Tag Archives: BLS

Non-Farm Payroll Propaganda – Aka Fake News

“If you tell a lie big enough and keep repeating it, people will eventually come to believe it.” Joseph Goebbels

I dislike giving the employment report any acknowledgment because the report is constructed for the purposes of political expedience. But I can’t help posting a few comments because, once again, the non-farm payroll report for June showed significant growth in sectors of the economy for which real world business economic reports showed economic contraction. The headline number purports that the 222k new jobs were created in June. This wailed on the consensus estimate of 170k.

The Government attributes 16k in new jobs to the construction industry. How can this possibly have been the case when construction spending declined 4.4% on a quarterly basis for April and May? Moreover, housing starts have been declining for the past few months, including June. Unless there’s a new model for running a business, contracting economic activity is accompanied by payroll cost-cutting. The number is just not credible. Same with retail, for which the Government wants us to believe that 8100 jobs miraculously were created despite the fact that retail stores are being closed at one of the fast rates in history.

Then there’s the nefarious “birth/death” model, which guesstimates the number of jobs created by new companies started in June net of jobs lost from new businesses closed in June. I have news for the Bureau of Labor Statistics: new business formation, according to Gallop, is at a 40-yr low. Furthermore, potential business owners are less likely to risk borrowing money for a new business when the cost of borrowing is increasing. Maybe the BLS statisticians forgot about the Fed interest rate hikes and forgot to plug the higher cost of capital in to their new business formations blender. The B/D model attributes 102k new jobs from new businesses net of business deaths. To convolute their reporting Hmmm…23k of those came from construction…need I say more?

The above commentary is a preview of this week’s Short Seller’s Journal.

BLS B.S.: 93% Of New Jobs Since 2008 Were Birth/Death Model Estimates

A research report from Morningside Hill Capital sourced from Zerohedge shows that 93% of the jobs “created” since 2008 were Birth/Death model estimates.  While some portion of those jobs were no doubt legitimately created, the issue is over-estimation of jobs created by new businesses net of jobs lost from failed businesses.  As it turns out, most of the job growth that has been reported by the Government since 2008 – and which in turn fueled some massive stock rallies – never existed.

Ronald Reagan’s administration was the “culprit” behind the creation of the Birth/Death model because apparently Reagan was complaining that the BLS was undercounting the jobs he “created” (from the link above, pg 11).

The source of estimation error derived from the methodology used by the Census Bureau is highly flawed because it extrapolates B/D growth estimates based on historical experience.  When the economic activity in the current period is below the historical rate of economic activity (real economic activity, not inflation-generated growth or growth fashioned from data manipulation), the slow-down in new business formation that occurs in reality is not picked up by the B/D model.

BLS Admits High Error Potential – If you bother to sift through the section of the BLS website that describes the Birth/Death model methodology – something which Wall Street analysts and financial news reporters have never bothered to do – the BLS admits the high potential for error.  From the BLS website:

The primary limitation stems from the fact that the model is, of necessity, based on historical data. If there is a substantial departure from historical patterns of employment changes in net business births and deaths, as occurred from 2008 into 2009 during the 2009 benchmark, the model’s contribution to error reduction can erode. As with any model that is based on historical data, turning points that do not resemble historical patterns are difficult to incorporate in real time. Because there is no current monthly information available on business births, and because only incomplete sample data is available on business deaths, estimation of this component will always be potentially more problematic than estimation of change from continuing businesses.

Perhaps the biggest source of error comes from the Census Bureau’s estimate of jobs from workers not covered by UI tax reports (employers required to pay out unemployment insurance). These are part-time workers (primarily independent contractors). As the BLS admits:

There are some types of employees that are exempt from UI tax law, but are still within scope for the CES estimates. Examples of the types of employees that are exempt are students paid by their school as part of a work study program; interns of hospitals paid by the hospital for which they work; employees paid by State and local government and elected officials; independent or contract insurance agents; employees of non-profits and religious organizations (this is the largest group of employees not covered); and railroad employees covered under a different system of UI administered by the Railroad Retirement Board (RRB). This employment needs to be accounted for in order to set the benchmark level for CES employment.

