Tag Archives: employment situation

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

Financial Markets, Market Manipulation, U.S. Economy, , ,

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.

There IS No B.S. Like The BLS

Financial Markets, Housing Market, Market Manipulation, Precious Metals, U.S. Economy, ,

Bureau of Labor Statistics. It has an Orwellian ring to it. I guess it should stand for “Bureau of Lying Statistics.” A quick glance at today’s non-farm payroll report suggests that the economy likely lost hundreds of thousands of jobs in May. The headline 138k number was well below Wall St’s consensus estimate and below even the lowest estimate (140k).

The highly deceitful “Birth/Death” model gave the BLS 238k “newly created” jobs from alleged new business formation in excess of jobs lost from failed businesses in May. This number is shown before it’s sent through the BLS’ “X‑13ARIMA‑SEATS software developed by the U.S. Census Bureau.” No one knows exactly how that statistical sausage grinder produces the alleged jobs added and lost by new business formation – not even the Census Bureau. Then that number is blended into the overall headline number.

In truth, it’s quite likely that the U.S. economy lost jobs in May. A report showing less working age people employed would be a better fit with the state of the economy as reflected by private-sector reports, such as retail sales and construction/capital formation spending. The BLS covers up this fact by “finding” a large number of “new” part-time jobs to offset the loss of 367,000 full-time jobs.

And for its coup de grace, the BLS reports that 608,000 people in the working age population decide to stop looking for a job, for whatever reason, and quit working. They are no longer considered to be part of the labor force. This concept makes absolutely no sense when privately-generated surveys show that less than 50% of all households do not have the ability to write a check for $500 in the event of an emergency. Perhaps 608,000 people just decided that they were tired of buying food and paying bills and quit working altogether.

Regardless of how you want to slice and dice the phony numbers, the “labor force participation rate” fell to 62.7% of the working age population. This means that 37.3% of the entire U.S. population between the ages of 15 and 64 decided that they couldn’t be bothered with working or looking for a job. That metric alone completely invalidates anything the BLS reports about the U.S. “employment situation.” Perhaps a better title for the monthly report would be “The Government’s Interpretation of U.S. Employment.”

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

Financial Markets, Market Manipulation, U.S. Economy, , , ,

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”