Detailed
look at August Jobs Report Reveals BLS Disinformation Campaign
By the Curmudgeon with Victor
Sperandeo
Jobs Report Summary:
U.S. employers added 1.4 million non-farm payroll jobs in
August, the Labor Department's Bureau of Labor Statistics (BLS) reported
on Friday. That was lower than the gains of the three previous months (two of
which were revised down).
The unemployment rate fell to 8.4% but is 4.9% higher than in
February 2020 (before the lockdown took effect in the U.S.). The U.S. economy
is operating with about 11.5 million fewer jobs than in February.
Note: BLS monthly employment
reports present statistics from two monthly surveys. The household survey
measures labor force status, including unemployment, by demographic
characteristics. The establishment survey measures nonfarm employment, hours,
and earnings by industry.
..
The slowdown would have been more pronounced without
the hiring of nearly a quarter-million temporary census workers.
The mainstream media failed to report that jobs added
the past two months were lower than originally reported:
·
The change in total nonfarm
payroll employment for June was revised down by 10,000, from +4,791,000 to
+4,781,000.
·
The change for July was
revised down by 29,000, from +1,763,000 to +1,734,000.
-->With these revisions, employment in June and
July combined was 39,000 less than previously reported.
Note: Monthly
revisions result from additional reports received from businesses and
government agencies since the last published estimates and from the
recalculation of seasonal factors.
.
Curmudgeons Comment and Analysis:
Applications for unemployment benefits rose last
week, while data from Homebase which provides time-management software
to small businesses shows that the number of people working has declined
since early August.
State reopening of their economies boosted employment
this summer, but the gains have cooled in recent months. Economists expect the initial hiring spurt
from business reopening to ease as state restrictions are lifted at a slower
pace than earlier in the summer. Further, the number of unemployed individuals
saying their layoffs are permanent rose last month to 3.4 million, a headwind
to the pace of recovery in future months.
Were in a very deep hole, and were working our way
out of it, said Gus Faucher, economist at PNC Financial Services Group. We
continue to see very good improvement in the labor market, but I think the
improvement is going to be slower going forward.
The economy continues to face uncertainty with an
average of 36,000 new Covid-19 cases a day and an increase ahead of Labor Day
weekend, prompting warnings from some governors about persistent risks from the
virus.
An increasing number of people reported in the Labor
Departments August survey that they had lost their jobs permanently, rather
than being temporarily laid off or furloughed a sign that the COVID-19
lockdown is doing lasting damage.
Theres a fragility in the numbers, said Diane
Swonk, chief economist at the accounting firm Grant Thornton. There are cracks
in the underlying foundation.
Economists suggest that job growth could turn flat or
negative in the fall, especially without a new fiscal stimulus.
Fiscal Stimulus Needed, but on HOLD:
Those cracks are appearing as trillions of dollars in
federal spending, which helped sustain many households and businesses early in
the pandemic, are drying up. The August
jobs data was collected early in the month and might not reflect the full
impact of the loss of benefits, economists warn.
While consumers and small businesses urgently need
more fiscal stimulus, talks between the White House and Democrats over possible
further coronavirus aid have stalled, and as Congress faces an approaching
deadline to keep the government running after its current funding expires Oct.
1st.
I dont know if there will be another package in the
next few weeks or not, Senate Majority Leader Mitch McConnell (R., Ky.) said
at a Kentucky event this week.
Economists warn that without another fiscal stimulus
package there likely will be a big drop in consumer spending in the fall,
leading to more job losses and a wave of small-business failures. Corporations
including American Airlines, United Airlines, Ford Motor and MGM Resorts all
announced they are laying off more workers.
Big name department stores like J.C. Penney and Lord & Taylor are
going out of business.
ShadowStats John Williams - Headline
Unemployment Rate Understated for the Sixth Straight Month:
Meaningful quality and credibility issues continue to
plague the improving headline labor numbers. The August 19th preliminary
annual downside benchmark revision of 173,000 (-173,000) to March 2020 payrolls
will not be adjusted into headline monthly reporting until February 2021.
While August Payrolls gained month-to-month for the
fourth month, the monthly slowing in annual decline is taking on the form of an
L-shaped recovery.
Year-to-year payrolls declined into an initial April
2020 trough of 13.4% (-13.4%), narrowing to 11.7% (-11.7%) in May, but have
begun to flatten out at 8.7% (-8.7%), 7.7% (-7.7%), and 7.0% (-7.0%) in June
through August. Similar patterns in industry payrolls ranging from Retail Sales
and Construction to Manufacturing suggest a slowing pace of economic recovery.
