something smells fishy / Pimco on the employment data

nothing new to readers of the blogging world. it is very telling when one of the most important statistics is almost useless....remember this when you hear the "experts" yelling on cnbc etc after the number from friday......one can expect a mega revision downward in august......if you want more on this topc surf the labels with lots of frustrating details on how flawed the data is......

dürfte für leser der blogs nichts neues sein. es ist aber bezeichnend wenn eine der wichtigsten erhebungen komplett nutzlos ist....immer wieder lustig wenn man mit diesem wissen die "experten" auf allen kanälen zu sehen bekommt....erneut an diesem freitag zu bewundern..... es ist jetzt schon klar das die nächste revision eine echte hausnummer gen süden sein wird ..wenn ihr mehr details zur erhebung wissen möchtet bitte unter den labels stöbern..

Here at PIMCO, we continue to expect the unemployment rate to go up. Thus, we are still (painfully, since December) long of duration, concentrated in the front end of the yield curve. And why are we still bearish on employment growth?

First and foremost, unemployment is a lagging variable, notably of momentum in discretionary aggregate demand. And discretionary aggregate demand has been unambiguously decelerating in recent quarters, and not just in residential construction, as displayed in the chart below.

The Great Puzzle

So why hasn’t the unemployment rate already risen? It’s the great puzzle, in the words of San Francisco Fed President Janet Yellen. The short answer to the puzzle is that the labor force participation rate has fallen, accounting fully for the drop from 4.7% to 4.5% for the unemployment rate over the last year. But this doesn’t make sense when you look at nonfarm payroll growth, which, again in the words of Ms. Yellen, has been gangbusters.

The labor force participation rate is decidedly pro-cyclical, meaning that it goes up as tight labor markets induce new entrants into the labor market; and it goes down when soggy labor markets lead the discouraged unemployed to drop out of the labor force. So, the short answer to the puzzle is the right answer only if nonfarm payroll growth really ain’t gangbusters.

And new research by both Ray Stone4 of Stone and McCarthy and Sheryl King5 of Merrill Lynch suggest this is indeed the case. Please refer directly to their research for the exhaustive details, but the bottom line is simple. Detailed data in the Bureau of Labor Statistics (BLS) Business Employment Dynamics (BED) release, which comes out with a two-quarter lag, show employment growth of only 19 thousand in 2006Q3, while the nonfarm payroll tally for that quarter was over 450 thousand. More recently, the BLS’s more timely Job Opening and Labor Turnover Survey (JOLTS) for April – last month! – showed job openings rose only 24 thousand, with this series essentially flat since last August. The JOLTS report also showed that new hires in March (this data subset is released with a one month lag) fell 29 thousand.

Something smells more than fishy here. Not that I’m accusing the BLS of any skullduggery. None! Rather, it is a historical fact that nonfarm payrolls – before annual benchmark revisions, which continue for six years! – understate employment early in recoveries (leading to the inevitable contemporaneous label of "jobless recovery"), while they overstate employment late in expansions.

And a key reason is that the BLS, while very good at counting heads at existing firms, must make an assumption, in real time, about the birth-death rate for firms, so as to estimate the net gain/loss in jobs as firms open and close, a never-ending feature of a capitalist economy. In the early years of expansions, the birth assumption systematically is too low and the death assumption is systematically too high, which results in "jobless recoveries," which turn out to be not-so-jobless recoveries upon revision. The exact opposite holds in the late years of expansions and particularly in recessions. Such is the case, it would appear, at present.

Thus, in contrast to last August, when the job tally for the year ending March 2006 was revised up some 800 thousand, a stunningly large revision, the opposite is likely to unfold in this August’s benchmark revision for the year ending March 2007. Not to suggest, I hasten to add, that a downward revision equal to last year’s upward revision is in the cards. The honest answer is that we don’t know how big it will be. But available data, notably the BED and JOLTS data, point squarely to a downward revision.

So what, you say. Economists always bellyache about the quality of the data when they go against their forecasts. This is true. It is also true, however, that poor data can make for poor policy making, if and when the data is taken to be religiously true. This is particularly the case if the data is known to be lagging data of the business cycle, as is the case with the unemployment rate. Acting on the data, or refusing to act because of it, is the stuff of policy mistakes, sometimes known as recessions

as i´ve said before they should hire the "statz crew"..... :-)

Employment Numbers "Can´t Truss It" / Minyanville

click on the labels to read more about the bogus numbers.......and click on the headline to read the 4 other things you need to know.

mehr zu den unfassbaren ermittlungsmethoden des us arbeitministeriums unter den labeln...klickt bitte auf die überschrift um mehr von minyanville zu lesen.

