Was today’s unemployment release another Orwell sighting? Reader (and economist) Gonzalo Lira thinks the numbers were more than a tad tweaked to produce a more palatable result
“We’re leveling off! We’re leveling off!”—so is the hope of Turbo Tim, Helicopter Ben, Larry the Wall Street Lackey and the rest of Team Obama. “This recession is leveling off!”
No it’s not: The unemployment figures just released by the Bureau of Labor Statistics are totally cosmetic: We lost a whole lot more than 531,000 unemployed.
First, the “seasonal adjustment”, which is a black box that can tweek me into looking like Dumbo the flying elephant. They’re knocking off ±65,000 workers for no clearly discernible reason.
Second, notice that the Census Bureau hired 60,000 people last month. Those workers (by definition) are temporary, and are a net cost to the economy, as they will not be adding marginal utility to any economic sector, the census being merely a social expenditure.
Those two items alone turn 530,000 new unemployed into 655,000.
Now notice how, once again, previous months’ figures have been readjusted. This time, the readjustments weren’t so bad—a mere 30,000 more unemployed in February, turning that month’s official totals to 681,000, and another 30,000 for March, making that month’s official number 699,000, just shy of that magic 700,000 monthly number (BTW, remember back in the good old days when 300,000 monthly unemployed was “shocking”?)
But notice too: When those more realistic numbers were released, the markets were more or less copacetic—at least they weren’t nervously contemplating another suicidal round of cliff-diving, as we currently are. Ever since the October ’08 release of Sept. ’08 unemployment, when arguably the BLS numbers had a role in triggering the sell-off of
that very nasty month, the unemployment numbers have been generally rosy whenever there’s been general nervousness in the markets around the time of the number’s release. I know this sounds crazy-man
paranoid, but bear with me: Every time the markets have been nervous, the BLS numbers look pretty good, or at least not that bad, relatively speaking—and then the next month the figures are very quietly revised, sometimes by as much as 35% on the upward side.I will bet one double Quarter Pounder with cheese and bacon that next month, the revisions of the April numbers will be on the order of an additional 85,000 unemployed. My guess is that, discounting the Census Bureau hirings, April saw 680,000 newly unemployed workers.
That would mean that unemployment isn’t accelerating—but it’s still growing fast enough to scare the hell out of anyone sane. And anyway, what industry or sector of the economy will be able to absorb all of those unemployed workers in the near-term future?
Now wait for May and especially June numbers, when 2 million new college grads can’t find steady work.
This baby ain’t over yet.
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Is it not obvious by now?
The Obama plan is centered around letting the banks trade themselves to profitability. Who else could possibly be driving this market into its current delirium?
And if that plan fails, Plan B is to hope people make enough money off market speculation to forget that real jobs are evaporating. I’ve read a lot of commentary on the end of financial capitalism as we know it, but what if it gets WORSE? The rest of the economy is blown to smithereens, so it’s the only horse left in town.
Rather than being the economic game-changer everyone has been talking about, what if this great depression/recession is the final step towards the complete financialization of the economy, when numbers on screens throw off their last tenuous links to that thing some of us call reality?
And what does it matter, right? Money is money as things stand today, whether it is made producing something of REAL value, or whether it is made tracking a line on a screen and pushing a button. The line on my computer screen says up, so everything must be alright.
If that is the preferred exit strategy to this crisis, then we are all in serious, serious trouble. I hope stock certificates taste good. (wait, I don’t think those are even physical anymore either!)
The BLS is notorious for its revisions. The key catalyst for the improvement during the month was public sector hiring,due to 2010 Census hiring. At the industry level, losses in the manufacturing services nd retail trade remain brisk, suggesting the labor market remains very weak.
But the optimists will tell you the pace of deterioration is easing. One month’s data does not confirm this but if the next three months improve somewhat, then we can probably say the worst is behind us.
Still, the staggering job losses since last January (5.6 million) suggests that the recovery will be very tepid, perhaps the worst jobless recovery ever.
cheers,
Leo
There is also the fact that Easter fell in April this year … last year it fell in March …
So you at least need to average the two months to get a real number going forward …
great article …
The seasonal adjustment is an art rather than science. X-12-Arima is being used by Census and BLS to calcuate the seasonal adjustments. B of Lies and Statistics stopped using the X-12 numbers from Dec 2008 onwards and kept the official numbers much lower – as much as 0.5% lower. They can defend that practice by stating the obvious – seasonal adjustments is an art.