Over time some sources from which CES draws input data have become unreliable.

Thus, even the BLS admits that the B/D model is B.S. Furthermore, in all probability, the “Death” component of the B/D model likely has outweighed the “Birth” component of the B/D guesstimates, as new business formation is at a 40-yr low based on two studies, one from the Census Bureau and one from Gallup.  Per Gallup, the rate of firms closing began to exceed the number of new businesses in 2008.  Thus, by the BLS’ and Census Bureau’s own admission, the B/D model has grossly over-stated the number of net jobs created since 2008.  In fact, in all probability, the number of jobs from business “births” and “deaths” has declined.

It is likely that the U.S. economy has lost jobs since 2008.  This would explain why the Labor Force Participation Rate has declined to a level not experienced since the late 1970’s when household’s were primarily composed of one income providers.   The concept that the number of jobs since 2008 has, in reality, declined is reinforced by the fact that 94.98 million of the 254.77 million civilian non-institutional population – over 37% of the 15-yr old to 64-yr old population – is no longer considered to be part of the Labor Force.

Non-Farm Payroll Reports – The Big Lie: Feed The Pigeons

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/or military consequences of the lie. It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State. – Joseph Goebbels, Hitler’s Minister of Propaganda

Think about the psychology behind Goebbel’s statement for a moment. If you are going to tell a lie, make it so outrageous that most people would fall into believing that it’s true because they would not let themselves believe that someone would try to present an extreme lie as the truth. It’s like a modified Stockholm Syndrome mechanism.

Dave , this is so transparent and bad that I am almost rendered speechless and I always have something to say.  – John Embry  in an email exchange

I didn’t bother to watch the American Horror Story presentation of the release of the non-farm payroll report as it was released. I’m not in the habit of turning on the Cartoon Network this early in the morning. But when I saw the headline numbers my response was to laugh out loud.

No sense dissecting the numbers because I’m also not in the habit of spending time analyzing and interpreting complete nonsense. Everyone reading this has seen the analytic dismemberment of the BLS data releases ad nauseum.  After enough iterations, it becomes a boorish waste of time.  I am looking forward to John Williams’ comments later today, of which I’ll share a few snippets.

Kudos to my friend and colleague who predicted how today would unfold almost perfectly. Almost. Even he vastly underestimated the degree to which the BLS would shove a lie in our face. Well, he got the sequence of plays right but he underestimated the size of the Big Lie – this was from Wednesday:

BD model adds 145,000 jobs. NFP for October comes in at 190,000. Mark Zandi gets quoted in every wire service saying it’s a clear indicator of the underlying strength and improvement in the economy. All jump even harder on the consensus December Fed rate hike band wagon. Stock market rips lower and Gold gets hammered to under $1100. Stock market rips at 3:30pm into the Friday close as they force massive short covering into green and Gold goes unchanged on the day.

It remains to be seen if the stock market rips higher by the end of the day. I bet it will. I doubts gold will rally however, at least today. It’s for sure going higher but we might have to wait until the market understands that there will be no rate hike in December and, if anything, more QE is coming.  But the only way to support the Big Lie is keep a lid on the one indicator that would severe the Achilles’ Heel of the Big Lie.

On another note, the homebuilders are getting ripped apart again today. Gee, if so many people found jobs, doesn’t that mean homebuilders will selling more homes? Shouldn’t these stocks being flying? Two of the largest homebuilders have now reported big declines in deliveries in their third quarters through September. But I thought the summer was supposed to be the best period for home sales…bummer dude.

Burst of hiring sends unemployment to 5%!!!!! LOL! This is getting to be such a joke Dave. I’m getting crash fatigue. It’s like the Bataan Death March. Let’s get it over with my God! – blog comment from “Richard”

Extreme And Blatant Gold Futures Manipulation: Bad Jobs Report Ahead?

