Non Farm Payrolls Benchmark Revision and the Unemployment Rate as Cruel Farce

Well, we forecast the headline number exactly, with a loss of 20,000 jobs. No credit taken, it was as much a judgement call (aka SWAG) as any product of careful measurement.

As you may have heard, the Bureau of Labor Statistics did a benchmark revision. This is Washington speak for 'revised the numbers as far back as anyone might care to remember to give ourselves more wiggle room.'

The benchmark is a product of the Bernays Factor, that measure of public gullibility which permits obviously contrived government statistics to be taken seriously.

Did you react to the positive jobs trend initially announced in September - October 2009? Oops, it was really a greater loss than expected, and not a gain at all. One can only suspect that in a few years this whole recovery could be revised away without so much as a bureaucratic blush.

Here is a picture comparing the old and new headline numbers.



The change is pervasive. One item of note is the taking of more job losses in the earlier years, setting up a stable base for potential job gains in the present, without embarrassing oneself by getting out of synchronization with the actual growth of the civilian population. There will be more 'truing up' of the numbers in the future.


Unemployment Rate as Cruel Farce

Regarding that 'surprise drop' in unemployment to 9.7%, this is the result of people falling off the unemployment benefits radar, and becoming discouraged. It is essentially meaningless, if not downright misleading.

One may as well solve an unemployment problem by shipping people to Australia. Well, that does have some historical precedent. Hard to tell who has gotten the better deal on that one, at least over the long run.

A better measure of unemployment is the Labor Force Participation Rate, which provides information about the total number of people employed as a percent of the population, without benefit of official banishment.



That number continued its downtrend from 64.9% in November to 64.7% in January, with a slight uptick from December's low of 64.6%.

Here is a chart from the good folks at Calculated Risk that shows the employment situation in context with other post World War II recessions.



"Recession" hardly does it justice, does it?

Non-Farm Payrolls Report Preview for January 2010

The markets breathlessly await the latest Non-Farm Payrolls Report for the US, which will be released tomorrow morning. January is the month in this report that contains the largest seasonal adjustments by far.

Here is a projection of what tomorrow's numbers may look like, and their historical context. The raw number unadjusted for seasonality may be a loss of around 4,000,000 jobs.



It is no accident that the BLS does the major adjustment to its Birth-Death Model in January. Keep in mind that the Birth-Death adjustment is applied BEFORE seasonal adjustment, that is, to the raw, unadjusted number.

Given that the expected raw number will probably be around 3.5 million jobs lost, and then adjusted to a headline number much closer to zero, adding even 380,000 or so job losses to that does not result in such an enormous adjustment in January.

In other words, the adjustment is largely adjusted away by the seasonality. Nonsense, hardly connected to the real world, but quite clever bureaucratic sleight of hand really.



Saying all this, it seems almost needless to stress that any projection of the headline number is a tough call in January, because the seasonality has such enormous latitude. More in the nature of a SWAG than a proper forecast.

Then there is also the matter of the revisions to the prior two months at least, and the possibility of a revision to the whole series going back two years, which sometimes occurs.

So, we'll look for a 'headline number' closer to zero than not, with a shade to the negative, maybe a loss of 20,000 or so. But we are very prepared to be surprised to the upside to a positive number, and downside to a loss of around 80,000. That speaks less to our inability to forecast, we hope, and more so to the arbitrary nature of the government's willingness and ability to fiddle with the numbers.



With pretty colors, it may look more like a sideways chop than a plunge, especially in light of a greater negative from December which will be adjusted but not higher.



And as for the reaction of US equity markets in anticipation today?

As I have stated before, the banks and their prop trading desks are always and everywhere screwing you, and frontrunning their better insights into the markets, even if only by a few milliseconds.

Watch the sovereign debt situation. This may place a heavy weight on the equity markets. But perhaps not just yet.

Retail Sales "Unexpectedly Fall In December"

"Unexpected" only because we have been so systematically misled by the government and the financial media about the state of the US economy.

People bought in November in expectations and a believe in the recovery. And buying tailed off quickly in December as they realized it was a hoax: there would be instead of recovery a long cold Kondratieff winter.


