For those of you who have been wondering, here is the data on the 2007 Benchmark Revision.
The good news is when looking at the total employment situation, believe it or not, BLS was pretty accurate. Their models of employment came within 0.2% of the actually measurement of jobs.
Where they fell down was accurately measuring NFP job creation. Based upon their own benchmark revisions, BLS overstated new job creation by a whopping 19.95% 14.38%.
Nearly every month, the subsequent revisions were rather large:
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I suspect this says less about BLS, and more about the difficulties in
trying to accurately measure new job creation in near real time.
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Source:
Benchmark Article
Daniel Jackson
BLS, February 1 2008
http://www.bls.gov/web/cesbmart.htm
PDF version
http://www.bls.gov/ces/cesbmart.pdf
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the huge revisions are a benefit to this administration because it decided to switch to a model that could show whatever they want WHENEVER they want.
Coincidence that the NFP #’s started to fall off a cliff and then POOF we now have a model that doesn’t allow that to happen.
job creation , in this country, is the big myth. ever since someone decided that China was a cheap alternative…say 20 or so years ago.
Ciao
MS
Sept. should be positive/green.
265K? That seems like a pretty average benchmark revision from a historical perspective.
http://bigpicture.typepad.com/comments/2006/10/making_it_up_as.html
check the difference
i think it´s -191K instead of -265K
Something wrong with this article – the September input is backasswards? how does it look when corrected, does that change your story?
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BR: Good catch — I’ll fix above.
There’s an errant negative sign in the Septmber data series. That changes the overstatement from 19.95% to 14.38%
fede,
Heh…it really IS hard to count jobs.
95K per month–not even close to equilibrium.
Why would you trust the revisions any more than original numbers?
Action in market the last two days feels like a big player is getting liquidated or blowing up. Watch youself everyone.
Bernanke had a reason to lower aggressively after all.
Charlie Gasparino looked like his dog died this AM with the monoline demise looking more unlikely by the day. Last night on Kudlow he gave the monoline death spiral the old college try, and it was pretty entertaining. These days Charlie is a must watch.
Market could crash here…I have a funny feeling…look at gold tank on no news. This rally is ridiculous. If Dow 12000 breaks, it will hit 9800 very fast.
Look at Dow chart…right shoulder top right here. Aug and Nov lows are right around here too and are serious overhead resistance. Ominous.
head and shoulder
Barry: i agree and thanks to your post got me off the pot and out of cash. good call so far.
From John Hussman’s most recent post..
http://www.hussmanfunds.com
– “there is one particular scenario that would be ominous in my view. That would be if we see a relatively uninterrupted series of declines that breaks cleanly through the August and November lows, followed by a one-day advance of 200-400 Dow points. That’s a script that markets tend to follow pre-crash. Though it’s not a strong expectation or forecast, it’s something worth monitoring, because we’ve started to see the pattern of abrupt jumps and declines at 10-minute intervals that is often a hallmark of nervous markets.”
From my perspective, that’s largely the script we observed last week. Short-term market movements are demonstrating a form of chaotic instability that has generally indicated growing contagion rather than independence among investors. The most important difference between current market conditions and prior crash events is the behavior of interest rates. For example, rates were rising persistently before both 1929 and 1987. The clear downtrend of interest rates may turn out to be a saving grace here, given that the market’s most spectacular losses featured hostile rate trends. Still, the best interest rate action has been in Treasuries, while credit spreads have been pushing to new highs, so the favorable trends in Treasury yields are partly a symptom of growing default risks in other areas.”
The arbs don’t seem to be too confident about the YHOO bid.
Leaving 12 to 15% under the bid is a very bad sign……..If this puppy breaks it will be bad karma. Just a thought.
steve-
I agree with the H&S…it has been setting up since fall last year. The real issue is if it will be “allowed” to happen.
Fed just said it would do $60 billion TAF’s every two weeks for an “indefinate period of time”……
That is not a sign that all is well….I wonder if that amount will show up verbatim in the fractional reserve requirements that seem to be populated by the exact auction amount. See Shedlock’s post about this:
http://www.minyanville.com/articles/MER-C-jpm-bac-MBI-WB/index/a/15712
I am a bit surprised that more people are not aware of this…..not really sure if it means much but….it should.
How do you cause a bank run???…….LOL
let’s see if it matters…..
Ciao
MS
With the move in gold, I have a feeling dollar has made a major bottom. Time for other currencies to be debased to catch up…this will further cripple S&P earnings due to lower foreign revenue.