These guys are seriously overplaying their hand so something must be up.  – John Embry email to me in reference to the blatant intervention in the stock and gold futures markets

The Cliff’s Notes explanation to John’s comment:  The Fed knows the economy is technically in a recession and will be forced to take Fed Funds negative sometime in early 2016.  Yellen floated that trial balloon earlier today.   That’s an event that should launch gold.

First, in reference to the extreme degree of anti-gold propaganda currently being vomited by the western media – see this article from Mark Hulbert LINK and this article from the new Jon Nadler LINK – here is what is going on in the physical gold market:

Reuters has reported that the China Gold Association has announced that Jan/Sept gold production was up 1.48% to 356.9 tonnes and consumption was up 7.83% to 813.89 tonnes. This is the biggest gap between production and consumption growth that JBGJ can remember. The huge Chinese output growth has been going on for well over 10 years and with the early mines getting old sustaining the trend must be getting increasingly difficult. A leveling off or even more a decline in Chinese gold output could increase import demand dramatically.  – John Brimelow from his Gold Jottings report

Typically when there’s bad news coming, the Fed/banks engage in an extreme degree of market intervention to keep the stock market aloft and a heavy lid on the price gold.  After all, they can’t have a rising price of gold alert the world to the degree to which the U.S. system is one big fraud.

The stock market has become historically overvalued.  David Stockman discusses this in his latest article – This Time Is The Same – And Worse.  In his analysis, he reports that the trailing 12-month P/E ratio on the S&P 500 is 22.49x, or higher than it was at the peak of the stock market in 2007.

However, there’s one big flaw in Stockman’s analysis.  He’s using current GAAP accounting numbers.  In order to compare current S&P earnings with earnings and P/E ratios, we have to adjust the earnings by employing “apples to apples” GAAP standards.   Generically, the latest significant GAAP changes in 2010 enabled the big banks to include a significant amount of non-cash “adjustments” as part of their reported net income.  In some quarters, more than 90% of the GAAP net income reported by major banks and financial firms is based on non-cash, discretionary “adjustments.”

In truth, and admittedly this is somewhat imprecise but not wholly inaccurate because the same dynamic applies to the tech sector S&P 500 companies as well (note: IBM is currently being investigated by the SEC for revenue recognition issues – this fact supports my assertion), it is highly probable that the $93.80 per share EPS cited by David Stockman is substantially less than $93.80 using 2007 or 2000 or 1987 GAAP standards.   I would hazard a highly educated guess that if we did the exercise of adjusting today’s S&P 500 earnning using the GAAP rules in place in 2000 that the $93.80 EPS would be cut in half.

In fact, I know of someone who did that exercise back in 1998, using 1987 GAAP standards, and this person determined that the reported earnings in 1998 were less than half of what was reported that year if 1987 GAAP standards were employed.

In other words, the true P/E ratio on this current stock market is, in all probability, the highest in history.

I want to show the gold market intervention that occurred blatantly today and then I’ll suggest a good possibility for the current extreme degree of market intervention (click on each to enlarge):

5minGoldoneYrGold

The ratio of paper gold to deliverable physical gold reported to be in Comex vaults almost hit 300 earlier this week.  After yesterday’s long-side liquidation/bullion bank short-covering operation the ratio “mellowed” out a mere 278x.

As you can see, gold moved higher after a series of gold-friendly comments from the ECB’s Mario Draghi. It was promptly slapped back down about 10 minutes before he Comex floor trading in gold commenced. This occurs about 90% of the time. No news or events occurred that would have prompted the sell-off in gold. After starting to recover from the obligatory Comex floor trading smack, Janet Yellen issued tourettes syndom outbursts loaded with incoherent nonsense about how great the economy was doing, the labor market was tight and the FOMC was going hike rates in December.

