Lying with Statistics: the September Jobs Report

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. We have coined this term to describe the current monetary and fiscal policies of the U.S. government, which involve unprecedented money printing. This is the official blog of the New York Investing meetup.

One month before the presidential election, there was suddenly a major reversal in unemployment trends that have taken place during the entire administration of the Obama presidency. The figures indicate explosive growth is taking place in the U.S. economy and this has occurred overnight. The explanation of where this growth is coming from or how it has happened is illusive.

Unlike the previous four years, large numbers of jobs were supposedly created last month. Actually that's not exactly the case. The household survey reported 873,000 jobs were created, whereas the business survey reported 114,000 — a typical amount. In previous months, the household survey has actually indicated major job losses. The mainstream media has failed to report this. However, when a number suddenly appears that lacks credibility in the same survey, but that number is positive, it apparently is worth reporting. 

Where did these jobs come from?  It's not clear from the report. It was specifically stated that "manufacturing employment edged down in September". There was a loss of 16,000 jobs, so there is no evidence that U.S. manufacturing is on the upswing. Based on the following statement, 600,000 people were hired part-time last month: "The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) rose from 8.0 million in August to 8.6 million in September". This is a huge change. Where are these part-time workers employed and what were they hired to do? Will they be fired the day after the election?

Perhaps even more amazing is that the BLS reported that the U.S. labor force grew in September 2012 for the first time in years. From August 2007 to August 2012, the U.S. labor force shrank like it would during a depression with a total 9,602,000 people leaving it. It abruptly increased by 418,000 last month. What caused such a large number of people to suddenly influx into the labor force? GDP last quarter barely grew indicating a stagnant U.S. economy.

The number of unemployed persons, at 12.1 million, supposedly decreased by 456,000 in September. The BLS stated that the unemployment rate fell to 7.8% —  the first time it has been below 8.0% since just after President Obama took office. The continual multi-year unemployment rate of over 8.0% has been a major issue in the presidential election.

The numbers in the September employment report are quite fantastic and there is no basis for believing them. Disreputable statisticians can easily produce highly unreliable numbers. If statistics are inconsistent with the past, with each other, have no traceable explanation or seem contradictory with real world observations, they are suspicious. In the case of the September employment report all four criteria have been met. The quality of U.S. economic numbers have been decaying for the last 30 years. They seem to currently be making the transition from manipulation to outright fantasy.

Disclosure: None


Daryl Montgomery
Author: "Inflation Investing - A Guide for the 2010s"
Organizer, New York Investing meetup http://investing.meetup.com/21

This posting is editorial opinion. There is no intention to endorse the purchase or sale of any security.

July Jobs Report Shows U.S. Economic Statistics Are a Joke

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. We have coined this term to describe the current monetary and fiscal policies of the U.S. government, which involve unprecedented money printing. This is the official blog of the New York Investing meetup.

According to the Labor Department, the U.S. added 163,000 jobs in July. Also according to the Labor Department, the U.S. lost 195,000 jobs in July. So the U.S. economy is either doing OK or it's falling apart big time. Or maybe something between the two is happening. Confused? You should be.

Two separate surveys are used for the employment report. In one, they ask businesses about the amount of hiring they've done in the previous month and in the other the ask people whether or not they have a job. The amount of jobs created for the month is determined by the business survey and the unemployment rate from the survey of households. As more than one article on the July employment report pointed out today, "economists say the business survey is more reliable". So if you think you're unemployed, but an economist says you have a job, the economist is right.

The unemployment rate ticked up to 8.3% according to the household data.  The two surveys have frequently not seemed to match in the past with minimal job gains resulting in drops in the unemployment rate. The Labor Department explained that this occurred because millions of people have left the U.S. labor force since the "recovery" began in 2009 (150,000 more left in July). Even though these people are unemployed, they are not counted as unemployed and this makes the unemployment rate look better. Why millions of people would stop looking for work during a "recovery" has never been answered. Usually, this type of behavior takes place during depressions.

The Labor Department did not discuss the massive discrepancy between its two employment surveys in its press release. Instead it gave a rosy assessment of all the jobs created last month. This included 25,000 new jobs in manufacturing, even though the recent ISM Manufacturing report (a private survey) indicated U.S. manufacturing activity shrank last month.  So an industry that is losing business is hiring lots of new workers. That certainly makes a lot of sense all right.

One possible explanation for the discrepancy was that "inappropriate" statistical adjustments were made to the numbers in the business survey. While one should never rule out gross incompetence when discussing the output of the government statistical offices, a more cynical person might think that there was a purposeful effort to produce better numbers than actually exist because it's an election year. After all, those pesky downward revisions months later never get any notice from the press and the ugly truth can always be told later when no one is paying attention (and after they've voted).

Disclosure: None

Daryl Montgomery
Author: "Inflation Investing - A Guide for the 2010s"
Organizer, New York Investing meetup
http://investing.meetup.com/21

This posting is editorial opinion. There is no intention to endorse the purchase or sale of any security.