Yahoo Finance
Retail sales unexpectedly fall in December
January 14, 2010, 8:34 am EST

WASHINGTON (Reuters) - Sales at U.S. retailers unexpectedly fell in December as consumer spent less on vehicles and an array of other goods during the holiday shopping month, data showed on Thursday, raising concerns about the durability of the economy's recovery.

The Commerce Department said total retail sales fell 0.3 percent last month, the first decline in three months, after rising by an upwardly revised 1.8 percent in November. Sales in November were previously reported to have increased 1.3 percent.

Analysts polled by Reuters had forecast retail sales gaining 0.5 percent last month...

December 2009 Non-Farm Payrolls Report Preview and Forecast

As you may know, and as we suggested the other day, the ADP report, based on payroll data from American business, showed a loss of 84,000 jobs in December, versus expectations of a loss of only 75,000 jobs.

We also suggested that this Friday's US Non-Farm Payroll Report will be a positive surprise, at least 10,000 or so jobs to the good. Here are the details.

The Imaginary Jobs component, also known as the Bureau of Labor Statistics Birth-Death Model, will contribute approximately 72,000 jobs allegedly created by small businesses with less credible evidence than a Bigfoot or an Elvis sighting.

Not that they are always positive. Each January there is an enormous job loss shown here, in the neighborhood of about 350,000 jobs. The reason they do this is because the seasonal adjustment factor is so huge in January that this imaginary jobs number does not matter, since it is subtracted (and added) from the numbers prior to the seasonal adjustment.

We can expect this model to continue to show positive annual jobs growth until the End of Days, and perhaps longer than that if there is fireproof paper in the afterlife.



The 'headline jobs number' which is the Seasonally Adjusted Number will be a positive 58,000 jobs, and provide much joy and exultation in Washington and on Wall Street. Pundits like Paul Krugman will caution that the economy is still fragile and a second stimulus bill will be required to insure these positive gains.



What is the basis for these projected numbers? The same basis used by the BLS - nothing. At least nothing connected with the real world. These are the numbers that bureaucrats might mindlessly crank out in response to the desire of their bosses for certain targets, a phenomenon well understood by most corporate financial staffs.

We drew the trendline on that chart earlier this year, assuming that the government would wish to show a steady job increase with a positive number by December, or at least January. So far we have not been disappointed, although there have been quite a few revisions along the way.

There will also be revisions this time again, with some jobs added and borrowed from prior months to help make this latest number seem believable.



So, let's see how it really turns out. Am I being too cynical? I used to spend many hours estimating these numbers and potential targets, but this month I decided to go with the trends. Not trends in job growth, but trends in the general corruption of nearly all financial and economic data in the US, from the government, the banks, and the kleptocracy.

Perhaps the numbers will be realistic and credible this time, and I can be pleasantly surprised.

And perhaps the Obama Administration will begin to deliver the promised, genuine financial reforms.

Third Quarter US GDP Comes In Significantly Lower Than Original Estimates

Could we have expected anything else from the Madoff nation, a country whose major export is fraud, and predominant industry a large scale variation of Liar's Poker?

GDP in the third quarter is significantly weaker than the results reported in late October. And even the positive value that remains is probably overstated by a chain deflator that underestimates the monetary expansion by the Fed.

Ironically it is ineffective because it is so heavily applied to a broken and outsized banking model rather than to the real economy.

Look for another cycle of exaggerated improvement for the 4th quarter, with later revisions bringing the number well back to earth.

Oh look here, the second quarter was bad indeed, but the third quarter is a miracle of growth. Thanks to the stimulus and automotive programs of the government disaster is averted and all is well....

Oh wait, the third quarter was not so good after all, but the indications are that the fourth quarter is a miracle of growth. Thanks to the housing programs of the government disaster is averted and all is well.

What, you deny this? Do you not wish things to be better? Are you a dollar basher? (repeat as necessary until the fraud collapses completely.)

This is the campaign of perception management by the financial engineers in the Federal Reserve and the US government, and cynical statists of both the left and the right.

