Good News on the Job Front

[Jeremy Roenick]

So I guess the CBO has an agenda as well, huh NC.  Or maybe you missed their analysis last week that stated the real unemployment rate would be closer to 10% if you factored in the plunging labor force participation rate....

http://www.scribd.com/embeds/79972330/content?view_mode=list&start_page=1&access_key=key-m8jo4qvjqkauvuq9z44&

Participation in the Labor Force. The unemployment rate would be even higher than it is now had participation in the labor force not declined as much as it has over the past few years. The rate of participation in the labor force fell from 66 percent in 2007 to an average of 64 percent in the second half of 2011,  an unusually large decline over so short a time. About a third of that decline reflects factors other than the downturn, such as the aging of the baby-boom generation. But even with those factors removed, the estimated decline in that rate during the past four years is larger than has been typical of past downturns, even after accounting for the greater severity of this downturn. Had that portion of the decline in the labor force participation rate since 2007 that is attributable to neither the aging of the baby boomers nor the downturn in the business cycle (on the basis of the experience in previous downturns) not occurred, the unemployment rate in the fourth quarter of 2011 would have been about 1¼ percentage points higher than the actual rate of 8.7 percent. By CBO’s estimates, the rate of labor force participation will fall to slightly above 63 percent by 2017. The dampening effects of the increase in tax rates in 2013 scheduled under current law and additional retirements by baby boomers are projected to more than offset the strengthening effects of growing demand for labor as the economy recovers further.

[Sasquatch]

Here is the U6 chart from 2000 til 2012. WOW! I don't think I have ever seen this. The good news? It did drop some in 2011. Although, how much has the Labor Force Participation Rate affected it? Ummm, ummm, ummm:

[Jeremy Roenick]

I've often said that the more complex statistics are the more they confuse people, and the more simple, straightforward statistics are the easier they are to understand, teach and instruct with.  I've believed this since my college days.

Case in point.  The BLS stats factor so many variables (seasonal adjustments, birth/death etc) but a real easy way to look at this is income tax collected vs. actual workers (head count).  Trim Tabs' CEO explains this in simple, straight forward detail.  Something in the BLS' report doesn't add up.

http://www.youtube.com/watch?v=bCA8tR99ORA&feature=player_embedded

!

[NCVol]

So I guess the CBO has an agenda as well, huh NC.  Or maybe you missed their analysis last week that stated the real unemployment rate would be closer to 10% if you factored in the plunging labor force participation rate....

That's obviously a legitimate and informative way to understand the labor picture, and it's done by every legitimate economist who has looked at the employment numbers since the Great Recession began.  If ZH put up that analysis, I'd applaud them.  

Here's the bottom line, if you think their analysis of the 1.2 million drop in the labor force was legitimate, by all means trust their analysis of the BLS reports.  

The problem is it's easily proved misleading/lazy/dishonest.  I suspected the figures were bogus after reading one news report and then looking at your figures and it took me less than 10 minutes after I got back to my computer to confirm it, by posting a Table that BLS prepared just for the purpose of explaining the big spike.  If they omit that, it means they didn't READ it or read it and didn't care.  I'm not sure which is worse.  They're just not trustworthy on employment figures.   Bottom line.  If a reader has to go to the BLS report and confirm that their analysis, this time, is accurate, there's no point reading them ON THAT ISSUE.  Trading?  Absolutely.  That they know.  

As I said, read calculated risk.  He does the analysis and doesn't put up a post before he's had time to LOOK AT THE REPORT and ADD INFORMATION that you can rely on.  

It's not just this.  There are many other examples that we've been through on here.  Every month I debunk a ZH post on the BLS report.  

[NCVol]

The video makes a decent point - how do you seasonably adjust the numbers? 

The point is NOT that seasonable adjustments are bogus, because they're not.  Some months, the seasonable adjustments are NEGATIVE, so there might be 1 million jobs added, and the BLS reports 100k.  Over a year, the seasonable adjustments balance out.  For example, the NSA figures (I picked Table A-13) for January 2011 and 2012 are 137,599 and 139,944.   That is a gain of 2.3 million jobs, not seasonably adjusted.  Unemployed figures, NSA, are 14,937 and 13,541, a decrease of 1.4 million.

If this guy wants to do a legitimate analysis of the seasonable adjustments he should begin THERE, with NSA figures and then compare it to the monthly reports - they should add up to that number - and then highlight his fears/suspicions.  He doesn't do that.  So, what's the use of his analysis.  He could assign this to an intern. Why doesn't he do it?  I don't know. 

He also implies that Obama has ordered some change to the method of estimating employment.  That's reckless, since the BLS tells us where they get the figures and when and how they change it.  It is something you can determine, you don't have to guess. 

Also, the private employers use real time data to estimate employment.  It's another look at the figures and sometimes there is a significant divergence.  It's legitimate to point that out.  Does the real time data differ over a year from BLS? We don't know. 

Bottom line is he might be right, but he's guessing, and there is no particular reason to take it seriously. 

[Jeremy Roenick]

That's obviously a legitimate and informative way to understand the labor picture, and it's done by every legitimate economist who has looked at the employment numbers since the Great Recession began.  If ZH put up that analysis, I'd applaud them.

They did.  Check Feb 1 in their archives.

Bottom line is he might be right, but he's guessing, and there is no particular reason to take it seriously. 

   Ok, ok, ok....  So he's onto something, but he's not onto something.  So let's just dismiss this big bust in the comparison between jobs and income tax collected.  Trust the BLS and their secret formula.  They are beyond question!  got it....

[NCVol]

They did.  Check Feb 1 in their archives.

Well good 

Ok, ok, ok....  So he's onto something, but he's not onto something.  So let's just dismiss this big bust in the comparison between jobs and income tax collected.  Trust the BLS and their secret formula.  They are beyond question!  got it....

No, we have no idea if he's onto something because he threw a bunch of crap against the wall without the slightest bit of homework or actual analysis.  He thinks the seasonal adjustment might be too high... GREAT.  How does he know this?  It was a big number....scaryyy..... so it must be wrong....  BRILLIANT analysis!!! 

And you know what?  If the seasonable adjustment for January is too high, that means, by simple math of how these things work, some month in 2012 will report jobs gains that are too LOW.  It has to be that way.  And if the EVIL OBAMA wants to start fudging numbers, even the unsophisticated like me can figure out that it would be FAR better to have a BAD January (negative 50k!!!) and goose up August, September and October by 100k per month!  Who the hell is going to fudge a JANUARY employment number to win a NOVEMBER election? 

I promise, I'll take these kinds of SA is bogus arguments a lot more seriously when they actually make SENSE.  And I'll take these concerns a helluva lot more seriously when the first one of these doubters puts up a video questioning them when there are a million NSA jobs and BLS reports 100K.  "Why, how does an government agency turn ONE MILLION NEW JOBS into only 100k.  SCANDAL!!"   

I'm not worried about seeing that EVER.... 

BTW, I gave you the NSA figures for the whole year - postiive 2.3 million.  Sounds pretty consistent with the "fudged" seasonably adjusted figures to me, although I won't bother digging up 12 reports to confirm it. 

[NCVol]

BTW, ran across this little graph about initial estimates versus the revised estimate.  Seems I was wrong and Obama nearly always instructs the minions at BLS to release a huge jobs gained number with great fanfare then quietly revise them down each month outside the eyes of the lazy liberal MSM..... NOT!!!!

http://www.washingtonpost.com/blogs/ezra-klein/post/could-januarys-jobs-report-be-too-pessimistic/2012/02/03/gIQALt1pmQ_blog.html?hpid=z1




Lookee there, almost every month the revisions were UPWARD, for more jobs gained than the initial release!   

For most of 2011, the initial jobs reports frequently seemed dismal. Who can forget that dreadful August, when headlines trumpeted zero net jobs? But when those numbers were revised months later, they turned out to be significantly better. If you paid attention only to the initial monthly estimates, the economy added just 1.38 million jobs last year. But if you paid attention to the final revisions, the economy actually added 1.82 million jobs last year — twice as much as 2010, and a difference of 440,000 jobs:

You know, JR, I will bet this story does NOT get a mention over at ZH   

[Jeremy Roenick]

That's a good graph NC.  And it illustrates your point well.

To be honest the BLS plays more games with initial jobless claims than they do the NFP numbers.  Although I still stand by my claim that Decembers NFP will get lowered significantly when the revision comes.

And really, the BLS doesn't work in anything real for like one year down range anyway.  The monthly numbers are all based on surveys and projections.  Real numbers begin to hit the BLS almost a year downrange, so it's 12 months before they can really see how well they're projecting.

Irregardless.  The unemployment number, as I have always maintained, is a PSYCHOLOGICAL number.  95% of Americans go no further than that headline and percentage.  So if you're going to make any analysis of the NFP the more complexity you add to the formula, the easier it is to manipulate the desired out come.  If the NFP number was strictly just a thumb in the air figure and wasn't meant to manipulate people's perceptions of the job market or economy, then you'd simplify the formula and strictly use the number employed divided by the current workforce.  Why wouldn't it need to be any simpler than that?

[NCVol]

You know we agree on a lot of this.  Here's a change I bet never occurred to you - we used to count prisoners in the workforce!  They ARE unemployed!!   

It's one of many reasons why "our" 15% U-6, the most expansive number, is likely very close to the Great Depression "official" 20-25% days.  Shadowstats.com (SGS) puts it at 22.5%.  We just have food stamps, or there would be the same bread lines they had in the 1930s.  Point is, there is no doubt that the "official" number has been manipulated downward.  Greenspan presided over a lot of these changes, during the 80s and 90s as I recall - (weird how ALL the changes reduce unemployment, or decrease "inflation," or increase real GDP, etc.....) 

But the key is this - they TELL US HOW THEY DO IT.  Shadowstats.com goes into this in detail. 

And I happen to have some economist friends and acquaintances, and those people work with/associate with at meetings, etc. people who do stints at BLS, and they are NOT propagandists - they are gearhead econometric whiz kid nerds who spend a couple of years doing some of what i understand is cutting edge statistical sampling and analysis. 

So I just have little patience for the conspiracy theories. When Clinton kicked off people after a year - that "not in workforce" number, we knew it happened, and smart people like shadowstats then analysed the numbers, did the hard work, and revised them. What SGS didn't do was make up, with no evidence at all, allegations that the numbers might be, probably, who knows but this sure looks fishy, "fudged" - the method changed, and they tell us how. 

And I'm really tired of "economics" writers who are lazy or ignorant or both and pretend to inform their readers.  I seriously don't think ZH ought to comment on the BLS since they are worse than worthless.  You ought to be able to read commentary and not worry about whether it's simply WRONG.  Leave it to SGS or Calculated risk, or, yes, Krugman. 

Honestly, I'm not sure if some of the conspiracy peddling isn't to just make us immune to any data - hey, it's all fake.  Sometimes I can't make any more sense out of "why" than that.  Tax cuts increased the deficit by $2 trillion?  "Nah, bunch of manipulated numbers - tax cuts increase revenue, we know this..." 

[NCVol]

Two more points on the ZH stuff.  First off is...calculated risk.

http://www.calculatedriskblog.com/2012/02/employment-not-in-labor-force-actually.html

Some readers sent me a link to some terrible analysis that argued over 1 million people left the labor force in January. I pointed out the error. Apparently Rick Santelli at CNBC made the same mistake and reads the wrong blogs!

The "wrong blog" would be ZH.

Here's another take - bonddad - this is how I feel

http://bonddad.blogspot.com/2012/02/no-rick-santelli-and-zero-hedge-one.html

So Rick/Zero Hedge, unless you would like to argue that the population of the United States also grew by 1.5 million in one month (since that is from the exact same report/revision you quoted), I think both of you should retract your extremely misleading statements about those not in the labor force increasing by over a million in January and simply admit that you are either too stupid or too focused on selling a particular world view to read the data correctly.

And here's why it matters.  I go to ZH to see if they corrected their post - they did NOT.  And I see this comment. 

Indeed, the Tylers have arrived. I got to this article from a Drudge link this morning. Congrats, Tyler.

So this idiot ZH analysis was broadcast on CNBC by Tea Party fanboy Rick f'ing Santelli, and all their viewers were made dumber.  And it's hard to make Drudge readers dumber, but if it's possible all them are now dumber and less informed. 

This is why I have no patience for this coming from ZH. 

[Just Win]

Fact 1 - We Have fewer Americans working this month compared to last  month,

Fact 2 - More people are unemployed this month when compared to last month


Despite these two dreadful facts the Obama Department of Labor is alleging unemployment has gone down to an  ASTRONOMICAL 8.3% (Higher than the 8.0% were were told it would NOT exceed if we borrowed $1,000,000,000,000.00 from China for a Shovel-Ready Jobs Program.).  Can one of you condescending extreme left types please explain this illogical rot?