withholdings, or on average of $4,476.09 per worker over the first 4 months of the fiscal year 2012.

Translation: based on the above, even as America was "creating" jobs, 2 million to be precise (and 2.5 million between Sept 30, 2010 and January 31, 2012), the government tax revenues created by these jobs actually declined in 2012 compared to 2011, on a per job basis, by roughly 1.5%!

This analysis ignores completely any seasonal fudging, census adjustments, "updated population controls" and all those other "fudge factors" which keep BLS Ph.D.s employed (especially during election years). It is pure math based on numbers reported by both the US Treasury and the BLS.

This analysis also has substantial ramifications on the Treasury's forecast debt issuance schedule, which is driven substantially based on model assumptions for tax withholdings. Alas, absent some massive surge in income, and thus increased tax withholdings, going forward, we see no reason why there should be any material upside in government income tax revenues in 2012 compared to 2011. Which means that absent significant spending cuts, which we all know will never happen, the US is about to substantially underestimate just how much debt it has to issue for fiscal Q2 and Q3. Needless to say, this also means that the debt ceiling in such a case, would be breached far sooner than even in our pessimistic scenario of early November 2012.

Finally, and most, importantly, we hope that this analysis has proven that while the BLS may play around with various numerators, denominators, seasonal adjustments, and other irrelevant gimmicks which are only fit for popular consumption particularly by those who have never used excel in their lives, a deeper analysis confirms our concerns, that not only is America slipping ever further into a state of permanent "temp job" status, but that a "quality analysis" of the jobs created shows that the US job formation machinery is badly hurt, and just like the marginal utility of debt now hitting a critical inflection point, so the "marginal utility" of incremental jobs is now negative, which means that Obama, or whichever administration, can easily represent to be growing jobs, and declining the unemployment rate by whatever gimmick necessary. Yet these very jobs are now generating far less in so very critical tax revenue for the US treasury, and continue to declining steadily in quality.

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jonjon831983's picture

To summarize... and please correct me if I am incorrect: The government is paying people to dig holes and fill them in again?  However, the money is being spread out too far and supply of labour too great that the workers have no pricing power and as such not enough taxes are generated from these hole diggers?

Tyler Durden's picture

To summarize the summary: the government is now doing admirably what the Fed has been doing with perfection over the past 99 years: diluting.

jonjon831983's picture

However, a wise man once said the solution to pollution is dilution.  Doesn't it apply here as well?

redpill's picture

OT: You think that's ugly, check out this: http://www.reuters.com/article/2012/02/07/us-usa-fbi-extremists-idUSTRE81600V20120207

Something tells me the FBI definition of "extremist" is only going to get broader as time goes on.

Nobody For President's picture

Interesting - I posted that article to another ZH thread about an hour ago. Maybe YOU are gonna be on that list...



expert urls's picture

Of course, I will read it more. And I think that it is very interesting. Thanks!


Thiet ke web

GetZeeGold's picture



OK.....now I'm confused.....didn't we just create 1/4 million jobs?


CNBC told me so.


In deference to Clint Eastwood....the second half is not about to start. It's the fourth quarter......5 seconds left on the clock.

Oh regional Indian's picture

No No No No GetZee. You mis-read.

A million 1/4 jobs were created, see? Makes all the difference. I did a few 1/4th jobs in my time there (House painting-tough, fancy jewellery store in Marin-Easyyy)....

Earning less than you were before can be tough. Earning nothing at all for a while is really liberating. if all the 1/4 job people learned a new skill like emptying their garage on Ebay or taking apart the 6th car for parts... there is money to had/made.

A third world USA (which it already was 6 years ag by the way, only did not look like that) is here. I hear tales from friends of un-picked garbage, roads going to crap....



economics1996's picture


What the article is saying is that if you work one hour a week you are counted as employed.  If you stop looking for work after four weeks you are not counted.  States, Florida, are kicking people off the unemployment roles because it is a election year, so the numbers are bull shit.