"The power of holding two contradictory beliefs in one's mind simultaneously, and accepting both of them....To tell deliberate lies while genuinely believing in them, to forget any fact that has become inconvenient, and then, when it becomes necessary again, to draw it back from oblivion for just so long as it is needed, to deny the existence of objective reality and all the while to take account of the reality which one denies — all this is indispensably necessary. Even in using the word doublethink it is necessary to exercise doublethink. For by using the word one admits that one is tampering with reality; by a fresh act of doublethink one erases this knowledge; and so on indefinitely, with the lie always one leap ahead of the truth." George Orwell

“Through clever and constant application of propaganda, people can be made to see paradise as hell, or to consider the most wretched sort of life as a paradise.” Adolf Hitler

"Print is the sharpest and the strongest weapon of our party. The writer is the engineer of the human mind." Josef Stalin

NY Times
Third-Quarter Growth Weaker Than First Thought
By JAVIER C. HERNANDEZ
December 23, 2009

The nascent economic recovery was weaker than expected in the third quarter, the government said Tuesday, held back by slow business construction and dwindling inventories.

The Commerce Department said the economy expanded at an annual rate of 2.2 percent from July through September, down from the original forecast of 3.5 percent, tempering some of the enthusiasm about the speed of economic renewal. The downward revision was well above average, but analysts still foresee stronger growth in the fourth quarter, as exports rise and an improved jobs market encourages consumer spending.

“We did get off to a slightly slower start than we had thought,” said Nigel Gault, chief United States economist for IHS Global Insight. “That would be very worrying if we didn’t have evidence that we had done well in the fourth quarter.” (The same evidence that will be significantly marked down after the fact, just like the original overstated estimates of 3rd quarter GDP - Jesse)

....Analysts were caught off guard by the magnitude of the decline in the rate of expansion, measured in terms of gross domestic product — the total value of goods and services in the economy. Last month, the government revised the rate to 2.8 percent in the third quarter, down from 3.5 percent in October, and economists surveyed by Bloomberg News expected it to remain steady.

A revival of exports and consumer spending in the last part of 2009 is expected to bring the rate of growth to about 5 percent for the fourth quarter. The momentum will probably continue into 2010, economists say, though high levels of unemployment and a skittish business climate may curb consumer spending, hiring and production.

The Commerce Department’s revisions were based on smaller-than-expected business inventories, which fell by $139.2 billion. Spending by businesses on items like software and equipment was also weaker than expected, rising by 5 percent rather than the 8.4 percent originally predicted.

Paul Dales, chief economist for Toronto-based Capital Economics, said the overall drop was “nothing to worry about,” but he expressed concern about the decrease in investment by businesses.

“It may suggest that a lot of the demand pent up during the recession has already been released,” Mr. Dales wrote in a research note on Tuesday. “High uncertainty and lots of spare capacity are limiting capital spending.”

Construction of business facilities like malls and office buildings fell more than previously thought, by 18.4 percent rather than 15.1 percent. Economists attribute that drop to a frail commercial real estate market, which is confronting high vacancy rates and banks that are reluctant to finance business expansions.

Spending by state and local governments was also weaker than expected, falling 0.6 percent, compared with the 0.1 percent originally forecast. Consumer spending was revised slightly, growing 2.8 percent in the quarter rather than 2.9 percent.

As the New Year approaches, investors are optimistic that the economy will build on its earlier gains rather than fall into another downturn. Retail sales were higher than expected in November, and the trade deficit unexpectedly narrowed in October. In addition, a weak dollar is making American products overseas cheaper, contributing to hope that exports will rise.

A Reader Asks "How Did 558,000 People Lose Their Jobs When Only 190,000 Jobs Were Lost?"

Here is an excerpt from today's Bureau of Labor Statistics Non-farm Payrolls report.

"The unemployment rate rose from 9.8 to 10.2 percent in October, and nonfarm
payroll employment continued to decline (-190,000), the U.S. Bureau of Labor
Statistics reported today. The largest job losses over the month were in con-
struction, manufacturing, and retail trade.

Household Survey Data

In October, the number of unemployed persons increased by 558,000 to 15.7
million. The unemployment rate rose by 0.4 percentage point to 10.2 percent,
the highest rate since April 1983. Since the start of the recession in
December 2007, the number of unemployed persons has risen by 8.2 million,
and the unemployment rate has grown by 5.3 percentage points...

The civilian labor force participation rate was little changed over the month
at 65.1 percent. The employment-population ratio continued to decline in
October, falling to 58.5 percent."

