05 March 2010

SnowJob: Revising the Non-Farm Payrolls Report

It appears as though the concerns expressed by the Administration about the snow storms and their impact on lost employment was overdone, if not misplaced. The market is pleasantly surprised with this -36,000 jobs number, since the expectations had been calibrated lower so effectively.

In fairness to the Obama Administration, they are only doing what Bush II, Clinton, and Bush I* had been doing right along with almost every statistic that they have issued. It's called 'perception management.' Greece used one method of accounting management in shaping the numbers, and the US uses its own approach to what is essentially a similar problem.

“Propaganda proceeds by psychological manipulations, character modifications, and the creation of stereotypes useful when the time comes.
The two great routes that propaganda takes are the conditioned reflex and the myth.” Jacques Ellul

In addition to the 'better-than-expected' jobs loss announced today for February, the Bureau of Labor Statistics also went back and adjusted the employment numbers from April-July 2009.
"With the release of February data on March 5, 2010, BLS has corrected April-July 2009 establishment survey estimates for all employees and women employees for the federal government series. The changes result from corrections to initial counts for Census temporary and intermittent workers for Census 2010."
This adjustment itself was not so great, certainly not as significant as the benchmark revision done in January for the 12+ months preceding.

I thought it would be an interesting exercise to compare the views of the US employment Seasonally Adjusted "headline numbers" presented by the BLS in December 2009, and the current view that they are showing as the true number today after the two recent sets of revisions.

The net result of the revisions is that jobs were added to the beginning and the end of what will be defined as 'the recession.'

This serves to now make the slump look steeper and more severe, and the recovery to be a little sharper, with plenty of jobs leftover to create a 'flat impression' in 2010 at worst.

In short, jobs were removed from almost every month in the revision during the slump, and shoved into the beginning and into the end.

That looks like a nice picture of a recovery, doesn't it? See, the February 2009 stimulus program and the strategy of massive bank bailouts have worked.

I have seen corporate managers who have come into a new position and inherited a mess jigger the numbers in a similar way. You make the slump look as bad as possible, and shove the excess profits or revenue into the beginning and the end of the problem, to make your efforts look as heroically effective as is possible.

Perhaps this is all just the way things turned out, in revising the numbers so as to make them the most accurate.

Or perhaps the US economy and its monetary system are an increasingly untenable Ponzi scheme, the mother of frauds.

Mr. John Williams of ShadowStats, the must read site for commentary on US government statistics, had this this say this morning about Non-Farm Payrolls:
"With an unchanged unemployment rate and a near-consensus payroll number reported this morning (March 5th) by the Bureau of Labor Statistics (BLS), I certainly misread the nature of Larry Summers’ employment comments, as discussed in yesterday’s Commentary No. 283. Historically, at least with earlier administrations, it has been unusual for individuals in positions such as Mr. Summers’ to offer comments on employment in the week before a pending release, without having a specific political or market-related purpose.

Distortions to economic reporting — in seasonal factors and in other methodologies not designed to handle a protracted and severe economic downturn — appear to be continuing."

I think that Larry Summers did have a definite agenda in his remarks, and said so. My instincts were that Summer's comments were a setup for the stock market bulls, in the spirit of his mentor Robert Rubin, who loves to throw a positive spin to help a market rally through resistance.

The lowball is helping the SP to break out of a trading range, and potentially to help fuel the economic stimulus through monetary and financial asset expansion. All is well. Let's all buy risk assets. Let's see if they can make it stick.

There are no accidents in politics.