The BLS found a bunch of old farts who conveniently don’t work and are not counted as unemployed, and some teenagers, who conveniently are all attending college, and not counted as unemployed.  So even though the population is growing and jobs are stagnated at 2004 level, unemployment is only 8.3%

Some smartass at ZH cut through the bull shit and went strait to the payroll tax collection numbers and found a DECREASE of 1.5%.  If you compare that to the 1.3% decrease in disposable income they jive up perfectly.  The economy is in recession, and shrinking.

The “growth” you see in corporate balance sheets is nothing but inflation, which for those who understand, is normal when the central bank is printing.  People become fooled by the fake wealth and think they have more wealth than they really have.  Capital users will overbuy imputes into production and overproduce under the false assumption that the economy is growing. 

This is why you see the disconnect between corporate “profits” and disposable income.  The capital users get the inflated cash first.

I hope this helps.


economics1996's picture


As for the Gestapo at the FBI and CIA those mother fuckers will be civilians by 2018.  Think KGB 1985 circa.  Those mother fuckers have a date stamp on their forehead.


GetZeeGold's picture



Better spike the ball then.




francis_sawyer's picture

Turn those clocks back on Mortimer!

Pemaquid's picture

Delusion is not the solution.

GetZeeGold's picture




Then why do they keep doing it?


It's simple. Delusion while they're diluting.......it just works. 



ACP's picture

"Did he take the deal?  What?  What the hell is Cromwell doing giving a lecture tour when he's losing $60 million a quarter?  Giving lectures on how to lose money.  Christ, if this guy owned a funeral parlor, no one would die!  This turkey is totally brain dead!   Alright.  Christmas is over, and business is business.  Keep buying.  Dilute the son of a bitch."

-Fed govt referring to the average US worker

kito's picture

i heard that a person can build up a tolerance to poison by taking diluted amounts repeatedly. sure explains our citizenry.......................

Michael's picture

1.2 million less paychecks going out to workers who are paying no taxes in January, is a loss of jobs. The January BLS report is a complete and total fabricated lie! 

connda's picture

I see where you're going with this Tyler, but the first thing that jumped out at me was:

Loss of tax income = desperate labor force accepting lower paying jobs

I don't think this metric gives you the complete picture, although it's an interesting piece of the puzzle.

Michael's picture

I'm a prime example. I'm a precision diamond tip tooling insert cutter on manual and CNC machines, with 25 years CNC machinist experience. I make $11.50/hr and I don't pay much in income tax so the government doesn't get much from me. I can't compete with 50 cent an hour Chines labor. It's insulting but I need to eat. I just thank God I have my house paid off or I'd never make it. The USA sucks now.

TruthInSunshine's picture


Robert Oak over Economic Populist is on fire with his analysis.

I just discovered his research amidst the whole Ritholtz 'green shoots' NFP fluff post, and I'm tellin' ya, it's worth a look:

About Those 1.252 Million People Who Dropped Out of the Labor Force
  • Submitted by Robert Oak on Mon, 02/06/2012 - 03:27


Additionally the number of people age 55 to 64 years who entered not in the labor force from December to January was 300,000 or 39% of the civilian non-institutional population increase for this age group, which also includes the population controls. Yet the January labor participation rate for ages 55 to 64 is 63.9%, not seasonally adjusted. This implies a 61% labor participation rate for the 55-64 age bracket in the 2010 Census data population control adjustments only. 685,000 of the 721,000 December to January increase in age 65 or older civilian non-institutional population was categorized as not in the labor force, as expected.


The labor participation rate for those 65 years of age and older is 18%. How could possibly the labor participation rate for just the population adjustments be 17.1% then? The answer is due to the sharp decline in employed for ages 24-54. The non-institutional population declined but those working declined even more and those no longer counted in the labor force increased as well. Without this age group the population controls give a labor participation rate of 36.8%. Considering those over the age of 55 are 71.2% of that rate, and the January, not seasonally adjusted labor participation rate for those 55 and older is 40.1%, we have to assume the population controls of the age 55 and up bracket published must be a majority of people over the age of 65.