An astute reader noticed that the BLS press release says that 190,000 jobs were lost from payroll employment, but the number of unemployed persons increased by 558,000. What's up with that?

The BLS report consists of two independent data samples. BLS has two monthly surveys that measure employment levels and trends: the Current Population Survey (CPS), also known as the household survey, and the Current Employment Statistics (CES) survey, also known as the payroll or establishment survey.

There is the "Establishment Survey" which is based on responses from a sample of about 400,000 business establishments, about one-third of total nonfarm payroll employment. The headline payroll number, the job loss of 190,000, is based on this data.

Then there is the "Household Survey" which is a statistical survey of more than 50,000 households with regard to the employment circumstances of their members, which is then applied to the estimates of the US population to obtain the unemployment number. This survey was started in the 1950's and is conducted by the Census Bureau with the data being provided to BLS. It is from the household survey that more detailed information is obtained about employment statistics within population groups like gender and age, wages, and hours worked. It is this study that is responsible for the unemployment rate of 10.2%.



So which survey is correct? Neither. The truth is somewhere in between.

The most obvious reason for the discrepancy is that job creation in the US seems to be centered in the smaller business and the self-employed areas in recent years. These sectors are not polled by the BLS and their impact would only be obtained by the Household Survey's interviews.

The BLS does have a way to account for this called the "Birth Death Model" which is supposed to estimate jobs created by smaller businesses. That model is a bit of a joke actually since it almost always follows the same pattern of adding jobs, with two big corrections in January and July of each year when it will do the least damage to the headline number. Any model that does not reflect the job declines that started in 2007 can most certainly be called a statistical joke. Small business is not immune to business cycles.



The payroll survey for October will be revised several times in the short term, with each release of monthly data, and even larger revisions will be done periodically, every year or so, to correct the whole series and sometimes dramatically.

The household survey is not revised per se, but the data against which it is statistically evaluated, the census data of the population, will be revised and this will change the representation of the monthly samples. Let's hope that lowering of the population is only done by revision of the numbers, and not the more draconian things practiced throughout the earlier part of the 20th century.

There was a famous joke that the Household Survey and the Establishment Survey were synchronized under George W. Bush by getting rid of people, by lowering the estimates of the population that is, which is something his pappy did when he was the president. In the states there will be a new Census conducted in 2010 as you yanks may already know, so we will have to see if the census bureau's population estimates are lowball or highball.

So what are we to conclude from this?

First, that Wall Street and the government use the monthly jobs data as tools to achieve their particular ends, to justify programs, to buy and sell, to promote certain ideas and behaviours in the public. Secondly, people will believe what they wish to believe to suit their biases if they are not fact-based in their thinking.

The truth is more clearly demonstrated in the long term trends, the averaging of the data over time. It does not seem that the long term data is as manipulated as the Consumer Price Index information which has become a statistical disgrace with its hedonic adjustments.

So what do we do, the average person with too little time and too many other priorities, at times seemingly held captive by the flows of information from the mainstream media? As always, we must sift what the government and business tell us, with a keen eye for deception which is an unfortunate part of human nature especially when things are not going well and it is easy to rationalize many things, and do what seems to be the right thing based on our own judgement and a broader analysis of all the news.

Tomorrow's Non-Farm Payrolls Consensus of -175,000 Looks "Do-able"

Tomorrow the Bureau of Labor Statistics will be reporting its October non-farm payrolls number. The consensus of economists is for a job loss of only 175,000 which is an improvement over the prior month loss, but more importantly maintains a steady uptrend as shown in the chart below.



The BLS almost always revises the prior two months, in this case August and September. They tend to 'borrow' from good results and smooth out the trend, or at least they did under the Bush Administration. We will have to wait and see what happens.

The BLS will also have their Birth-Death Model at their backs helping to lift the number with a projected 100k imaginary jobs.



The BLS number will further have the wind at its back because this is a month which the actual number traditionally comes in high, and is seasonally adjusted lower for the 'headline number.'



The good news is that the 12 month moving average of jobs is starting to show a bottoming process IF this number comes in as expected.



We can be sure that the government is looking over these results, keenly. Lyndon Johnson famously pre-approved the number before its release, often sending it back for revision when he did not care for the implied headlines.

