Tag Archives: Birth Death model

There’s No BS Like The BLS

The employment report isn’t worth discussing, quite frankly.  We already know ad nauseum that the report is completely fabricated and, perhaps, only reflects a modicum of what is really happening in the U.S. labor market.  That is, the report shows that most of the employment “gains” are occurring in the part-time segment of the labor force, while full-time jobs continue to disappear.

The only purpose served by dissecting the report is to “legitimize” the number as if those are the numbers we should be discussing.  The talking heads and economic “experts” in the financial media look like complete idiots when they engage in passionate discourse about a “tight labor market” and an “improving employment situation.”  It’s beyond absurd.

Furthermore, we already know that the labor force participation rate continues to decline into oblivion.  Again, it’s become obvious over the last several years that the U.S. economy is quickly approaching the point at which more than one-third of the population is not even considered to be part of the “workforce.”  That fact is starting to put me to sleep – and perhaps that’s the goal of these Government manipulated economic reports.

But one area of the report did catch my eye.  According to Government data-collectors and statisticians, the number of workers over the age of 55 surged to an all-time high, while the number of workers in the 25-54 age bucket plunged by 131k.  Even if that latter number not the real number, it certainly reflects some sort of statistical reality.  In fact, I would bet the real number is even bigger.   This fact becomes obvious when you walk into any retail big box stores and grocery stores – not just Costco or Home Depot – and you see AARP members performing menial tasks like greeting and thanking customers, collecting grocery baskets and even bagging merchandise.  The Social Security set is being forced back to work and its crowding out the prime segment of the workforce who might otherwise take those jobs or who don’t take them because they don’t pay enough.

The only reason I bring this up is because – for any of you who remember – Obama gave a speech about a year ago in which he asserted that the rapid decline in the labor force participation rate was caused by people over the age of 55 taking early retirement.

Either Obama is a psychopathic liar or he is a complete idiot who merely serves the purpose of reading the propaganda that scrolls in front of his eyeballs on the teleprompter.  I suspect it’s a combination of the two factors.

I suspect I was not the only person at the time who pointed out this incongruity, because I have not heard that particular propaganda soundbyte coming from the Obama Government since Obama expelled that large brown piece of fecal matter from his mouth.

The Birth-Death Model Plug Theory Predicts New All-Time SPX High Friday

THERE’S NO B.S. LIKE THE BLS – decide what you want you want the non-farm payroll headline number to be and then use the Birth-Death model “plug” function to make that number happen.  – Investment Research Dynamics

The first Friday of the month means it’s the Government’s Bureau of Labor Statistics turn to dazzle us with a statistical magic show.  With 1st quarter GDP now revised into negative territory and the economic statistics reported for April and May showing even more economic contraction occurring in the first two months of Q2, the BLS statisticians will be forced to push the Birth-Dead plug number to a farcical extreme.

In fact, my bet is that on Friday the S&P 500 will scream to a new all-time high on an impressive “beat” of the consensus May payroll estimates that will have been fueled by a huge Birth-Death plug number.

My friend and colleague Mark Kellstrom has penned another amusing commentary about the Freak Show otherwise known as Non-Farm Payroll Friday:

It’s That Time of the Month Again:  May Non-Farm Payrolls

For the 9,000 (or how ever many are left) viewers, the debate by CNBC “experts” over their Non-farm Payroll forecasts minutes before the release of the numbers on Friday morning can provide exciting theater.  Viewers are treated to Steve Liesman’s detailed analysis used to back into an “estimate” based on a complex econometric model tracking monthly stats of all shapes and sizes.  For the rest of us, the exercise is a waste of time and as laughable as anything found on the comedy channel:   Watch Steve Liesman Bite The Head Off Of A Chicken

This Friday, June 5th, we get this ritual of the absurd again with the release of the May Non-Farm Payrolls and Unemployment data from the Bureau of Labor Statistics (BLS).  Estimates for May seem to vary around the +/-220,000 jobs “created” number and if we go with MarketWatch, the consensus estimate is 210,000, down from 223,000 previously.  Like the April NFP reported in May, Commentators have to be nervous eyeballing another month and another raft of soft economic data releases—the “expert” calls may surely be for a miss.

