The Non-Farm Payrolls Report: Air Brushing History - Nominal Work Force for Nominal GDP

Back in Stalinist Russia, they had whole departments of people that were responsible for rewriting history and documents in order to support the latest Party lines.

When a particular person fell out of favor, for example, they not only altered the documents, but even went so far as to air brush them out of important historical photographs.

Today the US reported a remarkably high Non-Farm Payrolls number, well in excess of even the most optimistic estimates. 243,000 jobs added, and unemployment has dropped to only 8.3 percent. Isn't that good news indeed.

If one tracks the data closely, and keeps their own copies of the records, what we see instead are revisions, sometimes going back as far as ten years, that most greatly affect the 'seasonally adjusted' numbers, but also affect the raw numbers as well.

The Obama Administration, as well as the previous Administration, have been going back and tinkering with history, rewriting the numbers here and there, in most cases 'rolling jobs forward' to the current months to make the current headlines look better.

The BLS keeps the digital copies of this and they are duly adjusted of course. But what was surprising in this latest round is that for the first time in my memory they went back and adjusted the Birth-Deal Model, which are imaginary jobs in the first place! And on the web site that I usually check they have stopped providing all the historical data, limiting it to what looks like a year or two of data.

What can one do when the statistics are questionable like this? One common touchstone for those who rely on data is to compare one set of numbers with another, or even with 'real things.' If the sales numbers look great, but unsold inventory is piling up, chances are pretty good that somewhere those sales reports might be disconnected from reality.

One real check I prefer is the Labor Participation Rate. The Census is pretty good about counting the number of people and estimating their growth within some reasonable statistical error. And people do not tend to disappear in large numbers, at least not yet.

Labor Participation is simply the number of people who are working or are unemployed as a percentage of the civilian non-institutionalized population over the age of 16, or simply number of people of working age who are not in prison, etc.

So if the number of people working is increasing and the number of unemployed are decreasing the participation rate *should be increasing* one would think, given the relatively stable growth of the population.

But we instead see that the Labor Participation Rate continues to decline. I am sure the spokesmodels will find some way to try to gloss over this.

Note: The spokemodels and the uninformed parrots quite predictably are tut-tutting this using misdirection by saying that the most recent drop for January alone is attributable to a revision in the Labor Force, the denominator in this case, by the Census Bureau. And I accept that. No problem. But my point again is not to look at a single month, but at the trend, even for this. And from a technical standpoint, the trend here undeniably 'blows.'

If the Fed can target a Nominal GDP, that is, economic growth targets that do not care how much is real and how much is paper manipulation, then I am sure it is only fair for the government to target a Nominal Work Force.

As you know, I do not like to look at these monthly numbers in the first, place, but they are integral to the Wall Street shell game, and the politicians love to play it for the headlines as well.

A more rational approach is to watch the trending average over some reasonable period of time, and to look at multiple sources of data, given the propensity for politicians to stick their fingers in the process.

The problem I have with painting the tape, accounting fraud, and the statistical manipulation of the numbers is that these numbers are the foundation for serious policy decisions. Making January 'look good' is going to make it all the more difficult to take the appropriate political steps to reform the economy and get it working again.

But the Yanks are notoriously short term oriented in their thinking. And this is an election year, and emotions are running high.

I cannot help but think that if the government is finally able to fully digitize money and other assets, all this airbrushing can become so much more simple. Just ask the customers of MF Global. One day you own Treasuries, and even solid bars of gold and silver in your own name, and the next day, poof, they're vaporized. Sorry don't know where they went. Go stand over there in line by the Lost and Found and see what happens.

And so I think we are not in Kansas anymore, Toto. It is looking more like Moscow on the Potomac every day.

Here is a comparison of the Seasonally Adjusted Jobs Numbers before and after the Revisions. Keep in mind that each square represents 100,000 jobs, so even slight changes make a big difference in the headline number which just shows the month over month change.