We cannot say if that practice still exists, or is handled by lower level functionaries on the Council of Economic Advisors. Who knows, it might even be a relatively honest number by Washington standards.

Watch the Birth Death model and the revisions to September and August in particular. If they 'borrow forward' from August this will be a sign of statistical manipulation in our minds at least.

We do have an open mind, and assume that an improvement in job losses is possible, even likely perhaps. If one throws several trillion dollars at a problem in a short timeframe some result is likely to be produced for it, although in this case it will not most likely last without some fundamental reforms and restructuring.

And it goes without saying that if the number misses by noticeable degree, with all this going for it, then any talk of even a short term recovery is placed on hold.

Governments lie, and people of privilege lie and cheat readily when their results do not match their expectations, on their taxes, in their relationships, in school, at work, all most of all to themselves.

Some of them 'bend the rules' so well that they can go through months without more than one or two losing days of trading in volatile markets, in defiance of all probability and the principle of a symmetrical dissemination of information.

Fed Official: Real US Unemployment Rate is 16%

Dennis Lockhart may be expressing his own views, but the figure of 16% he quotes is nothing more than the Bureau of Labor Statistics "U-6" measure of unemployment.

U-6 Total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons,economic reasons, as a percent of the civilian labor force plus all marginally attached workers.

Here is a chart showing the 'official' U3 measure of unemployment and the U6 alternate measure. The chart also includes the unofficial unemployment rate projection done by John Williams of Shadowstats.com.



It appears that Dennis wanted to take this occasion to say that things were SO bad that there is little use in applying any sort of stimulus to the public, although there is plenty of stimulus required for the banks.

Breitbart
Real US unemployment rate at 16 pct: Fed official
Aug 26 02:25 PM US/Eastern

The real US unemployment rate is 16 percent if persons who have dropped out of the labor pool and those working less than they would like are counted, a Federal Reserve official said Wednesday.

"If one considers the people who would like a job but have stopped looking -- so-called discouraged workers -- and those who are working fewer hours than they want, the unemployment rate would move from the official 9.4 percent to 16 percent, said Atlanta Fed chief Dennis Lockhart.

He underscored that he was expressing his own views, which did "do not necessarily reflect those of my colleagues on the Federal Open Market Committee," the policy-setting body of the central bank.

Lockhart pointed out in a speech to a chamber of commerce in Chattanooga, Tennessee that those two categories of people are not taken into account in the Labor Department's monthly report on the unemployment rate. The official July jobless rate was 9.4 percent.

Lockhart, who heads the Atlanta, Georgia, division of the Fed, is the first central bank official to acknowledge the depth of unemployment amid the worst US recession since the Great Depression.

Lockhart said the US economy was improving but "still fragile," and the beginning stages of a sluggish recovery were underway.

"My forecast for a slow recovery implies a protracted period of high unemployment," he said, adding that it would be difficult to stimulate jobs through additional public spending. (How about Bank bailouts and bonsues? Plenty of room to add more, right? - Jesse)

"Further fiscal stimulus has been mentioned, but the full effects of the first stimulus package are not yet clear, and the concern over adding to the federal deficit and the resulting national debt is warranted," he said.

President Barack Obama's administration has resisted calls for more public spending, arguing that the 787-billion-dollar stimulus passed in February needs time to work its way through the economy.

Lockhart noted that construction and manufacturing had been particularly hard hit in the recession that began in December 2007 and predicted some jobs were gone for good.

Prior to the recession, he said, construction and manufacturing combined accounted for slightly more than 15 percent of employment. But during the recession, their job losses made up more than 40 percent of all US job losses.

"In my view, it is unlikely that we will see a return of jobs lost in certain sectors, such as manufacturing," he said. (Yep that's it. Manufacturing is dead, forever. Never to return. - Jesse)

"In a similar vein, the recession has been so deep in construction that a reallocation of workers is likely to happen -- even if not permanent."

Payroll employment has fallen by 6.7 million since the recession began.

More Banks Fail in "Deepening Financial Crisis"

More green shoots for the fungus collection.

What if they gave a Great Depression but systematically rigged the statistics, manipulated the markets, inflated the currency, and were able to convince the majority that it was not all that bad?