The pool of college grads who won’t be able to find work will again be “absorbed” by the art of seasonalizing.
The pool of college grads who aren’t able to find work is huge and growing. Both of the universities I am a graduate of have been pleading with alumni for any information we might have on job openings available. I’m doing my best to help, as I have a family member who is in the recent graduate pool, but the numbers are dismal; I have heard that one of my alma maters, a top-ranked business school, is facing a 40% placement rate. The situation facing college graduates right now is absolutely bleak, and if the unemployment numbers do not show a huge jump in the next two months, we are being lied to.
Right now the only place hiring in significant numbers is the government; and I am hearing through my contacts in government that new hiring is taking time due to the flood of applications they are having to sort through. However, I should note for the banking veterans who read this blog that the FDIC is especially interested in experienced bankers right now. If the banking crisis has passed, the FDIC has apparently not been informed of that fact, as they are hiring hundreds of new people.
Give me a break.
Re: seasonal adjustment. The difference between the nominal and seasonally-adjusted figures for the last 10 Aprils averaged at 760,000 jobs. This April, it was 780,000. That is, the +240,000 in nominal jobs was seasonally adjusted into a -539,000, and the downward adjustment was slightly more than average. What’s up with the +/- 65,000???
NicktheLame, what’s the source of your statement that BLS is not using X-12? What are they using, if not X-12?
“BLS is notorious for its revisions…” The source of the revisions: late reporters in the monthly sample of employers. You have to go with the sample you got. Especially in this environment, a lot of employers are late in filling out the form and sending it in.
The faceless bureaucrats who produce these numbers don’t give a rip about Wall Street. What they care about is being accurate.
This post strikes me as “the numbers didn’t come out the way I expected, so they must be fudged!” Maybe there will be revisions next month–but they will be based on more sample reports from employers. But maybe this was just one of those months. Looking at past recessions, there are always bumps in the data. I don’t mind paranoia, but let’s ground it in a kernel of truth.
HOPELESS OPTIMISTS make me laugh. Anyone that even hints that the worse is behind us or that we are at the bottom and Green Shoots are all abound is delusional. WAKE UP YOU ARE BEING LIED TOO AND YOU KNOW IT!
1.) Banks report Q1 Profits! (Could that have anything to do with MARK TO MYTH ACCOUNTING?)
2.) 9 OF 19 BANKS TESTED FAILED THE STRESSLESS TEST (Even with Mark to Myth Accounting)
3.) Unemployments REAL FIGURE is more like 16 – 17% Unemployed.
4.) Commercial Real Estate rents & values are just now collapsing. (effects of which our banks haven't felt yet)
5.) The Fed is printing money to buy Treasuries because China cut up our credit card. (The dollar will sink, interest rates will rise and Hyper Inflation is on its way soon)
I could keep going, but hopefully you get my point. President Obama and his Administration is just painting a Rosey Picture until the TSUNAMI hits. It's the only thing that they can do at this point. If you want to believe MSM's and the Gov's lies go ahead. (Ignorance is Bliss)
“Now wait for May and especially June numbers, when 2 million new college grads can’t find steady work.”
Expect gov’t layoffs to kick in over the summer, too. Many already have their layoff notices, but are still working. The notice periods will expire soon.
So, you’re saying more like 680K? Does that even take into account Birth/Death model tweakage? Or just seasonal adjustment tweakage plus a little bit of subsequent month revision fudge factor tweakage? The Birth/Death adjustment for April was 226 thousand jobs. If that’s not fantasy land I don’t know what is. There is so much garbage in these numbers, they’re worse than worthless.
This is primarily for Ed (below) but fits in here too (maybe, probably not, maybe) with statistical illusions.
I feel free to add that unemployment often improves in a recession because fewer people are looking for work, and obviously fewer jobs exist to find, thus one should not read too much into these little changes in trends… other than that, I beg for forgiveness and offer myself prostrate before your will and Tender Mercies .
Background and History of the NIPAsHowever, when the components of an aggregate include large negative values, the Fisher formula may require taking the square root of a negative number.
For these aggregates, another method for calculating chained dollars must be used. The inability to calculate a particular Fisher quantity index (for example, change
in private inventories) because of negative values usually does not extend to the calculation of higher level
aggregates (for example, quantity indexes for gross private domestic investment and for GDP can be computed). The calculation of contributions to percent change is not affected by negative values, so they can be calculated for all components.
