Fuzzy Numbers: Jobs report bad at minus 533,000, but made to look better

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As expected the employment report for November was bad having shed 533,000 jobs with unemployment advancing to 6.7%.

WASHINGTON (MarketWatch) - U.S. nonfarm payrolls plunged by an astonishing 533,000 in November, the worst job loss in 34 years, the Labor Department reported Friday.

It's only the fourth time in the past 58 years that payrolls have fallen by more than 500,000 in a month. Since the recession began 11 months ago, a total of 1.9 million jobs have been lost.

But it would have been worse had it not been for the mysterious positive addition of 30,000 jobs by the so-called birth-death model. From here on out we'll just refer to it as the birth-birth model because no matter how bad the underlying economic data this model somehow always adds jobs in every month except typically January and July when the model backs out a few of its more irrationally exuberant additions.

However, keeping regular track of the amount of fudging in the Birth-Death model is one of my favorite activities because I think it provides insight into just how unreliable government statistical models really are. For a nation that drives economic policy "by the numbers" it's important that the numbers are good. The Birth-Death model provides a valuable caution flag for anyone with a tendency to "believe the numbers" that are being offered up for consumption.

I found it odd that the birth-death model determined that construction jobs were neither gained nor lost across the Oct-Nov time frame as we saw record-breaking slowdowns in both construction spending and project starts during those months. One wonders what sorts of model inputs they are using at the BLS?

Even odder would be the 5,000 jobs added to the financial activities sector. Based on this alone, we can be sure that this model does not use any sort of inputs from the real world.

And if we look a bit deeper into the jobs report we find more troubling trends with 1 in 8 people either out of work or forced to work part-time:

An alternative gauge of unemployment - which includes discouraged workers and those whose hours have been cut back to part-time - rose to 12.5% from 11.8%.

The 'alternative measure' mentioned above is much closer to how Europe reports unemployment, as it includes the so-called "discouraged workers," who would work but can't find anything worth doing and have given up looking.

Definition:
Marginally attached workers are persons who are currently neither working nor looking for work, but who indicate that they want and are available for a job and have looked for work sometime in the recent past. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not currently looking for a job. Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule.

Lastly, there is employment, but there is also under-employment. One measure of that is the number of people who are counting as "working," but who have part-time jobs when they would have preferred a full-time job. That measure has been trending upwards for quite a while and now totals more than 7.3 million people.

The number of workers forced to work part-time rose by 621,000 to 7.3 million.

The job losses are just beginning and will not peak for some time. The hope is that this cycle of losses will be over by early spring.

"It is blindingly obvious that the U.S. labor market is in a terrible state and is deteriorating rapidly," wrote Ian Shepherdson, chief domestic economist for High Frequency Economics. He expects the job losses "to accelerate over the next few months, peaking - hopefully - in the early spring."

The rate of decline may taper off in the spring, but the losses will probably continue throughout the year. "The eventual peak [in unemployment] will be close to 9%," Shepherdson said.

My own thought is that this cycle is not going to play out like past cycles and that job losses will not subside for another 12-18 months. My reasoning? The US economy is an 80% service economy and those jobs are sensitively dependent on an expanding economy.

Since our economy has not yet displayed any signs of responding to the trillions and trillions thrown at the banks I consider it very likely that the bottom is still out in front of us somewhere and that job losses will continue to mount until 3-6 months after that bottom is made.

This is a companion discussion topic for the original entry at https://peakprosperity.com/fuzzy-numbers-jobs-report-bad-at-minus-533000-but-made-to-look-better-2/

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I agree with Chis’ view here. There can be many ways to change statistical data. The most important point of this blog was concerning how large services make up the economy. If people aren’t willing to spend there money, the economic numbers will continue to contract. The process feeds on itself. More people loose their job; therefore, less are willing or able to spend, bringing the result that more consumer related companies will cut employment.

The scariest part of this situation is the enormous printing of money the government is currently doing to stave off the crisis. These funds are jammed up in the system right now. Once the get unclogged, massive inflation could be the result.