Yellen’s comments, other than being the drool of a babbling idiot, had no basis in provable fact. Nearly every private-sector compiled economic data series is reflecting a precipitous decline in economic activity that is back down the activity levels of 2008/2009.  As for a “tight” labor market?  Yes, I suppose if you just ignore the 93 million who have left the labor force – i.e. 28% of the total U.S. population – then I suppose it’s a bit easier to manipulate the data to reflect a low rate of unemployment.  Make no mistake, the unemployment rate number being reported is an unmitigated fraud, which makes Janet Yellen an unmitigated fraud.

This brings me back to my explanation for the extreme and blatant stock/gold market manipulation this week.  A friend and colleague of mine from NYC does great work on how the BLS uses its fraudulent “birth/death” model to manipulate the non-farm payroll report every month.  The employment report for October comes out Friday this week.  Historically the BLS inserts a big bump up in the birth/death jobs additions in October.  My colleague believes that the number reported will be manipulated higher than the 177k estimate in order to support Janet “Tourettes Syndrome” Yellen’s rate-hike in December fairytale:

BD model adds 145,000 jobs. NFP for October comes in at 190,000. Mark Zandi gets quoted in every wire service saying it’s a clear indicator of the underlying strength and improvement in the economy All jump even harder on the consensus December Fed rate hike band wagon Stock market rips lower and Gold gets hammered to under $1100 Stock market rips at 3:30pm into the Friday close as they force massive short covering into green and Gold goes unchanged on the day. A bullish comment from Jim Bullard is optional…

This view is well-crafted and will likely be right.  However, with each passing non-Government economic report which shows jobs being cut, especially in the manufacturing, energy and financial sectors, the big job additions reported by the BLS take the Government numbers deeper into the credibility hole.   The extreme manipulation and intervention in the U.S. stock/gold market reflects the extreme degree of desperation which the Fed/Treasury/banks are exerting in order to prevent the markets from revealing the truth about the degree to which the U.S. political/financial/economic system has been completely engulfed in fraud and corruption.

Expect a big “beat” on Friday from the NFP report, followed by beat-down of gold.  That smack in gold should be bought with both hands.

One more point, Yellen referenced the possibility of taking rates negative. Talk about an obvious trial balloon.  This tells us that she and her band of FOMC stooges understand the truth about the economy.   This is an event that should send gold on a moonshot.  They are working to make sure that the lift-off platform is as low as possible.

Paul Craig Roberts: The US Economy Continues Its Collapse

When I was a Wall Street Journal editor, the deplorable condition of the US economy would have been front page news.  –  Paul Craig Roberts

President Obama attributed the decline in the participation rate to baby boomers taking retirement. In actual fact, over the so-called recovery, job growth has been primarily among those 55 years of age and older. For example, all of the July payroll jobs gains were accounted for by those 55 and older. Those Americans of prime working age (25 to 54 years old) lost 131,000 jobs in July.

Over the previous year (July 2014 — July 2015), those in the age group 55 and older gained 1,554,000 jobs. Youth, 16-18 and 20-24, lost 887,000 and 489,000 jobs.

Today there are 4,000,000 fewer jobs for Americans aged 25 to 54 than in December 2007. From 2009 to 2013, Americans in this age group were down 6,000,000 jobs. Those years of alleged economic recovery apparently bypassed Americans of prime working age.

You can read the rest of Dr. Roberts’ commentary here:  The U.S. Continues To Collapse

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.

Government Jobs Data: Defining Deviance Downward

Your analysis on the June jobs report was posted in the comments section on the WSJ online.  After reading them, I did some more research based on concepts you introduced [to me].  I learned more in the last 90 minutes about the BLS surveys than from the past 12 months of WSJ articles on the topic.  Thanks.  – from “Jim” in his Linked-In connection request

640,000 thousand people leave the workforce but the unemployment rate drops to 5.3%. Only here in this country now can sell that big bag of shit.  20 years ago anyone would have been embarrassed to print that report or laughed out of the meeting room.  – Dave’s NY friend

NY Friend:  Of all the lies you ever told in your days of a junk bond trader, you never told a lie that blatant.  You used to say a good lie contained an element of truth.

