Statistical Manipulation
Research for Online Investors

02/07/12

Federal Reserve Chairman Ben Bernanke is appearing before the Senate Banking Committee this morning.  We have one eye on the hearing and one on our computer, watching for a statement to set off a market reaction.  Sure to come up today is the “great” Non-Farm payroll report released last Friday before the market opened.

The DJI index recorded a 156 jump as investors and traders enthusiastically jumped on the bandwagon.  Talking heads on the network business shows told us the U.S. economy was coming back.  Administration shills said this was verification of Obama’s policies.  Republicans ran for the hills, how could they retool their political message to run against Obama if the economy was recovering, and unemployment was going down?

We wrote about the January report by the Bureau of Labor Statistics last year when it came out and showed a drop in unemployment.  January’s report last year was a fabrication as is this year’s.  Here is what we wrote on 2/4/11 in Duplicitous Obama:

This morning the Labor Department reported that unemployment fell to 9.0% in January.   That was only because so many people have quit looking.  The private economy only added 50,000 new jobs, less than the estimated 250,000 it takes to employ new job seekers every month.

January is when the Bureau of Labor Statistics makes its ANNUAL adjustments to the civilian workforce for the past year.  These adjustments are based on household surveys and nine month old unemployment statistics from the individual states.  These adjustments make January’s numbers unreliable when compared against prior or later months.

Table A in the BLS release showed seasonal adjustments made to employment for every month for 2011 at 2,191,000.  We excluded December, since this is still a “preliminary” number.  This “seasonal adjustment” number was higher than any used in the last three years.  If the BLS had used the average of the last three years, unemployment would not have dropped and Non-Farm jobs added would have only been 132,000, which would have been less than the 140,000 expected by the market.

Table C in the BLS release tells us how the worker bees at the Labor Department were able to massage the numbers to come out with the headline number they wanted.  They increased the “Civilian noninstitutional population” by 1,685,000.

Remember, citizens that have not looked for work in the last four weeks are not counted as unemployed.  The Labor Department calls these individuals “marginally attached” rather than unemployed.  To get the unemployment percentage to drop this “Not in labor force” number was increased by 1,177,000

This dropped the labor force participation rate by 0.3%, to a new 30-year low of 63.7% and viola, the unemployment rate dropped to 8.3%  On first blush; this low labor participation rate is an indictment of the U.S. work ethic.  On second thought, think about this.  These adjustments are all about not counting people that want to work but can’t find a job else the unemployment rate would be astronomical.

If the political appointees and bureaucrats at the Labor Department add just a little over 4% more people to the “marginally attached” group, they can end up with a 0.0% unemployment rate by Election day!  Oh happy day.

If you thought the market was manipulated by banks and high frequency traders…be suspicious of the information you believe that may not be accurate.  What would the market have done last Friday if the Non-Farm payrolls number would have come in low, and unemployment rose?

Quote:
There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don't know. But there are also unknown unknowns. There are things we don't know we don't know.---Donald Rumsfeld

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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