Gold is dropping like a rock. Somebody is dumping (I wonder who?). If the market absorbs this supply quickly (as in this isn’t a general sell-off), we’re in some deep doodoo.
repost:
on Gold:
My guess is that some bank (most likely Spain) is dumping yet again. They actually back up the printed money with a real asset…funny that…..like for like.
Ciao
MS
John Nadler thinks gold’s drop this morning is due to profit taking by a large European firm:
http://tinyurl.com/2qbq9y
Great buying opportunity.
being the first of the month I would say ECB’s are getting capitalized via Gold sales.
Ciao
MS
What we need to do is create an Federal Independent Statistical Department. Just like the FED – lol!!!
Want to share here what I just read on another board:
So, it seems like there will be a lot less home buying goin’ on in at least the near future if this is any indication.
Barry, why don’t you make it interesting…all you gurus should start calling each other out! You guys play this game of “I’m right, but I don’t want to step on your toes.” If one has to crash and burn, to tell the truth, well then lite the fire! Can’t believe we are not at 2001 levels, when the economy is so much worse off. I just got back from a long drive and there were so many for sale signs, my head is swimming. I just turned 50 and can’t remember anything like this. Perhaps there is a happy story to be told when it is all over. These Fuckers on tv, pump, pump, and pump – Kudlow should have goldielocke’s stuffed down his throat – I’ve got his goldie right here.
Central banks could be capitalizing, as suggested… or could be more of this… good article. We stare into the abyss again.
http://seekingalpha.com/article/62678-anybody-seen-our-gold
how many times are we going to see
Moody’s, Fitch put out PR that says they “might” downgrade the mono’s.
I “might” get a million dollars…..
Hell one of them has been “assessing” that very thing for over two months now…..
And still no call outs at all except Ackman, who got really quiet all of a sudden..
Ciao
MS
Stuart,
Fascinating stuff! Makes you wonder how much the bullion banks have been losing recently, being forced to buy gold in the open market to cover their lease agreements.
“Staring into the abyss” indeed.
OT – a fair and balanced post on Barry’s part. The revisions weren’t major though the data challenges make things noisy. Which means you ought to be looking at trends and patterns, especially YOY changes (which you can see in his charts these days). The key point is that the slowdown in employment growth which started circa Jan06 continues and is accelerating. FWIW some charts looking at NFP & Unemployment (which is often clearer on trends) are posted here: http://tinyurl.com/229g4a
When you look at that data a couple of things. First the differences in the old vs revised from JAN79 to now are about -375K jobs. Not significant IMHO. BUT…the economy as a whole is -2.9 million jobs in the hole when you use 150K/month as the breakeven point. Now that’s significant.
OffTopic – this does indeed look like a nervous market. Thanks for the Hussman post. Excellent guy who I wished there was more time to follow. It looks like Mr. Market is debating whether or not have that bounce let along “recover” from the “correction”. As various pieces of the credit breakdown keep rippling outward (bond insurers, corporate debt, housing walk-aways, increasing delinquency rates)these stresses will just increase.
Statistics, Statistics, and, then there are lies.
Obfuscating the nation into a war, Guantanamo, the ingeniously named “Patriot Act”, down to the commandeering of the school curriculum (“intelligent design”) and national statistics (CPI).. and, now, this revision of the employment data !
Goebbels will envy this record!!
But, then again, I have an open mind. This may be all just coincidence. Especially,if tyoung has his facts right that a 14% revision of the data is within the historical norms of BLS revisions!!
Barry, you have to remove November and December of 2007 and add in Nov and Dec of 2006.
Neither Nov and Dec of 2007 are final, they are still in the 2nd and 3rd revision stage and certainly will be subject to big changes next Feb of 2009.
And for the record? Nov of 2006 was revised down by 14,000 jobs and Dec of 2006 down by 27,000 jobs (old monthly change over new change)
FMI, I’ve often heard the figure cited that we need to add 150,000 jobs per month to keep up with population growth. Can anybody tell me if there’s an actual source for that figure, or if it’s just based upon some percentage of average population growth?
Thx.
LFC
That number is just the %chg that payroll needs to keep up with population growth. It’s also an old number. You’d need to take a look at population growth rates in the 18-65 age group and then apply that percentage growth rate to payroll jobs to back out the latest number but I’d bet 150,000 jobs per month is pretty close
This small market rally feels a little strange–Like we are in the eye of a hurricane. Once it passes, the back half of this sh!t storm is going to be severe.
Thanks, MD. I was wondering if that was the case, or if there was a tracked “official” number anyplace.