Ed, I’m sorry to place that in here, but it doesn’t fit anywhere else, and I had no other choice other than placing it here. What was I to friggn do, not post that or just bookmark it and shut the hell up ….. nah, that didn’t feel right, so there yah go, and now it’s outta my system and in your hands, and I’d like to thank you once agin for your GDP post and ask one more favor, while I have you here, but obviously anyone else can feel as free as I do and thus jump in here to reply to this Q: How has population been impacting GDP? For that matter how would population impact unemployment? That kinda works …. huh, huh?
Also see:
Series: GDPDEF, Gross Domestic Product: Implicit Price Deflator
U.S. Population 306,384,321U.S. Population mid-2008 305 million
How does population increase impact unemployment?
Hey, Everyone – it’s Friday. Go out and have a drink with some friends and try to enjoy some time together. Who knows what we’ll be doing next year!
If you stand on your head and squint, the April job numbers actually do look pretty good. Alcohol also helps this process.
I don’t really understand the statement that census workers don’t add marginal utility. The census is important — better information means better decisions means more efficiency means more utility. Sure they’re public sector, and so we shouldn’t just blindly equate their value-added with cost, but the jobs in question certaintly aren’t worthless.
doc:
Do you post on Slate also? You look familar.
How does population affect Unemployment? Not sure if I understand the question; but, I will try. If job creation does not keep up with population growth they end up in Not In Labor Force rather than the Civilian Labor Force.
What is interesting is Participation Rate jumped 3 tenths of 1% to 65.8 from March to April. I have never seen that happen before in the last decade. Obama’s extension of Unemployment Insurance may have draw those people into the Civilian Labor Force from Not in Labor Force. They are counted as looking for work rather than discouraged and not looking. That is a significant jump. It could also be the Census also.
Can anyone provide a historical context that would allow us to see how current US unemployment compares to the US in the 30s or the Weimar earlier?
Question?? Appreciate if someone could explain:
The quote, “the “seasonal adjustment”, which is a black box that can tweek me into looking like Dumbo the flying elephant. They’re knocking off ±65,000 workers for no clearly discernible reason.”
IS this normal for every month?? so does that mean every month so far needs to have their number revised, and an addition (about) 65,000 jobs loss need to be included in the unemployment numbers? thanks for the explanation.
good article.. I can personally vouch for 2 students, from top 10 univeristies who are having an extremely hard time finding a job. They interned at a couple of companies over their 4 year schooling period, and these 2 students thought this might give them a leg up, but that fortune 500 company is laying people off and not really hiring.
The 2 million figure might be overshot, my guess would be between 1 – 1.5, and of those at least half will not find work they trained for.
Very sad, but with Obama’s economic policy, companies are not willing to make new invesments, and hire (One of the HR people so much as told the students I know.)
run75441,
Population interests me because you have about a 2% annual population growth rate, which must influence employment metrics in terms of adding more people to a shrinking job market.
I take it that these additional new humans, many of which are working age, are not just members of the birth/death rate adjustments, but perhaps people related to immigration.
As an example, in the housing boom era, there were a lot of jobs available and many people south and north of “our” border were added to positive employment reports — reports that helped push the bubble of The Owner-Ship Society. Construction jobs fueled the economy as report after report praised the housing market for helping hold the economy together (with multiple layers of fraud, collusion and corruption).
Let’s just say that during The Bush Coup, there was a potential increase in population of 16%, e.g, Total US Population in 2000 was 281,421,906, but that increase of 45,027,504 that would have brought us to about 326,449410, didn’t officially occur, because we now have an estimated 306,384,321 people (accounted for). U.S. Population mid-2008 was 305 million.
So, my question is, how does population distortion influence employment and GDP. I know some people used to think in terms of GDP per capita, because population can overestimate or underestimate output.
I guess the bottom line, is that we have fewer jobs in a weak economy, an increased supply of people and apparently a labor market that connects TARP funding to a black market of underground labor …. or something like that, I don’t know, you figure it out!
More on conspiracy theory:
The Government’s Macroeconomic Series: X-Files, Dilbert, or Resource Constraints?
I think B/D model over-estimates in a recession because it uses averages grounded in the last expansion.