Me:  Dude, I only told lies I knew I could get away with.

NY Friend:  We’re back to the 1977 level of employment when one income could support a household.

Here’s the analysis of the jobs report today from my good friend and colleague, John Titus of Best Evidence:

The labor force is defined as people working or looking for work. It’s a solid approximation of the real jobs number, and it’s on the high side because obviously not everyone looking for work is actually working. But if you accept the sunnyside fudge and equate looking for work with actual work, you’ve got a very accurate picture of jobs.

Since Obama took office in January 2009, the U.S. labor force has added 2.827 million people. Obama’s claim of adding 11 million jobs is just a straightjacket-and-electrodes-crazy lie no matter how you cut it.
What is even worse is that those additions to the labor force came from the total pool of people added to the working age population—a pool that has grown by 15.924 million people.
So under this so-called jobs president, an astounding 82.25% of people enter their working age years without working and without looking for work. Think about that number for a second. More than four out of five people who aren’t working or looking for work is grim, worse-than-Great-Depression-ugly, no matter how small the sample is. But the fucking “sample” here is 100% of everyone added to the entire working age population for almost the last 7 years.
Anyone who thinks that what’s happening in Greece can’t or won’t happen here is at best dreaming and more likely unhinged. Based on the real jobs data, it’s guaranteed to happen here.
The the definition of “defining deviance downward.”  The phrase was first used by Senator Danial Patrick Moynihan in the early 1990’s after Clinton had assumed office to describe the willingness of our society to tolerate the rising criminality and fraud in the political and economic system.
Our system is well past the breaking point of recoverability.  I asserted in 2003 that:  “the elitists running our system will hold up the system with printed money and debt certificates for as long as it takes to sweep every last crumb of middle class wealth off the table and into their own pockets.”
We are witnessing the end-game phase of this operation.  For the record, “middle class” is defined as anyone who does not have enough cash laying around to buy their own Congressman, Senator or the Oval Office.  This means anyone reading this who has a few million in the stock market, bonds and a house or two will soon be stripped of that unless they convert that “wealth” into real money.

Non-Farm Payroll: Ignore Headlines – Labor Force Participation Hits New Low

The headlines reported that 223k people found jobs last month.  Of course, you have to read into the details to find out that the 280k report in June for May that caused a parabolic spike in the stock market was revised significantly lower to 254k.  So the stock market was artificially driven up on a fictitious reporting of a fraudulent number.

In fact, 60,000 jobs were removed from what was originally reported over the last two months.

The real story in today’s report is the fact that the labor force participation rate hit a low not seen since October 1977:

LFPR

Even the Government’s outrageous manipulation of the data and the media’s outrageously bullish spin on the data can’t hide the fact that a record number 93.6 million working age people are NOT in the labor force after 640,000 removed themselves from the pool of people who had been looking for a job.

The birth-death fairy tale threw another 109k into the mix of make-believe jobs that were seasonally-adjusted statistically abused to produce the fictitious jobs reported in the headlines.

The U.S. economic and political system is precariously perched on an insipid foundation of fraud, corruption and debt.  Perhaps most emblematic of this cesspool of waste is the Government’s non-farm payroll report.  It’s nothing but a huge lie which is shamelessly promoted by the media and Wall Street and used by the Fed and the Plunge Protection Team to juice the stock market.

Non-Farm Payroll: “Something Must Be Horribly Wrong For Them To Be This Blatant”

When the propaganda gets so bad that Wall St. Journal readers respond with threats of violence [to the Hilsenrath editorial], you know the lies are getting extreme. Regarding today’s NFP, the numbers are beyond absurd. 57k jobs added in hospitality and leisure? No one has money spend and everyone knows that. We used to laugh at the propaganda numbers coming from the old Soviet Union. The numbers coming from the U.S. Government are a bigger farce than the old Soviet Union’s propaganda…Don’t hold your breath waiting for the Fed to raise rates.  –  John Titus, Best Evidence

The title quote comes from John Embry.  I was going to do a detailed dissection of the Bureau of Labor Statistics non-farm payroll data to show why the numbers are simply can not be believed.  But it’s become a pointless and repetitive exercise.

A colleague of mine thought that next to the October 2012 pre-election NFP, this was the most fraudulent report ever released.  I disagreed because at least back then the GDP reports, for as rigged as they are, were at least showing “growth” would could be used to “justify” reported employment gains.

Today’s report was far more fraudulent than the October 2012 fairy-tale for two reasons. First, we expected the pre-election 2012 fictitious report for obvious reasons.  But second, by the Government’s own numbers the economy contracted in Q1 2015.  Moreover, almost all of the economic data released in April and May showed not only further economic contraction but also that the rate contraction increased.   In Q1 2015 corporate profits dropped by the most amount since 2008 .   Companies DO NOT hire people when their business is contracting.   The non-farm payroll report is a complete fraud.

The non-farm payroll report is the poster-child for everything that is wrong with our country.  The banks have been announcing 10’s of thousands of layoffs coming.  Banks are downsizing because lending activity of all sorts is declining.  When there is no economic activity to finance, it means that the economy is contracting and businesses fire – not hire – workers.  Hewlett Packard, one of the countries largest business services companies announced yesterday that “more layoffs are coming”  LINK.  That means the same holds true for every other large technology/business services company.   These companies did not hire 63,000 people in May only to turnaround and fire them in June.

The Government wants us to believe that the construction industry hired 17k new workers in May.  Yes, construction spending showed a slight bounce in April but this was 110% driven by Government spending, which has been in a downtrend.  Private residential construction spending continued its 3-month decline.  As John Williams of Shadowstats.com summarizes:

The aggregate construction series remained near the recent low of a down-trending pattern of stagnation, with the real series holding at 32.9% below its pre-recession peak of March 2006.  The private-residential series remained down-trending both before and after adjustment for inflation.

This implies that there were not any construction workers added in May.  If anything homebuilders kept their payrolls flat or down-sized.

The BLS claims Financial services added 13k in May.  But sadly, we know just the opposite is true from disclosures by HSBC and JP Morgan.  My friend who works on Wall Street in NYC told me last week that fixed income trading floors all over the Street are like a morgue. Banks and finance companies fired, not hired, in May.

Leisure and hospitality reportedly added 57k workers in May.  Again, this is a complete fairy-tale – an outright fraudulent data-point.  Consumer spending has been declining for the better part of the last year.  Every major consumer sentiment index reported the consumer sentiment and outlook crashed in May.  This means that, to the extent that any consumers might have some disposable income to spend, they are NOT going to spend it. This means the leisure and hospitality companies – at best – kept payrolls flat.  It is a lie of epic proportions to report that this sector was responsible to 57k in jobs added to the economy.

You don’t need me to explain just how fictitious today’s employment report is.  Just look at the graphic below and decide for yourself if the numbers are justified by the economic reports released in May and by your observations in your surrounding environment:

NFPdata

One last point. The Birth/Death model showed 213k jobs created in May from new businesses being started minus businesses that closed. It is not a seasonally adjusted number so it is not mathematically accurate to simply subtract it from the headline 280k number. However, the likelihood is that, even seasonally adjusted, the B/D number was a source of at least 200k of the 280k headline report. By the Government statisticians own admissions, the B/D model is highly overstated when the economy is contracting. The more probable likelihood is that more businesses died than were born in May. This fits with the “for lease” signs I’m seeing in strip malls all over Denver. If anything, this component of payroll measurement likely should caused a decline in employment during May.

But this brings up the question:  why does the Government report its payroll numbers on a seasonally adjusted basis but then releases the B/D model not adjusted?   Of course it’s obvious:  the Government wants its economic reports to be as opaque and misleading as possible.

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