Can't Truss It
So here's a song to the strong 'bout a shake of a snake, and the smile went along wit dat, can't truss it, according to Public Enemy and (finally!) the Wall Street Journal this morning.

• All the way back in 1991 Chuck D warned us that we can't truss it.


• Now, 16 years later, the Wall Street Journal is wondering if Chuck D was right.
  How is it, the Journal asks, that job growth remains robust even as the economy has slowed, especially relative to the housing industry?


• Housing starts in April fell 33% from their recent peak in January 2006, the Journal notes, yet the number of residential-construction jobs has dropped by only about 3% over the same period.


• After surveying a handful of economists, the Journal concludes that this must be because 1) layoffs have lagged the housing slump and the worst is yet to come, 2) the Labor Department's Bureau of Labor Statistics is overestimating employment, or 3) the BLS isn't registering job losses by illegal immigrants.


• Well bass in our face! Can't truss it.


• Like Chuck D we got a story that's harder than hardcore and one that, as incredible as it is to believe, wasn't even mentioned in the Journal story.


• The BLS's use of the Birth/Death model. Can't truss it.
  How a story about the economy slowing in the face of "robust job growth" can not mention even once the Birth/Death model is beyond us, but what are you gonna do? Ya can't truss it.


• U.S. job growth in April slowed to 88,000, but you can't truss it, because the Birth/Death model contributed 317,000 adds to those 88,000 jobs.


• Since the beginning of the year, the birth/death model has accounted for a net 388,000 jobs. Can't truss it.


• Last year it added 964,000 jobs. Can't truss it.


• We want to believe, of course.


• But because the Bureau of Labor Statistics refuses to allow academics and commercial economists access to the models they use for the birth/death additions, we'll stick to our song to the strong 'bout a shake of a snake, and the smile went along wit dat, can't truss it.

maybe the bls should hire this crew....

employment report april 2007

88.000.....plus downward revisions.......plus , plus, plus......

just one or two comments on the jobs report. the bls has assumed that in the year 2006 271.000 jobs were created via the "birth death model".

mhhh, now with gdp significantly lower and the economy clearly weakening they come to the conclusion that 317.000 were added. (especially the plus 12k in construction....)

this shows the problem with the model that isn´t able to adjust timely to swings in the economy. i think we will see a big downward revision in the future.

read more about this from barry ritholtz http://tinyurl.com/3bzw5n

so langsam machen die daten zumindest in etwa sinn. eine ausnahme ist allerdings das via dem birth/death model ein höherer ansteig als im jahr 2006 unterstellt wird. da inzwischen die us wirtschaft klar im trend gen süden geht werden hier noch gewaltige revisionen nach unten erfolgen. lest bitte unbedingt die erläuterungen zu dieser "eigenwilligen" ermittlung der daten von kevin depew....

2007 Net Birth/Death Adjustment (in thousands)

Supersector	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec
Natural Resources & Mining	-2	1	1	2
Construction	-52	11	27	49
Manufacturing	-23	3	6	3
Trade, Transportation, & Utilities	-29	10	19	30
Information	-9	5	0	7
Financial Activities	-17	11	8	26
Professional & Business Services	-48	28	21	44
Education & Health Services	10	12	1	47
Leisure & Hospitality	1	34	39	95
Other Services	-6	3	6	14
Total	-175	118	128	317

birth/death model http://www.bls.gov/web/cesbd.htm


thanks to http://www.glasbergen.com/

this comment from kevin depew (s.link mish) sums it up......

• According to Minyanville Professor Scott Reamer, since 1999 there has been only one other month in which the add was bigger, January 2004.


• For some perspective, in the 36 month period ending March 2002 - 36 months - the total adds from the birth/death model were 353,000. Over 36 months.


• Since the beginning of the year, the birth/death model has accounted for a net 388,000 jobs.


• Last year it added 964,000 jobs.


• The kicker is that the Bureau of Labor Statistics refuses to allow academics and commercial economists access to the models they use for the birth/death additions.

from the bls:

"The most significant potential drawback to this or any model-based approach is that time series modeling assumes a predictable continuation of historical patterns and relationships and therefore is likely to have some difficulty producing reliable estimates at economic turning points or during periods when there are sudden changes in trend"

and times are changing.........

and the government contributed almost 30% with 25k new jobs..........

es sei am rande noch erwähnt das "vadder staat" satte 30% aller jobs selber geschaffen hat (25.000).....

