In article <
dfritzin-6D63F7...@news.eternal-september.org>,
> Every article you posted says there was no wrongdoing at the BLS.
> Doesn't that tell you something? Remember, these are articles *YOU*
> posted to try to support your case.
Did you forget this article:
Shadowstats.com Author John Williams wonders if politics are at play
behind the latest jobs report, which shows 114,000 new U.S. jobs since
September and a 0.3% drop in unemployment since August. Investors need to
know how seasonal factors and month-to-month volatility affect the Bureau
of Labor Statistics' reports. In this exclusive interview with The Gold
Report, Williams explains why he doubts that we are in a recovery. The
take-away? Look at the unadjusted figures before you sell your gold.
The Gold Report: John, as Mark Twain famously quipped, "There are three
kinds of lies: lies, damned lies and statistics." The Bureau of Labor
Statistics (BLS) just came out with new jobs numbers that show the country
added 114,000 jobs since September and the unemployment rate dropped to
7.8%, down from 8.1% in August. On Shadowstats.com, you argue that the
numbers are wrong and pointed to politics as a possible reason for the
incorrect figures. Are unemployment statistics being manipulated and if so
how?
John Williams: I normally put out a commentary on the numbers, and, in
this one, I raised the possibility of politics as a factor. The problem is
very serious misreporting of the numbers and the result is what appears to
be a bogus unemployment rate. The BLS reported a drop in the unemployment
rate from 8.1% to 7.8%, three-tenths of a percentage point, which runs
counter to what is being experienced in the marketplace.
What few people realize is that the headline unemployment rate is
calculated each month using a unique set of seasonal adjustments. The
August unemployment rate, which was 8.1%, was calculated using what BLS
calls a "concurrent seasonal factor adjustment." Each month the agency
recalculates the series to adjust for regular seasonal patterns tied to
the school year or holiday shopping season or whatever is considered
relevant. The next month, it does the same thing using another set of
seasonal factors. Rather than publish a number that's consistent with the
prior month's estimate, it recalculates everything, including the previous
month, but it doesn't publish the revised number from the previous month.
The assumption is that the monthly recalculations don't make much
difference over time, but they do. The depth and the protraction of the
current severe economic downturn have thrown off the annual
seasonal-factor adjustments. The result is very volatile seasonal factors
month-to-month. That means the new calculations for the September number
may have resulted in a very significant revision to the August number.
Again, though, the BLS doesn't publish that, so the headline
August-to-September 2012 change in the unemployment rate is not consistent
and not comparable. Last December, when the BLS put the seasonal
adjustments on a consistent basis for the year, as it does once per year,
the November 2011 unemployment rate had just been reported as showing
four-tenths of a percentage point drop‹an unusually large monthly decline
that never took place. When revised to a consistent basis, the drop in
headline November unemployment revised to two-tenths of a percent. That is
a big change. I think something like that happened here.
The BLS knows what the actual number is. It has an actual estimate for
August, which is consistent with September, but it doesn't publish it
because it says it "doesn't want to confuse data users." But it is putting
out numbers that have no meaning month-to-month. One month before the
election and a month after Federal Reserve Chairman Ben Bernanke announced
Quantitative Easing (QE) 3, is not a time to have inaccurate numbers. The
BLS should publish the consistent numbers now.
TGR: You have said that BLS has been using this recalculation method for
years. Do you feel that this month the numbers were more skewed than usual
because of the political timing?
JW: Because there is no transparency in the calculation and reporting
process, it leaves open the possibility of manipulation. What has happened
here, though, is that in the wake of the economic collapse, the seasonal
factors have been heavily distorted and are not stable on a month-to-month
basis. Where the concept originally might not have made that much of a
difference, it does make a big difference now. I suspect that is why we
woke up to such a screwy unemployment rate this time around.
The 114,000 jobs growth in the payroll survey (which reflects the number
of payroll jobs, counting multiple jobholders more than once) also is
suspect and subject to concurrent-seasonal-factor adjustments. There,
however, the BLS publishes revised estimates for the two prior months that
are on a consistent basis with the headline number. Nonetheless, jobs in
even earlier months are not re-reported, although they too are
recalculated each month, with the effect that jobs reported in earlier
periods can be moved into present reporting, boosting the current numbers,
without the related earlier changes being revised in the published
historical numbers. Nonetheless, the purported 114,000 jobs gain was not
statistically significant.
From the household survey, which gives us the unemployment rate and counts
the number of people who are employed (multiple-job holders are counted
but once), the headline gain in employment was 873,000, the largest
seasonally-adjusted monthly increase since Ronald Reagan's first-term.
That number clearly is nonsense and again suggests there is a severe
problem with the seasonal factors.
TGR: Do you think the unemployment rate was manipulated on purpose or did
the bad economy just make the reporting more confusing?
JW: It could have been manipulated. I do not know and do not have direct
evidence of current political massaging of the data. I know for certain
that there have been direct political manipulations by different
administrations, since the days of President Lyndon Johnson, involving
various data sets that have included the gross domestic product (GDP), the
trade numbers and the employment and unemployment numbers.
From what I've seen of the Obama administration, the reporting has been
reasonably clean. Nonetheless, at best, the administration is using
seriously flawed data, and the reporting and calculation process has the
potential for manipulation. The timing of the announcement of such a big
downside swing in unemployment certainly is a fortuitous circumstance for
the administration's political needs.
Main Street U.S.A., however, has a much better sense on the economic
reality than do the government's economic statisticians. If the headline
unemployment rate is not as advertised, a goodly portion of the public
will not buy it. Past experience has shown gimmicked reporting often
backfiring on the manipulators.
TGR: What is the correct unemployment rate? What would be a reliable data set?
JW: I don't know of one. The unemployment rate comes out of government
surveying and data manipulation, and the base number is wrong. What are
good in theory are the un-adjusted numbers, although unemployment
definitions still suffer. Those don't get revised for the seasonal
factors. But there you have regular annual patterns of economic activity,
so you'll see the unemployment rate go up and down as it follows the
normal flow of annual business activity through the various seasons. Even
so, it makes some sense to look at that unadjusted series over time. The
average person doesn't think of himself or herself as employed on a
seasonally adjusted basis, but a lot of people, according to the
government, are so employed.
If you surveyed everyone in the country as to whether he or she were
unemployed, you'd get an unemployment rate above 22%, instead of the
headline 7.8%. The difference is in how the government defines whether
someone is unemployed, versus the view from common experience.
TGR: What are the ultimate consequences of inaccurate statistics on the
stock market, commodity prices and everyday people?
JW: Right now, the impact of the unemployment numbers is mostly political,
although the Federal Reserve has made it part of its targeting in terms of
QE3. But the primary political concerns are on the impact to the upcoming
election, which is what makes the timing of this release so suspect.
There is a serious problem with the reporting. If it has been used to
manipulate the public, that eventually will come out. If it hasn't, the
simplest thing is for the BLS just to publish the actual numbers. They
have them. They don't have to do any recalculations. They've already done
that. They just need to publish them in a timely manner.
TGR: There seemed to be an impact on the stock market. The Dow ended
Friday up. Was that simply a coincidence?
JW: Yes, the market jumped all over the place. But I see no rationale
whatsoever behind the movements in the stock market. Any numbers will be
used to spin a story that will explain what's happening with stocks at a
given point in time.
TGR: What about commodity prices? What will this do to gold?
JW: You had some sell-off in gold Friday. Again, that could all be spin.
Was it due to people thinking Bernanke was not going to have to ease
monetary policy as much? I'm not into day-to-day calling of the markets.
The stock market is absolutely irrational. You can make up all sorts of
stories based on that. Markets respond to lots of really worthless
information‹the 114,000 gain in payrolls for example is not statistically
meaningful. It could have been a contraction as well as a gain, when the
129,000-job margin of error is considered. Yet, the markets gyrate wildly
over very small changes that have no relationship to what's actually
happening in the economy. I think traders just love to trade. It's like
going to the racetrack and betting on a horse because of how it wiggles
its ears. It has little to do with the underlying fundamentals.
TGR: Is there an ultimate consequence of having faulty data? Do incorrect
numbers build on themselves and become more inaccurate over time? Will we
see a jump in the unemployment rate in December when they are recalculated
after the election? Are there other consequences?
JW: When governments use bad numbers, and believe them, they don't respond
appropriately to problems like unemployment and inflation. People don't
properly target their investment returns or adjust their income
projections. There are good reasons for having accurate information, but
accurate numbers just are not coming out of the U.S. government at the
moment.
TGR: You mentioned the correlation with the announcement of QE3. When we
talked in May, you called QE "dangerous" and said it would eventually lead
to a massive decline in the U.S. dollar, triggering new dollar selling and
lead to dollar inflation, spikes in oil prices and eventually
hyperinflation. Your special commentary on inflation and systemic
conditions comes out next week on ShadowStats. Can we expect any good
news?
JW: The outlook hasn't changed. I've been looking at this for a long time.
Let me put it this way: The economy is not suddenly improving. Underlying
fundamentals have not changed. You just are getting bad-quality numbers.
The average guy has a pretty good sense of what is going on. When Main
Street suddenly starts getting jobs and businesses pick up, then we will
know the economy is picking up. Shy of that, I'd be wary of anything I
hear out of the government on business activity.
TGR: So the reports that we are in a recovery aren't accurate? What
indicators should we be watching?
JW: Over time, you will find the better-quality statistics are confirming
that we never had an economic recovery, and that we're not about to get
one. When you have faulty numbers, you need to look at the underlying
fundamentals to see what's happening. The problem is the consumer doesn't
have the liquidity, either from the standpoint of income growth or credit
availability, to sustain positive growth in the GDP.
TGR: Thank you for your time, John. We will check in with you periodically
to see if you see any changes in those numbers.
Walter J. "John" Williams has been a private consulting economist and a
specialist in government economic reporting for 30 years. His economic
consultancy is called Shadow Government Statistics (ShadowStats.com). His
early work in economic reporting led to front-page stories in The New York
Times and Investor's Business Daily. He received a bachelor's degree in
economics, cum laude, from Dartmouth College in 1971, and was awarded a
Master of Business Administration from Dartmouth's Amos Tuck School of