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Chris,

Given there are so many extraordinary disconnects between the "information" that the "government" provides and the reality that is so painfully apparent to anyone with a brain cell and a pulse:

  1. why has nobody come forward from one of the fuzzy number crunching crews and exposed what’s going on?;

  2. who exactly is "The Wizard," and where did he/she/they acquire a gall (as in "some gall…") of that size?

The models: I know people (non-thinking) often trust the tools/models they have, simply reporting whatever the guage or screen tells them; as you or any other sensible person who has a science/math background know, there are those students who punch the numbers into their calculators for, say, a simple volume calculation of a cube that will fit on the average desk, they get a number that represents the volume of the nearest dozen galaxies, they write the number down and proceed to the next problem…

Is that what we’ve got here? Fuzzy-number bots? People who haven’t the common sense of zuccini?

And if that is the case, someone made the tools and models that are given to the bots to use; those people must at least question the models they’ve developed? No? Unless there truly is a curtain behind which they are sitting and purposefully manipulating The Show…

I am having a hard time reconciling the utter absurdity of the government’s numbers with the conspiracy it would require to cover up such an enourmously brazen deception of a nation of people–among which there are one or two who should be challenging these things in court.

What exactly is this thing we have been calling the U.S. of A? I am beginning to think like people I used to call crazy! WTF is going on here?

4

Nonzeroone: I’m with you on this.

My own thoughts are that understanding the numbers takes a small bit of work or at least psychological strength to face the realtiy. Our population is weakened by its binge on entertainment and consumption. The mainstream media doesn’t help this at all.

It takes both intelligence and inner strength to admit we’ve got some big problems. It takes the same to admit our government has been dishonest with us.

Eventually, the masses will wake from their slumber, I only hope that it is not then too late.

Mike

5

jobs are one thing but what about the small business owners who are closing up shop?.

are there any stats on those numbers?. i know many in construction who are self employed and are not eligible for unemployment and can not find work. where do they fall?

this is not to mention the vast numbers of immigrants who have gone home because there is no work,

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Joe2Baba:
I couldn’t agree with you more!
We are getting clobbered now. Our residential work has shot up, even folks unemployed are paying and using us. Businesses are unable to pay us becuase they aren’t getting paid. For the first time in 10 years she has had to turn stuff over to collections.
I truly feel that the USA is Enron. http://www.videosift.com/video/Enron-The-Smartest-Guys-in-the-Room
Our books are so cooked, I’m not even sure economists or politicans or govt. officials or wall street get this. To me, Ken Lay, Fastow, Scilling - all saying everything is good, buy, buy, buy - are just faces. The faces we see now are just different, Paulson, Bernanke etc.
The deck of cards is coming down. We will wake up as broke as the poor b@st@rds who worked and invested their life savings in Enron. I’m glad these guys (statiticians) don’t have A&P (Airframe and Powerplant mechanic) liscenses for if they did the guages in the cockpit would all be in the green as the engines melted off the wings with two bumbling idots in the cockpit too suicidal or too stupid to know better.

7

It’s not a "enormous conspiracy" in the traditional way people tend to think of such things with secret agreements to silence and all that.

Rather, it’s as Kevin Phillips describes (somewhat brilliantly) in this Harper’s article (which is in my Essential Articles section - everyone should read it). How can our official numbers be so bad and how did they get that way?

"Pollyanna Creep" is an apt phrase that originated with John Williams, a California-based economic analyst and statistician who "shadows," as he puts it, the official Washington numbers. In a 2006 interview, Williams noted that although few Americans ever see the fine print, the government "always footnotes the changes and provides all the fine detail. Nonetheless, some of the changes are nothing short of remarkable, and the pattern over time is what I call Pollyanna Creep."