That said, don't let anyone claim people are not dropping out of the labor force due to not being able to find a job and aren't being counted any longer. You cannot blame an aging population or education on the below declining labor participation rates for those between 25 and 54 years of age.


spencer's picture

as I said previously here:


participation rate is inverse to unemployment and should move inversly to it but it doesn't.

If the data is fudged - then you see both falling at the same time.

And that is the point. If the unemployment was steady - the participation rate would also be steady but it's falling.

The explanation from those Ritholz websites is pure bulshit.

If the guy was right - the overall participation ratio trend would be flat.

This guy is full of shit and just accept it.


Over longer term - the raising employment causes drop in unemployment and raise in participation rate.

If the data was indeed accurate - the participation rate wouldn't be falling like a waterfall.

They are fudging numbers EVERY MONTH and that's why you see participation rate in a long downtrend and at 63.4% now. Got it?

pine_marten's picture

@ Michael - You have become a meat based profit unit.  Keeping you humor under such conditions is priceless.

francis_sawyer's picture


Just think... If you were a midget tranny, you could make 10x that much working inside the capital beltway...

g speed's picture

Michael--- after 30 years in a seafares union with skills that are unsaleable I run my own little ship ashore. I use my skill to be a self employed small manufacturer. If you could find a broken/used Bridgeport or a Hass or a Fadel etc, could you put it in your garage, fix it and start running parts for some small outfits that couldn't afford you even at $11 /hr. Not being a smart ass--just trying to help.

WillyGroper's picture

Eaton was hiring CNC's based on experience for $17-23. 

JPM Hater001's picture

Pretty much but the effects are spread across 3 or 4 areas:

Those now in part-time jobs too low to generate a taxable revenue

Those on unemployment- not highenough to push most households into taxable territory

Those getting full time jobs not making enough to be taxable

And my favorite... Independent and contract workers not being hired so not only do they not count un da BLS stats but das tax revenue is defintely not there.

Per a much earlier post we will end up like Greece--- Cash jobs evade taxes begets black market begets lower tax revenue begets more government programs begets cash jobs begets black market begets lower tax revenue and on and on and on.

I have 3 or 4 friends that were gainfully self-employed/contractors and are now out of work, didnt qualify for unemployment and are doing cash work to be able to pay the rent.  Labor is getting cheap and I am depending on it for building my security fence this spring.

Assetman's picture

Uhhh.... don't you mean "deluding"? :)


vast-dom's picture

You meant to say as The Fed upgrades paper, The Gov downgrades people; net result: shit.

Tuffmug's picture


Government "diluting"? No!

Government lying, spinning, obfuscating, conning? Yes!

Your numbers clearly indicate US workers have become on average 1.5% cheaper to employ. Bullish for corporations and their stocks. Bearish for people. Not something Government wants to tout.

"Morning in America"? No!

Evening in America? Yes!

Id fight Gandhi's picture

Dollar lost 99% to gold since 71. That's dilution.

Before 71 people would say why hold gold, it makes no interest for you. Well dollar earns nothing in savings and every day it's worth even less.

onthesquare's picture

More dilution to consider when you look at the Canadian $ and the American $.  A few years ago we needed $1.25C to buy $1.00US.  Now it is, and had been for a while, par or close to it.  In other words the dollars you are using to pay off your workers and your debtors is not worth as much as it was to some.  This does not hold true for all countries and definitely not the Euro where the US$ keeps getting stronger.

I hope you do not think of me as boosting because I am more than aware that we are loosing our grip on the toilet bole as the trip to the sewer continues.

pine_marten's picture

My name is August West.....................

tarsubil's picture

The only issue I can see with these numbers is for example, my family has increased tax deductions, we reduce our withholding for our paychecks. Does that mean our jobs are downgraded? I dunno. The tax system is so ridiculously complicated I wonder if these numbers aren't the most ideal thing to use. But it may be the best we have.

X. Kurt OSis's picture

This is great.

Since the government has real liabilities it would be interesting to present this jobs quality number in both nominal and inflation adjusted. It looks like the real marginal utility would be much lower...