Would it still be a Great Depression? Or a Great Delusion?

How angry would people be when they realized they had been fooled into making very destructive personal financial decisions based on this deception?

Would the perpetrators be able to claim immunity because they were performing a service to the government? This is one defense that Barrick Gold (and JP Morgan) used when they were initially sued for manipulating the price of gold in the New Orleans court case. Barrick Corp Drops Bombshell

"The conscious and intelligent manipulation of the organized habits and opinions of the [public] is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country." Edward Bernays

“It is the absolute right of the State to supervise the formation of public opinion...If you tell a lie big enough and keep repeating it, people will eventually come to believe it. The lie can be maintained only for such time as the State can shield the people from the political, economic and military consequences of the lie.” Joseph Goebbels

Bloomberg
Seven U.S. Banks Seized in Busiest Year for Closures Since 1992
By Ari Levy and Flynn McRoberts

July 3 (Bloomberg) -- Six banks in Illinois and one in Texas were seized by regulators as the deepening financial crisis pushed the toll of failed U.S. lenders this year to 52, the most since 1992.

Twelve banks have failed this year in Illinois, the most of any state. The seven lenders seized yesterday, with total assets of $1.49 billion and deposits of $1.34 billion, were closed by state or federal regulators and the Federal Deposit Insurance Corp. was named receiver, according to statements from the FDIC. Buyers were named for each of the closed institutions.

The Illinois banks are affiliates of Peotone Bank & Trust Co., in Peotone, Illinois, about 45 miles (72 kilometers) south of Chicago. The failures resulted primarily because of soured loans and losses on investments in collateralized debt obligations, the FDIC said. Illinois, with an unemployment rate above the national average, was one of seven states to begin the fiscal year without a spending plan.

"The six failed Illinois banks are all controlled by one family and followed a similar business model that created concentrated exposure in each institution," the FDIC said. CDOs, which packaged bonds and loans into notes of varying risk and yield, lost money as real estate defaults soared.

Regulators this year have closed the most banks since the savings-and-loan crisis of the 1990s as lenders struggle with mounting losses on mortgages and commercial loans. The total for 2009 is more than double the 25 banks shuttered in 2008 and surpasses the 50 that were closed in 1993. The prior year there were 181 failures or government-assisted transactions.

FDIC Fund

The FDIC estimates yesterday's seizures will cost its insurance fund $314.3 million. The regulator imposed an emergency fee in May to raise $5.6 billion to rebuild the fund, which has deteriorated in the past 18 months. More assessments are possible, the FDIC said.

Illinois Governor Pat Quinn, a Democrat, refused to sign a budget because lawmakers failed to approve raising the income tax. In his original $53 billion budget proposal in March, the governor sought personal and corporate tax increases to help eliminate an $11.6 billion deficit and maintain state services.

Chicago is 280 miles from Detroit, home to General Motors Corp. and Chrysler LLC, which were forced into bankruptcy. Lear Corp., the Southfield, Michigan-based maker of automotive seats, announced plans yesterday to enter bankruptcy. The unemployment rate in Illinois was 10.1 percent in May, compared with 9.4 percent nationally.

A Mess

"This is a mess," said Jack Ablin, who oversees $60 billion as chief investment officer at Harris Private Bank in Chicago. "We're a manufacturing state and in the Midwest, so we're influenced by the autos."

In addition to CDOs, the failed banks were plagued by losses on commercial real estate loans. Founders Bank of Worth, the biggest of the Illinois banks seized yesterday, had $374 million in construction and commercial real estate loans as of March, accounting for 63 percent of the bank's net loans and leases, according to a regulatory report.

Millennium State Bank of Texas, the Dallas-based bank taken over yesterday, had $67.5 million in such loans, or 81 percent of its total loans.

"The common denominator for most of the bank failures so far has been troubled construction loans," said Matthew Anderson of Foresight Analytics, an Oakland, California-based real estate research firm. "There's no easy way out with defaulted construction loans in today's environment..."

Non-Farm Payrolls Trend Mismatch

Here is our usual chart comparing the seasonally adjusted and actual payroll numbers from the Bureau of Labor Statistics.

Two things are worth noting.