Again, the point is not that there is some conspiracy, which is how many easily dismiss this, especially the uninformed who want to appear to be 'sophisticates.' Rather it is mean to show that one months data is relatively useless and often misleading, and subject to significant revisions sometimes much later. It is the TREND that matters.

Byron Dorgan and Bill Moyers: Making the Banks Play By the Rules

There was a lot of money thrown around Washington in the 1990's to make this happen, and the effort was shephered by a number of prominent financiers, regulators and politicians. Prominent among them are Phil Gramm, Alan Greenspan, Robert Rubin, Larry Summers, and Sandy Weill. And of course a willing President in Bill Clinton.

And the sad, sad truth is that nothing has really changed. The Banks were able to seriously weaken, if not cripple, the Dodd-Frank financial reform bill with a generous application of money and influece.

The people of the US need to find and elect an honest and effective President, and a Congress with a conscience and some balls to serve the public. Let's see, Mitt Romney or Barack Obama...

Oops, there's the problem. Time for Plan B? Or should I say Plan P?

Maybe voting all of the non-Progressive incumbents out of the Congress would be a way to send a message.



Byron Dorgan on Making Banks Play by the Rules


See also Mr. Weill Goes to Washington: The Long Demise of Glass-Steagall

Gold Daily and Silver Weekly Charts - Clawing Up the Wall of Worry One Brick at a Time

Gold and silver continued to claw their way higher through tough resistance.

When I hear the spokesmodels on financial television talking about the need for austerity and 'tough love' for the rest, I always listen carefully to see if I can hear one word about reform, and the curtailing of the financial sector imbalances, excesses, and fraud that actually brought the world economy to where it is today.

And if I do not hear it, then I know they are just spinning out more propaganda for the monied interests, who have taken their loot, privatized the gains, and now wish to continue to socialize the losses, the public and the country be damned.

One way to protect your wealth from this ongoing plunder and confiscation is to stay as far away as is possible from the Wall Street and London money centers, the heart of the Anglo-American banking cartel, and to keep some portion of it safely in hard assets with high liquidity.

This course is not without its own concerns. As we can see clearly from the chart, the precious metals are subject to wide swings of price manipulation by the hedge funds and the banks when it suits their interests. Such is the state of the paper markets and slack regulation we have today.

These much abused markets and exchanges may fail, and possibly quite spectacularly, and the Wall Street bankers and their politicians will look around and say once again, 'We did not know, who could have predicted it? Don't worry, we have a plan. But it will require your sacrifice.'

Why not? It has worked every time so far.

The Banks must be restrained, and the financial system reformed, with balance between individuals and the corporations restored to the economy, before there can be any sustained recovery.

SP 500 and NDX Futures Daily Charts - Benign VIX - Goat Rodeo

"My concern is that an improbably large number of things will have to go right in order to avoid a major decline in stock market value in the months ahead. We presently estimate that the S&P 500 is likely to achieve a 10-year total return (nominal) of only about 4.7% annually, which reduces the likelihood that further gains will be durable even if they persist for a while longer. In the context of present valuations and a probable Goat Rodeo in the months ahead, my impression is that the recent market advance may be a transitory gift...

If we think in terms of "exhaustion rallies," the syndrome we're observing here is a multiple indicator version of signals like the Coppock "killer wave" - which occurs when the Coppock Curve reaches a peak, declines, and the market then recruits an advance large enough to establish a second wave higher. Some technicians have debated how best to define the signal (e.g. the decline required to define a negative shift) - in our view, it's not a good idea to use a single indicator in the first place - but in any event, the selloffs from those exhaustion waves have often been brutal, and a few overlap the syndrome outlined here.

In short, market action is presently showing features associated with "exhaustion rallies", which have often been followed by deep losses over the following 6-7 month period.

John Hussman, Goat Rodeo

The markets may very well decline at some point. Perhaps after Romney sews up the nomination.

But do not try and get in front of it. Wait for it.

Never underestimate the willingness of the Fed to puff up an asset bubble that benfits Wall Street. And never underestimate the willingness of the sociopaths in the financial sector to hold the nation hostage to get their way.