And these timing differences are going to catch up real fast as the boomer egg moves through the snake.

jonjon831983's picture

Actually, I love MCD - so change the holes example to flipping burgers and then eating the burgers themselves.  Now, things are sorta in balance, however the cost of cow meat may be going up as has been suggested by the herds moving further north.  So input costs will be rising hence burger flipping is getting more expensive to sustain.

However, further economic stimulus will be generated as people need urgent medical care for early onset heart disease, baby asprin, and hospital beds.

The US medical knowledge base in heart disease will skyrocket and be in demand throughout the world, thereby creating a new American industry.

Tuffmug's picture


Your spin would go over well at CNBC. You should apply.

Sandmann's picture

I really would not consider employees of Goldman Sachs, JP Morgan Chase, Morgan Stanley and similar companies as doing anything as remotely useful as digging holes, let alone clearing up their own mess, by filling them in. It is more likely that the US Treasury is being used to recycle tax revenues to FIRE Sector who are offering IOUs on pink slips to paper the walls of the US Treasury. In short, American workers are seeing their taxes taken and given to provide for a New Aristocracy and the cost of tax collection driving increasing numbers of Americans to the wall or perpetual impoverishment.

Id fight Gandhi's picture

I always have a very hard time watching any msm news especially on economic matters, the jobs report is a major rub to me.

People must be waking up to the bullshit that unemployment isn't as bad anymore because just talking with regular non financial real people, friends and family, nobody believes any real improvement has happened and they're still very worried about their jobs.

Would anyone have any context or data sets figuring in social issues other than SNAP? Something like a crime index or something.

scatterbrains's picture

My preliminary HQI  data suggests the longer term economy trends are very much contracting. The HQI (Hooker Quality Index) at least judging by the photos of new hookers joining the industry via pictures posted on the New York city area Craigslist seem to be improving dramatically, which of course reads inverse to general economic trends.  I havn't done any boots on the ground field work though.. just judging by the photos.

zhandax's picture

Well get off the internet and go throw your boots on the ground.  We want some hard data.  Metaphorically speaking, that is.

LookingWithAmazement's picture

BLS changes its name to BS immediately.

btb2010's picture

Or the 'jobs' only 'exist' in the BS spouted by the  BLS and while you can fool the MSM all of the time but unlike Helicopter Ben and his band at the  FED the UST still hasn't begun manufacturing revenue out thin air quite yet. 

indianajohns04's picture

Have there been any material changes in the employment and/or income taxes compared to last year? I know it doesn't change the debt problem but it could provide some more substance to the theory that income is eroding.

Assetman's picture

I'll admit that I'm a little slow on the take sometimes... but that graph is painful to try to interpret.

Someone is bound to say that you're attempting to frame the data to 87 days in order to suit your purposes.

I can take a look at inflation-adjusted wage and income data trends and tell there is plenty of slack in the labor market.  The comparision of tax receipts in aggregate, does expose the so-called job gains for what they are-- disappointing.


Tyler Durden's picture

As explained, the "87 "days represents the workday equivalent of the first 4 calendar months of fiscal 2011 and fiscal 2012, the ones for which we now have BLS job data on file as of Friday, and the comped prior period. The data is merely included to show that the current year has not benefited from either the "faster" addition of workers in 2012 compared to the prior year, nor the incremental 2 million employed workers added overall, which simply means that the "quality" of the jobs (earning power) is being diluted as the government is forced to scramble to get as many people employed as possible ahead of the election. All else being equal.

Assetman's picture


I gather you can gather only so much information when your collecting FY'12 information year to date, huh? :)

Does this time period include the stretch of weeks where tax withholdings are seasonally at their peak?  I gather that comes during the summer months, when we get the opportunity to hire all the underemployed college kids.

I would think weather might be a factor, but FY'12 (since Oct 1)overall has been pretty clear sailing... with some very minor exceptions.

Of course a lot of us could just be putting '0' exemptions on our W-4 forms, and getting as much as we can now-- then worry about paying the tax man later.  I can gather that probably isn't happening en masse, though.