The first is that the recent uptrend in the seasonally adjusted 'headline' number is conspicuously at odds with the actual numbers, which are still in the same downtrend.

The second is the usual observation we make, and that is to remind people that the adjustments that are made to the actual numbers for seasonality are enormous, and subject to significant revisions after the fact.



About 220,000 of those jobs in the actual number are due to the birth death model 'plug' which is a real howler when you look at the specifics that the BLS attributes growth in the new / small business segement of the economy.



We will get a little more optimistic when the longer term trend turns higher. Granted, it will miss the bottom by a few months, but it is an important signal to confirm any uptrend in the economy that seems to be highly reliable.



The level of unemployment is still a major impediment to the economy despite hopes for a bottom to the economic contraction. Economists will say that this is a lagging indicator, and we will say yes, but we would say that it is the standard by which a bottom will be judged.

Our take on these numbers is that they are at best a short term uptick in response to historically unprecedented monetary stimulus and at worst a false recovery fueled by dangerous levels of monetization and some disappointing short term statistical razzle dazzle.

Non-Farm Payrolls: Revisio ad Absurdum

Orwellian manipulation of government economic statistics, par excellence.







The moving average of the Non-farm Payrolls marked the downturn in the economic expansion with amazing clarity by a steep drop in late 2007. It will also mark the bottom and a sustained upturn when it arrives.

GDP Number Far Worse Than Expected by Most Economists (But Not Here)

The Fourth Quarter GDP number came in at a negative 6.2% versus the original negative 3.8 percent announcement earlier this year.

That is not a big adjustment. It is a HUGE adjustment. That first number was so obviously cooked by a high side inventories estimate and a lowball chain deflator that it was a knee-slapping howler to anyone who is following this economy closely.

This decline did not happen overnight. It is merely being reported that way.

There should be little doubt in most people's minds that Bernanke, Greenspan, Paulson, and many in the Bush Administration were deceiving us about the state of the economy, for years, almost routinely as a matter of course.

That is important to understand. This was no act of God, no hurricane or meteor strike. And a lot of folks on Wall Street and in Washington playing dumb now knew what was coming. You can decide their motives for yourself, but fear and greed should be high on the top of your list.

The economy has been rotten for a long time, since at least 2001 if not before, and as it worsened more and more money was taken off the table by the Bush Administration and their corporate cronies through no bid contracts and welfare for the wealthy. Coats of paint were slapped over the growing imbalances, market manipulation, malinvestment, fraud and corruption.

Remember that. Don't let it go. Because as sure as the sun will rise, these jokers will be back in business given half the chance. They are shameless, greedy beyond all reason, and persistent. The fiscal responsibility being preached now by the Republican minority is repulsive hypocrisy.

That is why it is so disappointing to see what looks like business as usual from the Obama Administration. Larry Summers appears to be a tragic choice as chief economic advisor. And Tim Geithner, while a capable fellow, is not a thinker, but a doer, an implementer, and a disciple of the fellows that caused this mess.

What to do? Let them know now we expect reform. Don't fall for the same old rhetoric from the 'conservative' think thanks and paid pundits who misled you for the past eight years. They are not conservatives. They are jackals who play on your emotions. And let's not accept a new batch of paid pundits and clever deceivers either. But don't give up and pull over a blanket of cynicism.

Typically Americans will give a new president like Obama 100 days to get his bearings and deal with a tidal wave of problems that he did not create. We do not expect him to fix them, but we want to see a decent start in the right direction. We gave Bush far too much allowance, primarily because of 911 which his handlers played for all it was worth.

So far, with some noted exceptions in non-financials, we the people have not seen what we voted for last November.

President Obama recently said that Wall Street reform is coming, but it will take time.

Mr. President, you may not have the leisure to show us that you know what needs to be done. You are riding a high tide of bipartisan support in the people who voted for you. Once you lose them it will be very difficult to get them back.

We must demand action from the Congress and the Administration who we recently put in place through the elections to clean this mess up and then change the system that delivered it.

Contact the White House

Contact Your Senator

We do not want fewer, bigger banks exacting a fee on every commericial transaction in this country.

1. Bring back Glass-Steagall.

2. Clean up the derivatives market, starting with J.P. Morgan and their 90 Trillion dollar positions.

3. Enforce the various anti-trust laws, enacting new ones where necessary, and break up the media and banking conglomerates.