Williams is one of the small group of economists and analysts who have paid any attention to the phenomenon. A few have pointed out the understatement of the Consumer Price Index — the billionaire bond manager Bill Gross has described it as an "haute con job." In 2003, a University of Chicago economist named Austan Goolsbee (now a senior economic adviser to Barack Obama’s presidential campaign) published an op-ed in the New York Times pointing out how the government had minimized the depth of the 2001-2002 U.S. recession, having "cooked the books" to misstate and minimize the unemployment numbers.

Unfortunately, the critics have tended to train their axes on a single abuse, missing the broad forest of statistical misinformation that has grown up over the past four decades.

 

8

Some thoughts and questions here.

Why would job losses subside in 12-18 months? Does subside mean stop hemorrhaging (reduced to a very small amount or perhaps flat) or does subside mean the restoration of growth, even at a minuscule rate? What would be the reasons for job growth – and, therefore, most likely GDP or some other statistical growth as well – in an economy that is on the trajectory that ours and the world’s is currently on?

I hate to say this, but of course the bottom is out in front of us somewhere. I mean, if it weren’t, what’s the point of this very website? Well, to answer a rhetorical question, the purpose of this website is to alert people to what one man feels could be a significant and perhaps even disastrous change in the lifestyle and social conditions of the US and much of the world because of an overwhelming and compelling data set.

Also, when speaking of bottoms we should always say of what. The bottom of lost jobs, the bottom of the Dow, the bottom of the housing market, the bottom of foreclosures, etc.

In 12-18 months (mid-2010) we may well be experiencing the first food and fuel shortages, as the delayed reaction of the volatility of oil prices continues to ripple through the system. More ARMs are scheduled for reset in the 2010-11 than I believe have already reset. And as the housing market heads towards its nadir, perhaps sometime in the 2012-14 window, we’re only headed for more foreclosures, more "underwater" mortgages, more abandoned and subsequently vandalized homes, more abandoned developments, more abandoned strip malls because of the abandoned developments. I’m not being negative here but simply following the mathematical trendlines.

Doesn’t it seem like the global juggernaut has a lot more bottoming out to do before we reach something that vaguely could be called equilibrium, a place and a manner that could be sustained for decades?

Couldn’t the absolute bottom (to maybe coin a new term) – a place where everything has worked itself out, redundancies eliminated, sustainable practices attempted and sussed out, new financial infrastructures put into place, governmental structures rearranged along more regional and local lines – be something like 20 years out?

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Another great site for everyone here to visit is Shadowstats.com. The real numbers are given there along with an explanation.

10

Here is an article that is apropos of this conversation:

http://www.commodityonline.com/news/Revolution-food-riots-in-America-by-2012-13062-3-1.html

One might be inclined to dismiss it as the ravings of a lunatic, but this particular lunatic has an excellent prediction track record. At any rate, it’s worth familiarizing ourselves with the worst case scenario. Better to be over prepared than underprepared, I think.

Arthur

11

How about the bottom of Capitalism…

12

I am looking forward to seeing some American ladies added to the "mail-order bride" catalogues. It is good to have variety.

13

Was reading on another chat site that Several TV economists (haha) were saying the worst is over too. based on historical models. economy should be going back up by summer. Ha ha ha. Some people will say anything. I posted the article. Considering they are saying this before we even know if any of the big 3 will be seriously laying off more along with those little companies around them. I dare say they need to defog their rose colored glasses. ( Many pilots and other related workers have been laid off as well as freight pilots of companies that flew to different places bringing in parts for those cars they build at the main plants.) Some of pilots also fly the "bigwigs" around and those people are not even looking until early 2010 before they see a recovery worth noticing. It says a lot when they don’t watch the same news that the "unwashed masses" watch.