LFC (& Michael) – actually the 150K number is labor force growth (a subset of pop but not a big deal) + productivity growth. It’s been pretty well analyzed though sources escape me at the moment. We had a big debate on CalculatedRisk last year and there were some strong arguments for it going down to 120-140K give or take slowing pop/lbr force growth plus slowing productivity. The BLS has a very handy tool for dloading many of these states and the STL Fed FREDII site keeps a subset that is very easy to dload. You can check the math by looking at Pop growth and looking up some productivity stats. Anyway that’s how it was explained to me FWIW :)
Currently, (3PM, EST) the DJIA is bouncing against its resistance level for the 3rd time in 2 days. Will it break out above, or fail for good? Is Ben B watching?
LFC (& Micheal): intriguing. Went and did some fiddling around. The compound rate of growth of the Labor Force is about .0114% monthly, with an annul average of 1.6%, so with a LF of about 153M looks like you’d need 174K jobs/month. Add on a labor productivity of 1.5-2.0% and wow we really have a problem. No wonder real wages haven’t been keeping up and the middle class (me at least) don’t feel so optimistic. By the way Labor productivity from 1948 to now was, over the period, downtrending from about 2.5% to 2.0%. Similarly for 60-now. BUT from 80 to now it was flat at 1.5% from 80-96, increased to 2.0% 97-00 and is showing a slight decrease since about ’06 or so. Can you spell re-engineering (downsizing) ? :)
dblwyo,
I’ve gotta disagree with you on this stuff. The way I described it is the way we did it at Global Insight.
If you use Labor Force you’re going to get the wrong number because folks can and do step in and out of the labor force very much depending on what the business cycle is doing.
Using Productivity just makes zero sense to me at all. All that does is tell you how much more STUFF we can churn out, not how many JOBS are needed to maintain the unemployment rate.
Over the past 24 months population has grown on average by 0.89% y/y, so to get payroll to grow by that same 0.89% y/y you would need 102,000 new jobs every month.
Population growth was faster during the 1990s, hitting 1.3% at times so you’d need 150,000 jobs.
Of course all this assumes that labor force participation remains the same and assumes the 18-65 age group is growing the same as overall population.
but enough, or Barry will tell me to GYOFB
14% was probably in their ballpark. Hey, that’s about how much inflation is understated do you think there’s a correlation?
Michael – Pop vs LbrFrce ? Oh well. Conceeded. I was playing back of the envelope with the data I had.
On productivity though if fewer hours will produce the same amount of goods I need less labor. To absorb that excess labor I either need a)lower wages, b)increased output or c)more job opportunities. Or all of the above.
Anyway the 150K figure of merit is also one I’ve heard the Fed use and for the Pop + Prod growth reason. Believe Mankiw ahs made the same point among others.
But a fun debate all the same. And usefully OT for Barry’s post IMHO :)
The standard error is on the order of +- 500,000, so the month-to-month is meaningless.
All in all, pretty good data. If I was a gambler, the serial correlation of downward revisions suggests that the job growth trend is below historical expectations.
Two questions.
Why does the Market pay so much attention to Non-Farm Payrolls when its methodology is, as we discuss here every month, so fanciful?
Why wouldn’t the ADP employment report be more accurate and trustworthy? As the biggest payroll processor, they should have access to a big enough sample of very accurate data, and they shouldn’t have the political agenda that an executive branch agency of the Federal Government might have.
Effect of increasing labor force on developed economies could be not only strictly positive. It is well known that increasing labor force participation rate, LFPR, results is decreasing productivity, P.
I have compiled a simple figure
(link to the figure
http://inequalityusa.blogspot.com/2008/02/effect-of-labor-force-growth-on.html )
illustrating this observation for the USA. For the sake of better representation, the measured growth rate of labor force participation rate, dLFPRm/ LFPRm, has been converted according to the following relationship:
dLFPRc/LFPRc= -2.0dLFPRm/LFPRm + 0.022
Effectively, dLFPRc/LFPRc, is a scaled inverted and shifted dLFPRm/LFPRm.
In addition, I have smoothed the original data series using leading MA(3), i.e. leading 3-year moving average. It is clear from the figure that any increase in dLFPR/LFPR resulted in a doubled reduction in the productivity growth rate.
More interestingly, cross-country comparison shows that relative (i.e. ratio) productivity changes could be completely explained by corresponding changes in participation rates. In other words, when productivity grows in one country relative to another country, corresponding LFPR move in opposite direction.
http://inequalityusa.blogspot.com/2007/10/some-myths-about-slowdown-of.html