4. Enact aggregate position limits in all commodity markets and transparency with immediate disclosure of all position over 5% in any market.

5. Effective restrictions and enforcement of naked short selling, price manipulation, reinstatement of the 'uptick rule,' the prohibition of regulated banks from engaging in any speculative markets either for themselves or as agents, and usury laws and regulation of all interstate financial transactions at the national level.

And for the sake of the country, establish a vision, a model, of what the system should look like in accord with the Constitution. And then strike out for it, as painful as that may be, and stop this management by crisis.


Bloomberg
U.S. Economy Shrank 6.2% Last Quarter, Most Since ’82
By Timothy R. Homan

Feb. 27 (Bloomberg) -- The U.S. economy shrank in the fourth quarter at a faster pace than previously estimated as consumer spending plunged, companies cut inventories and exports sank.

Gross domestic product contracted at a 6.2 percent annual pace from October through December, more than economists anticipated and the most since 1982, according to revised figures from the Commerce Department today in Washington. Consumer spending, which comprises about 70 percent of the economy, declined at the fastest pace in almost three decades.

The recession is forecast to persist at least through the first half of this year as job losses mount and purchases plummet. The Obama administration’s attempts to break the grip of the worst financial crisis in 70 years are unlikely to bring immediate relief as companies from General Motors Corp. to JPMorgan Chase & Co. cut payrolls.

“There has been no evidence that the pace of decline is slowing at all, there are other shoes waiting to drop,” Bill Cheney, chief economist at John Hancock Financial Services Inc. in Boston, said in an interview with Bloomberg Television. “There is a chance that the stimulus package will kick in” in the middle of this year, he said.

The US Employment Picture

The official US Unemployment Percentage Rate.



The average number of weeks a job seeker is unemployed.



The percentage of people in the Civilian Labor Force who are working.

This statistic helps to keep track of workers who are 'discouraged' and no longer included in the official unemployment rate.

This statistic shows that there never really was any recovery after 2001, that the appearance of growth was ephemeral, all a bubble spun by the Fed and the Banks and the Bush Administration.



Source: Bureau of Labor Statistics

A Closer Look at the Revisions to the Non-Farm Payrolls Numbers

"I am a firm believer in the people. If given the truth, they can be depended upon to meet any national crisis. The great point is to bring them the real facts."
--Abraham Lincoln

The 'actual' jobs loss number, before seasonal adjustments are applied, was significantly worse than expected. It was so bad that we had to adjust the lower boundary of the chart by an extra 500,000 jobs lower than the projected chart we showed yesterday. Jobs Number for January Could Be Much Worse than Expected



So why was the 'headline number' after seasonalization relatively benign and better than many had expected, or 'not as bad as feared?' A gas station pricing number that came in at -598,000 just below the psychologically important -600,000? Besides a liberal upgrade from seasonality, the revisions to the prior month, and months as it turns out, were interesting.



Revising job losses from prior months lower 'creates jobs' that can be moved forward on the statistical count. It would be like revising losses in the prior years of your income statement to allow you to show lower losses in the more current periods. Its kind of like shoving job losses around on a plate. Nothing really changes, but the data 'looks better.'

Further, we see the usual "current month - prior month" two-step wherein the current month is shown slightly better than the prior month. Then at the next reporting period, you revise the former current month lower, and show the new current month as slightly better.

We had a business unit direct report who liked to play those kinds of games to show 'better numbers' for their piece of the business. The fix was to lock them into rolling averages for results and not something more short term.

And so it is with the US jobs jockeys. The longer term trend does not lend itself so easily to data manipulation in the revisions and seasonality.

And it shows the economy is in a nose dive. But stocks are rallying today on the expectations that the bad numbers will insure that the Senate will pass the stimulus, and that Turbo Tim will announce a big giveaway for the banks next week.

The Obama Administration is doing nothing new. The Bush Administration's numbers were so hollow that we started calling the US a Potemkin Economy, or perhaps Ponzi Economy because it is built on ever increasingly unredeemable debt. Clinton was no better, merely more effective, more competent, more 'artful.'

This may not be new, but it is not reform either. Meet the new boss, same as the old boss.