"THE ECONOMY REMAINS IN
TERRIBLE SHAPE"
By John Williams. 11/10/2014
INTRODUCTION By Tyler
Durden
When it comes to inflation data, there are two parallel
sources: the BLS, and ShadowStats' John Williams, who continues to plough
through the underlying "data" using pre-pre-pre-revision protocols,
and every month reveals a parallel universe in which something shocking is
revealed: the truth. Here is his take on the October "weaker but really
stronger than expected" jobs numbers. Here is what really happened.
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From ShadowStats
Never Recovered, the Economy
Remains in Terrible Shape. The large number of opening
headlines in today’s (November 9th) missive reflects various stories, ranging
from twisted unemployment data, to an election dominated by underlying economic
reality, and to headline 2014 financial results on the federal government’s
operations that should raise some troubling questions in the markets. The
general outlook is unchanged
Twisted Unemployment Numbers. Headline
October 2014 unemployment reporting, in particular, was skewed heavily by
warped seasonal-adjustment factors that do account properly for last year’s
government shutdown. When the U.S. government closed in October 2013, the
shutdown encompassed the Bureau of Labor Statistics (BLS) base-period for
determining the unemployment and employment detail in the household survey, as
well as for determining employment in the payroll survey. The BLS was
unable to determine fully the impact of the government shutdown on the monthly
October labor data.
For last year’s October 2013 headline payroll-employment
survey, the shutdown’s impact generally was guesstimated by the BLS, but it was
not reflected in the headline reporting of the time. For the headline
unemployment and employment detail, some government employees were counted
among the unemployed as being on temporary lay-off, some were just counted as
employed but absent from work. Where the headline employed dropped by
735,000, unemployed only rose by 17,000 in October 2013 (see Commentary
No. 572 andCommentary
No. 580 for the analysis of the time). Where all government
employees should have returned to work by the November 2013 reporting, the
headline employed rose by 818,000, the unemployed dropped by 365,000.
The BLS never attempted to correct its data, and heavy
distortions to the regular seasonal-adjustment process were a virtual
certainty. As revised in December 2013, only for the resetting of
seasonal adjustment factors—not adjusting for poor-quality
reporting—seasonally-adjusted household data now show employment dropping by
785,000 in October 2013 and rebounding by 958,000 in November 2013.
Distorted Numbers One Year
Later. The seasonally-adjusted 683,000 jump just
reported in headline October 2014 household-survey employment largely was an
offsetting seasonally-adjusted artefact of those 2013 events. The October
2013 plunge in household employment, and the counter-adjusted jump in October
2014 employment, can be seen later in these Opening Comments in the Employment
and Unemployment section, in the graphs of Civilian Employment Level and the
Civilian Employment-to-Population Ratio.
Employment Should Fall Sharply
and the Unemployment Rate Should Rise in November. Reversing
the swings seen in 2013, November 2014 likely will move sharply in the opposite
direction from October, as the reporting and adjusting imbalances catch
up. Watch for an offsetting sharp headline decline in the November 2014
household-survey employment number, and an increase in the November headline
unemployment rate.
Otherwise, the headline October 2014 payroll employment and
unemployment reporting suffered their regular distortions and non-comparable
month-to-month estimates, where the non-comparability results from BLS
reporting policies tied to the concurrent seasonal-factor adjustment process
(see Reporting Detail section), with general detail and misreporting summarized
later in these Opening Comments.
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