Nonfarm employment....... p88

Government .......... p25

Goods-producing (1).... p-28

Construction ........ p-11

Manufacturing ....... p-19

Service-providing (1).. p116

Retail trade (2)..... p-26.....

here are more details http://www.bls.gov/news.release/empsit.nr0.htm

no way to spin this............very very weak .....especially with the 26.000 revision for the previous two months....

keine chance das als gute zahlen hinzustellen...extrem schwach...besonders mit den 26.000 revision der vormonate

via barry ritholtz http://tinyurl.com/2kot89

• BLS continues to understate the unemployment rate, as it has been doing for most of the past 6 years, by reducing the ‘pool of available workers’. BLS reduced the labor force by 392,000 in April. This kept the Unemployment Rate from jumping higher than 4.5%. The ‘participation rate’ declined to 66% from 66.3%, which is an unusually large monthly decline. That's 0.3% times 143 million or so workers -- instead of rasisng the unemployment rate, we lower the labor participation rate by 429,000 workers.

here are the takes from

tim http://tinyurl.com/3b59r5

barry http://tinyurl.com/37p4ot

the street light http://tinyurl.com/2v3ubf

calculated risk http://tinyurl.com/39ywwf

mish/minyanville http://tinyurl.com/2xqszz

housing doom http://tinyurl.com/2w52ns

mish http://tinyurl.com/2d57u3 (must read)!

disclosure: chapman and dylan fan :-)

us employement data nov.2006

one of the better reports if you look at the headline (especially the small impact of the birth/death model). but as we know from prior releases we have to wait aftre the revisions in 2007 or maybe 2008 to get the right figures. ... the weak point in this release is that all the gains are coming from the servicesector and the gouvermentsector. hard to believe that especially the gain in the retailsector has much room to grow. i think it is a safe bet that there is lots of downside...... http://immobilienblasen.blogspot.com/2006/11/us-arbeitsmarktbericht-us-employement.html#links

U.S. Nov. average workweek steady to 33.9 hours
U.S. Nov. average hourly earnings up 0.2%
U.S. Nov. factory jobs down 15,000; services up 172,000.
U.S. Nov. construction jobs down 29,000
U.S. Nov. retail jobs up 20,000 strongest pace in a year
U.S. Oct., Sept nonfarm payrolls revised up by net 42,000
U.S. Nov. unemployment rate 4.5% vs 4.4% in Oct.
U.S. Nov. nonfarm payrolls up 132,000 vs 112,000 expected

one thing that is a little bid optimistic is that the bls assumes that they have only a 2k difference in the construction assumption from 2005. maybe this can be explained to some part with the desperate builders try to built as fast as they can so they can sell before the full bust is coming. if this is the rational behind this number should fall of a cliff in the next quarters!

http://www.bls.gov/web/cesbd.htm

2006 Net Birth/Death Adjustment (in thousands)

Supersector	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov
Natural Resources & Mining	-4	0	0	1	1	1	1	1	1	1	0
Construction	-55	10	27	36	39	29	-8	14	10	8	-8
Manufacturing	-25	3	5	-1	7	9	-21	2	5	-4	3
Trade, Transportation, & Utilities	-36	10	21	23	26	20	-28	23	19	24	20
Information	-8	4	-1	7	4	-2	-6	6	-6	4	7
Financial Activities	-11	10	8	19	5	6	-11	7	3	19	4
Professional & Business Services	-59	29	30	62	33	28	-8	22	10	30	1
Education & Health Services	14	12	2	31	13	-4	-4	16	11	33	10
Leisure & Hospitality	-5	33	37	85	76	81	38	25	-28	-41	-9
Other Services	-4	5	6	8	7	7	-10	5	3	-1	1
Total	-193	116	135	271	211	175	-57	121	28	73	29

http://www.bls.gov/news.release/empsit.nr0.htm

Nonfarm employment....... 132
Goods-producing -40
Construction.........-29
Manufacturing........ -15
Service-providing 172
Retail trade 20
Professional and usiness services.. 43
Education and health services........... 41
Leisure and hospitality 31
Government........... 18

Construction employment declined by 29,000 in November, following a loss ofsimilar size in October. The November decline was spread across all componentindustries. Since peaking in February of this year, employment in residentialspecialty trades was down by 109,000. Employment in nonresidential specialtytrades edged down in November, after trending up during the first 10 months ofthe year.

Manufacturing employment continued to trend down (-15,000) in November.Motor vehicles and parts lost 7,000 jobs. Employment continued to fall in two construction-related industries: wood products (-6,000) and furniture and related products (-5,000). Computer and electronic products manufacturing added 5,000 jobs over the month.

update from mish! http://globaleconomicanalysis.blogspot.com/2006/12/november-jobs-report.html