However, once again, if theory holds, the May Non-Farm Payrolls report will beat consensus expectations with no problem.  In fact, if 210k is the consensus hurdle, a beat on the high side may be an easy slam dunk.  History shows that the BLS “Birth Death” plug model will “add” – i.e. fictitiously create – at least 205,000 jobs this month.  So unless the BLS actually “marks to market” the true number of oil patch jobs lost during May (a lot more than the supposed paltry 3,000 oil patch jobs lost in April), then count on another BLS “beat”….much cheerleading…..and a 1Q negative GDP print sent well into the rear view mirror.

BD Plug

 

 

Non-Farm Payroll Prediction: Huge Beat Of Consensus Estimates, SPX Melt-Up

As John Williams of Shadowstats.com reiterates every month when he presents his analysis of the monthly jobs report, the non-farm payroll report is the most useless, unreliable and politicized data report produced by the Government.

One my biggest pet peeves with this report is the so-called “Birth Death model,” which is nothing than a statistical plug used by the Government in order to pad the number of jobs created during the quarter.  Of course, the headline report only shows the number of jobs created.  You have to dig into the bowels of the report itself in order find the number of people who left the labor force.  Typically the number of people who leave the labor force every month greatly exceeds the number of “new” jobs “created.”

I use the word “created” quite loosely there, because a preponderance of the jobs are created by a few computer keystrokes at the BLS.

My friend and colleague, Mark Kellstrom of Strategic Energy Research, has written an informative essay which describes why he (and I) think the payroll report a week from tomorrow will exceed the consensus estimates and trigger a melt-up in the stock market:

April Non-Farm Payrolls Preview:  Look for a beat next Friday  – Mark Kellstrom, Strategic Energy Research

In this Orwellian universe we presently inhabit, little to nothing currently carries less statistical legitimacy than the monthly U.S. Non-Farm Payrolls report.  We know that the Bureau of Labor statistics has a host of measures used to manipulate the data including labor participation, removing headcount from the job seeker category, not separating part time versus full time jobs, counting temp workers, counting census and other transitory government workers, making seasonal adjustments, diverging from the household survey, fudging survey data, revising prior numbers and lagging the impact of items like the roll over effect of oil prices on the energy related jobs market, etc.

However, my favorite tool used by the BLS to massage the monthly non-farm payrolls report and the unemployment rate is the “Birth Death” plug model.  The Birth Death model is used by the BLS to guesstimate how many jobs were added in a given month due to business start ups, offset by business failures.  The Birth Death plug numbers, fluffing up the monthly report, rarely have basis in economic reality and are typically removed from the labor statistics with a large one time downward revision in January, before the imagined Birth Death job additions grow anew over the next 11 months of NFP reports.

In watching the reported “Birth Death” model over the last few years, I have noticed a very regular pattern in the quantity of jobs “added” each respective month using this dubious model.  A look at the historical data since 2012 for January through June is included below.  One can see a very distinct pattern in how the model “creates” jobs during that time frame.  The reported monthly numbers can be revised to a small degree over the course of a year but not by a material amount until the January washout.

So, I am testing a theory this next week:  If history holds, when the April Non-Farm payrolls are reported on next Friday (May 8, 2015), then the NFP number should be robust and beat expectations.  The reason is simple.  Current consensus forecasts (I believe) expect the April NFP report to show that approximately 250,000 jobs were added to the labor pool.  However, if historical patterns repeat, then the BD model will add between 225,000 and 250,000 jobs in April alone, meaning that few or no real jobs are required to match consensus—the BD model sets up the beat by itself……unless of course, the BLS finally subtracts the many thousands of newly unemployed in the oil & gas space from the Birth Death gains.

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