The BLS acknowledged that continued misclassification
of unemployed persons as employed persons in the Household Survey might
have reduced a potential headline July U.3 unemployment rate of 9.1% to the
headline 8.4%.
Curmudgeon Note:
From the previously referenced (hyperlink) BLS
website:
For
March through July, BLS published an estimate of what the unemployment rate
would have been had misclassified workers been included. Repeating this same
approach, the overall August unemployment rate would have been 0.7 percentage
point higher than reported. However, this represents the upper bound of our
estimate of misclassification and probably overstates the size of the
misclassification error.
Whatever the difference, official headline
unemployment was understated meaningfully for the sixth straight month, due
to survey misclassifications. Headline U.3 unemployment dropped to 8.42% in
August, from 10.22% in July, headline August U.6 declined to 14.24% from
16.53%, with the headline August ShadowStats Alternate Measure, on top
of U.6, at 28.0%, down from 30.0%
.
Victors Comments:
The BLS unemployment numbers are not at all reliable.
One could say they are made up to paint a positive political picture. (You
all know this is an election year).
Permit me to cite one example of obvious questionable truth: the number
of jobs added by new businesses.
The monthly payroll numbers and unemployment stats
are reported on a seasonally adjusted basis.
According to BLS, thats to smooth the reports for public consumption.
The reported jobs created for August were 1.371M,
but the NOT Seasonally Adjusted (NSA) new jobs were
actually a little higher that month at 1.535M.
More importantly, the assumption of new jobs
created from NEW businesses is estimated (never counted), according to the Birth Death (BD) Model,
developed in the 1980s.
BLS NSA data assume new jobs added monthly from
February to August 2020 were the following:
143k, 26k, -533k, 345k, 295k, 241k, and 154k, respectively. During those six months, the BLS guesses
that 671,000 net new jobs were created according to the BD Model. Do you believe that? With NYC and LA being
CLOSED DOWN since March?
...
..
Curmudgeon Note:
It gets even more convoluted. The BLS has recently made changes
to the BD Model to reflect the widespread disruption to labor
markets due to the COVID-19 pandemic.
The August 2020 BLS estimates for BD Model jobs added are: 154K with
adjustment vs 104K without adjustment.
That is a difference of 50K new non-farm payroll jobs
supposedly added in August AFTER ADJUSTMENT.
In other words, the BLS adjustment to correct the BD
Model jobs added, has made it even more incorrect!
...
..
...
Victors Conclusion:
I leave it to the reader to decide if the reported
BLS job numbers are accurate. My
personnel belief is that the numbers are almost completely contrived. To
think that entrepreneurs would START NEW businesses, ADDING an average of
111,700 NSA jobs per month (?) when the economy is in lockdown seems extremely farfetched.
This seems to be an example of fake news, or
disinformation from the U.S. government (rather than from social media sources
or Russia).
Closing Quotes:
This quote captures the essence of the BLSs
inaccurate reporting of the jobs numbers:
Well know our disinformation program is complete when
everything the American public believes is false William
Casey Director of the C.I.A. (1981-1987) at an early February 1981 meeting of
the newly elected President Reagan in the Roosevelt Room of the WH with his new
cabinet secretaries.
A corollary quote, from Thomas Sowell, is depicted in
this graphic:
Thomas Sowell is an
American economist and social theorist who is currently a senior fellow at
Stanford University's Hoover Institution.
.
Be well, healthy, and safe. Good luck and till next
time
..
The Curmudgeon
ajwdct@gmail.com
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Curmudgeon is a retired investment professional. He has
been involved in financial markets since 1968 (yes, he cut his teeth on the
1968-1974 bear market), became an SEC Registered Investment Advisor in 1995,
and received the Chartered Financial Analyst designation from AIMR (now CFA
Institute) in 1996. He managed hedged equity and alternative
(non-correlated) investment accounts for clients from 1992-2005.
Victor
Sperandeo is a historian, economist and financial innovator who
has re-invented himself and the companies he's owned (since 1971) to profit in
the ever changing and arcane world of markets, economies and government
policies. Victor started his Wall Street
career in 1966 and began trading for a living in 1968. As President and CEO of
Alpha Financial Technologies LLC, Sperandeo oversees the firm's research and
development platform, which is used to create innovative solutions for
different futures markets, risk parameters and other factors.
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