http://www.cnbc.com/id/28069440/site…t%7C&par=yahoo
Huge Job Losses Could Be Signal That Worst Is Over
The sky has fallen. The sun also rises.
If there was ever a time to remind investors that the labor market is a lagging economic indicator, economists say today is such a day. Once the knee-jerk, doom-and-gloom reaction is over, something resembling optimism will prevail with the conclusion that the worst is over for the economy.
“This is history,” says veteran Wall Street economist Ram Bhagavatula. “December payrolls will be weak as well. The leading indicators will come from a slow re-activation of the credit markets and increases in consumer spending. You should begin to see that in the next couple of months.”
Bhagavatula is among a growing number of economists who say the seeds of recovery are already in place, even if they are revising their forecasts for GDP contraction in the fourth quarter to show an even greater decline.
"Every recession has its worst day, and this is probably the worst day," says Chris Rupkey of Bank of Tokyo-Mitsubishi.
Economists point to historical data and recent developments as solid grounds for optimism.
"This number is a unique number because it reflects an unprecedented economic situation, which began with the bankruptcy of Lehman on Sept 15, “ says long-time Fed watcher David Jones, of DMJ advisors. “The economy has never been shut down as quicly as it was following that bankruptcy. The economic response to that cut off in credit is unprecedented.”
Jones points to significant downward revisions in September and October payroll losses.
Indeed, the November payrolls decline of 533,000 was enormous and the biggest since December 1974, when they dropped about 600,000. But declines after that month—in what might be considered closer to the end of the recession than the beginning—were much less severe.
“Severe drops like this (the Sept.-Nov payrolls ) cannot be sustained,” says Robert Brusca, chief economist at Fact & Opinion Economics. “It suggests we are getting so weak there will be a turnaround."
One-off staggering declines in GDP are also not unheard of. At its worst in the 1980 recession, GDP fell by 7.8 percent. In the immediate aftermath of the jobs data release, some economists said the fourth quarter contraction could hit 8 percent. The consensus, which happens to be shared by Jones, is 5 percent.
“The fourth quarter will be the cathartic period,” says Brian Bethune, senior US economist at Global Insight. “Once you have a steep drop like that, even a steady weak state starts to look better.”
Economists say there’s a lot of tailwind to drive an economic recovery and already emerging signs of one.
“There’s now starting to be some visibility about how this might end.” Says David Resler, chief economist at Nomura International.
Resler and others point to a host of mitigating factors, including sharply lower gas prices, the steady and gradual decline in Libor rates and the very recent improvement in the mortgage market, a revival in the corporate bond market and the massive stimulus package expected from the Obama administration as soon as possible in January.

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Economists point to historical data and recent developments as solid grounds for optimism.

This never ceases to amaze me. The "Pollyanna" approach to modern economics seems to me to be a lazy way out. "It happened this way before so it will happen this way again." Do any of these so-called "economists" bother to look at the larger picture? Do any of them actually use that lump of gray jelly in their skulls we like to call the "brain?"

I wish they were right, but I’m not counting on it.

Arthur

 

15

I’d like to refer the readers of this thread to a forum I posted several days ago. It addresses some of the things Arthur is mentioning above.

But for those who may not have the time to read it, some questions.

What will the source of an economic rebound or turnaround be? Or, how could there be a turnaround considering the following:

Household debt is maxed out.

Household savings are non-existent.

Credit is contracting, recent reports say by almost half over the coming year.

Unemployment and underemployment are at historically high levels (and going higher?) if one looks at the unmanipulated data.

Real wages have been stagnant for a quarter century.

Home prices will continue to sink, through perhaps as late as 2014.

Individual financial and economic literacy remains non-existent.

National debt is at an all-time high and definitely going higher.

The Federal budget deficit is at an all-time high and heading higher.

In fact all levels of government are drowning or about to drown: city, state, local.

Just to name a few.

Hardly the conditions one would imagine for a robust recovery or the feeling known as optimism.

 

16

You guys are so right. It reminds me of all the bottoms that they began calling to the housing market in late 2007 and early 2008 before it really began to crater.
I’ve seen the hands of altimeters snap, unwind and spin down slower than this thing.
Do you think we will get hyperinflation or the destruction of the bond/dollar before goods and services hyper deflate? I’m thinking until Benny Boy goes "willy nilly" with tax payer rebates, huge tax payer reabates, that this thing has too many holes to re-inflate. I mean really, who is going to buy even if foreigner sell bonds?
Oh well, it is still entertaining to see Benny Boy go willy nilly giving money to corporations, overpaid retarted executives and bloated governments.

17

I think an important thing to point out here is that the powers that be will do everything within their means to "engineer" a "recovery" just as they’ve done so many times in the past. They’re so desperate right now (do Bernanke’s eyes get redder and smaller by the week) that they’re willing to take unprecedented measures to prop things up for mere months or perhaps even only weeks. Each day the illusion is maintained is a victory for them at this point. I wouldn’t even be surprised if we get a little post-inaguration into early spring rally in stocks. Of course, it won’t mean anything – the stock market is pretty much decoupled from the real economy and is almost purely symbolic – as most other "fundamentals" will continue their journey down the toilet bowl.

18

[quote=cmartenson]

"It is blindingly obvious that the U.S. labor market is in a terrible state and is deteriorating rapidly," wrote Ian Shepherdson, chief domestic economist for High Frequency Economics. He expects the job losses "to accelerate over the next few months, peaking - hopefully - in the early spring."

The rate of decline may taper off in the spring, but the losses will probably continue throughout the year. "The eventual peak [in unemployment] will be close to 9%," Shepherdson said.

My own thought is that this cycle is not going to play out like past cycles and that job losses will not subside for another 12-18 months. My reasoning? The US economy is an 80% service economy and those jobs are sensitively dependent on an expanding economy.

Since our economy has not yet displayed any signs of responding to the trillions and trillions thrown at the banks I consider it very likely that the bottom is still out in front of us somewhere and that job losses will continue to mount until 3-6 months after that bottom is made.

[/quote]

 

Chris and Others…

 

We must accept were dealing with incomplete data and questionable…flawed ASSUMPTIONS. Add what is happening in energy (Oil…Alt. Energy), other commodities, plus reactionary government actions that harm more than help. Were on a wild ride to somewhere with exact path and destination unknown…except its down economically.

 

Tend to be more inclined with a monthly longer term job loss slope of 300-600+K…take 12-18 months as Chris referenced is not unreasonable. So…talking in ball park of unemployment rate 10 to 13 percent early/mid 2010 per BLS calculations. If you look at "non-fudged numbers like shadowstats…were would be pushing 15-20 percent.

 

FWIW…since almost every "expert" has missed boat past 6 plus months (excluding Chris and a few others)…reckon I can speculate as well as them. It’s compelling how well Chris has discerned this past several months…for his acumen and others to continue we all must be using best decision-making principles in a dispassionate manner.

 

Question is…will we have marches…hyperinflation…tax revolts within 2 years. In other words, how will "the people" react?

 

Nichoman

19

 

Damnthematrix…

 

Not about Capitalism…but more an unsustainable path per Chris’s CC.

 

My 2 cents.

 

Nichoman

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There is nothing unsustainable about capitalism. The unsustainable aspects are the growth and the monetary system.

And nichoman, I agree with you. I think at this moment, the potential political and military actions scare me the most. Too many Americans are over taxed and overworked while the elite continue to plunder their wealth. One way or another, that situation is unsustainable. Collectivism is not the answer as that just concentrates more power in the hands of an even smaller group of elitists.

I believe the key linchpin that makes the recession "different this time" is oil. In the '20s and '30s, the USA was swimming in a sea of black gold. Today, the USA is very dependent on an increasingly small number of exporters.

In a broader sense, I don’t know how I could even define a "bottom." Until we have resolved our issues with oil, I think the general trend will be downwards. We should embrace the recession and the restructuring it is creating. The truly unproductive occupations will hopefully disappear and everyone will work towards an economy that produces useful goods. As Chris has said "if we are clever about it, I believe we can work it out." Unfortunately, a lot of the lies, manipulation, and greed we see today might prevent cleverness from emerging.

 

Mike