Fun With Numbers

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Fun With Numbers: Jobs, Food Stamps, Conspiracies

(Excerpt from the MarketShadows Newsletter: Fun With Numbers (10/7/12))

The September Nonfarm Payrolls last Friday stirred up heated debate as some commentators, presumably Democrats, cheered the results. Others, with Republican tendencies, complained that the numbers being touted were aberrations, manipulated, or strong evidence of a big conspiracy to reelect Barack Obama. Accusations were flying, with Jack Welch in the spotlight for tweeting ”‘Unbelievable jobs numbers..these Chicago guys will do anything..can’t debate so change numbers.’” (Mish) Jack Welch, former GE CEO, might know a thing or two about cooking books.

Key numbers in Friday’s report

ESTABLISHMENT SURVEY – also called the survey of employers

New jobs: 114,000
New jobs in the private economy: 104,000 (of 114,000)
Upward revisions for July & Aug: 86,000 combined (all government jobs). The change in total NFP employment for July was revised from 141,000 up to 181,000. The August number was revised from 96,000 up to 142,000.

HOUSEHOLD SURVEY ~ a smaller, more volatile and error prone survey than the establishment survey

873,000 surge in employment
Jobless rate: 7.8%, down from 8.1% ~ this decrease was being celebrated by Obama supporters….

Breakdown of the household survey’s 873,000 jobs:

Self-Employment +118,000
Government Jobs +187,000
Part-Time +582,000 (part-time for economic reasons, or involuntary part-time)

Numbers in the breakdown of the household survey jobs (above) may overlap.

(“Unbelievable Numbers” Says Former GE CEO Jack Welch; Another Look at Jobs Including Government Jobs and Self-Employment)

Big Picture numbers (reported by WSJ)

Labor participation rate at 63.6%
12.1 million Americans out of work
nearly 23 million out of work when including those who have stopped looking or can’t find full time work
Job growth has averaged 146,000 a month in 2012, down from 153,000 in 2011
Part-time workers “for economic reasons” 8.6 million (up from 7.7 million in March)
40.1% of the unemployed in America have been jobless for six months or more.

The Wall Street Journal summed up the results, “You don’t need a conspiracy to know the job market is still lousy.” Happy Days Are Not Here Again:

“The jobless rate fell in September to 7.8% from 8.1%, though the economy created only 114,000 new jobs, and some of our conservative friends smell a bureaucratic rat so close to Election Day…

“Democrats are celebrating the decline in the jobless rate, which only shows how their standards have changed since President Obama entered the White House. In 2004, they were lambasting George W. Bush for a September jobless rate that was 5.4%. Only last month they were begging the Federal Reserve to print more money indefinitely because the job market was so weak. Now they say happy days are almost here again…

[Comment: Wall Street was begging the Fed to print more money, and got its wish, Quantitative Easing to Infinity, QE-Infinity.]

“The number that has our friends suspicious is the giant 873,000 leap in employment as measured by the ‘household survey.’ That’s the biggest one-month increase in nearly 30 years, which certainly does deserve an explanation. (Our emphasis)

“The household survey contacts about 60,000 individual households to find out how many Americans are working. It is different from the much larger ‘establishment survey,’ which measures about 141,000 businesses and government agencies to see how many jobs they created. The household survey determines the jobless rate, so the huge one-month leap accounts for the September decline to 7.8%.

“Because of its small size, the household survey tends to be highly volatile. In August it found that the number of net new jobs had fallen by 119,000 and in July by 195,000. The point is that you can’t read too much into one month’s number. As much as we agree that you can’t trust the government, this is probably the explanation for the huge one-month jump in September.” (WSJ)

The household survey showed that 582,000 of the 873,000 new jobs were classified as “part-time for economic reasons.” That means that these jobs were taken by people who would rather be working full-time. The number of people working part-time for economic reasons rose from 7.7 million in March to 8.6 million in September.

In a normal recovery, the economy would have created nearly twice as many new jobs as it has–closer to 10 million jobs compared to the five million created so far. The economy is around 4.5 million jobs short of the 2007 job market.

The unemployment rate was declining in the past two months because people were dropping out of the labor force, but in September, people re-entered the labor force, reflecting part-time hiring and government hiring. (“Unbelievable Numbers” Says Former GE CEO Jack Welch; Another Look at Jobs Including Government Jobs and Self-Employment)

According to Mish, “The establishment report of +114,000 jobs was pretty much about what most expected. The four-month average is a mere 120,000 a month (a very weak set of establishment numbers for this point in a recovery).

“However, the household survey surprise shows the unemployment rate fell three-tenths of a percent to 7.8%.

“On the surface, this is a solid showing, and 100% certain to boost the Obama campaign. I suggest these numbers will overshadow a horrendously weak performance by the president in the debate.

“That said, a closer look shows the entire drop in the unemployment rate can be attributed to a surprise rise of 582,000 in part-time workers. U-6 unemployment remained at 14.7%. U-6 includes part-time workers who want a full-time job…”

The results did not change Mish’s outlook. He contends that we are already in a recession even though we don’t know it yet.

“A one-month potential outlier based primarily on a rise in part-time employment, accompanied by other weak data does not change my perception…

“The official unemployment rate is 7.8%. However, if you start counting all the people that want a job but gave up, all the people with part-time jobs that want a full-time job, all the people who dropped off the unemployment rolls because their unemployment benefits ran out, etc., you get a closer picture of what the unemployment rate is. That number is in the last row labeled U-6 (table below).

“U-6 is much higher at 14.7%. Both numbers would be way higher still, were it not for millions dropping out of the labor force over the past few years.”

BLS Alternate Measures of Unemployment

“Given the complete distortions of reality with respect to not counting people who allegedly dropped out of the work force, it is easy to misrepresent the headline numbers… The drop in the unemployment rate over the past two years is nothing but a statistical mirage. Things are much worse than the reported numbers indicate.” (September Jobs +114,000; Unemployment Rate 7.8%; Part-Time Workers +582,000; Initial Reaction and Election Impact)

Weighing in on the NFP report, Goldman Sachs also noted the extraordinary jump in those working part-time for economic reasons as the factor behind the drop in the headline unemployment. Even though the broader U-6 rate showed no decline, remaining at 14.7%, Goldman’s analyst called the report encouraging, noting a large increase (418K) in the previously shrinking labor force.

Work from home soars 41% in 10 years. The number of Americans working from home has soared 41% in the last decade. About 13.4 million people currently work from home in the United States, according to a Census Bureau report out Thursday. That’s about four million more Americans since 1999.

CHOOSE YOUR CONSPIRACY

While the WSJ and Mish doubted the results were a product of a conspiracy, Michael Snyder of Economic Collapse argued in favor: “The number of Americans with a job fell by 195,000 in July. Then it fell by another 119,000 in August. But somehow in September it miraculously exploded in the other direction and 873,000 jobs were added to the economy? [Household survey numbers]

“If you believe that, I have a bridge that I want to sell you.

“Somehow, the largest increase in jobs in 29 years happened just when Barack Obama needed it the most…

“And if you look at the U6 unemployment rate [14.7%], nothing has really changed at all…

“According to the survey of employers, the U.S. economy added fewer jobs in September [114,000] than it did in August [142,000], and it added fewer jobs in August than it did in July [181,000]. So according to the survey of employers, the employment situation in the United States is getting worse. [Establishment survey numbers]

[Comment: these are the seasonally adjusted numbers. Lee Adler argues (below) that these numbers are inaccurate and a waste of time. He prefers looking at the NON seasonally adjusted numbers.]

Michael: “But according to the household survey, we just had the greatest month of job creation since the first term of Ronald Reagan. Something does not add up.

“And as I have written about previously, the unemployment rate would actually be up around 11 percent instead of 7.8 percent if not for the millions of workers that the government claims ‘dropped out of the labor force’ over the past few years because they became too discouraged to look for work.” (A Jobs Report Conspiracy?)

Sharing a unique perspective, Lee Adler of the Wall Street Examiner suggested that the job situation is actually improving and the conspiracy theorists have it all wrong.

The real conspiracy was to paint a bleak picture to give the Federal Reserve an excuse to embark upon QE-Infinity. Now that QE Infinity is a done deal, previous numbers are being revised upward.

Lee dismisses the Seasonally Adjusted (SA) numbers, which he argues are fiction. He focuses on NON Seasonally Adjusted (NonSA) numbers which are more accurate:

“The BLS today reported a gain of 114,00 in nonfarm payrolls. That compares with a gain of 574,000 in the actual, not seasonally adjusted (SA) number. In the actual (NonSA) data, September is always an up month…

“Fox News and Jack Welch are accusing the Administration of cooking the books. Ironically, last month I complained:

“The Bureau of Labor Statistics (BLS) must be staffed with Republicans. There’s something wrong with the headline number this month. It is consistent with the pattern of the past five months where the seasonally adjusted (SA) headline numbers appear to understate the trend of the actual, not seasonally adjusted (NonSA) numbers.

“A few weeks after I posted that, the BLS came out with its preliminary benchmark revision announcement that it had underestimated growth from April 2011 to March 2012 by 386,000, and that as a result of the new benchmark all of the previously published data for 2012 would also be revised up.

“Lo and behold the August SA headline number has now been revised up by 46,000 and July has been revised up by 40,000. The BLS headline number is really lousy data, but the market pays attention to it. We need to look at the best data we can find to know the truth about what’s going on. That means watching things like the withholding tax data and actual, not seasonally adjusted first time unemployment claims trends.” (The Real Deal on Jobs – The BLS Is Just Catching Up With Massive Undercounting in Seasonally Adjusted Estimates)

[For more insightful economic analysis, regularly, try Lee's WSE's Professional Edition risk free for 30 days!]

ABSTRACT TO THE REAL

Whether job numbers reflect a conspiracy or not, and whether there is real improvement in the data, the job situation in the U.S. is not improving as much as would be expected in a normal recovery. Other indicators confirm that general conclusion.

Consider Food Stamps.

Zero Hedge reported, “While the perfectly unmanipulated and totally coincidental swing in the unemployment rate in an Obama favorable direction one month before the election came at a prime time moment for the market, one hour ahead of the open, setting the market mood for the rest of the day (which despite all best efforts still closed red), there was one other, far more important data point released by the government’s department of agriculture, sufficiently late after the market close to impact no risk assets. That data point of course was foodstamps (or the government’s Supplemental Nutrition Assistance Program, aka SNAP), and we are confident that no readers will be surprised to learn that foodstamp usage for both persons and households, has jumped to a new all time record.

“At 46,681,833 persons hooked on SNAP, the July number crossed the previous record posted a short month before, as the foodstamp curve continues ‘plumbing’ newer and greater heights each month.

“More disturbing is that in the same month, the number of US households reliant on foodstamps rose by a whopping 99,493 to 22,541,744. Assuming a modest 2 persons per household, the increase means that more people went on Foodstamps in the month of July than found jobs (181,000 according to the latest revised NFP data)…

Finally, and putting it all into perspective, since December 2007, or the start of the Great Depression ver 2.0, the number of jobs lost is 4.5 million, while those added to foodstamps and disability rolls, has increased by a unprecedented 21 million. Oh and about $7 or $8 trillion in debt. Who’s counting really.

And this is the real and only key economic statistic of today that nobody wants to talk about, because it is equally the fault of both parties.

Total foodstamp recipient persons: