Tuesday, February 09, 2010

You don't believe that BS, do you?

It's a snow day today for us - snow, then rain, then freezing rain, then "mixed" then more snow...so I have some time on my hands to blog about something that has been bothering me. Recently it has been much hyped in the news that unemployment supposedly went down - to 9.whatever percent. That is complete and total bull malarky.

Business Insider: The Money Game
TrimTabs: Here's Why The Real Jobs Loss Number Was 5x Worse Than What The BLS Reported
Joe Weisenthal
Feb. 5, 2010, 4:01 PM

TrimTabs employment analysis, which uses real-time daily income tax deposits from all U.S. taxpayers to compute employment growth, estimated that the U.S. economy shed 104,000 jobs in January. Meanwhile, the Bureau of Labor Statistics (BLS) reported the U.S. economy lost 20,000 jobs. We believe the BLS has underestimated January’s results due to problems inherent in their survey techniques.

In addition to their regular report, the BLS published benchmark revisions to their employment estimates derived from an actual payroll count for March 2009. As a result, job losses from April 2008 through March 2009 were revised up a whopping 930,000, or 23% from their earlier revisions. In addition, the BLS revised their job loss estimates for 2009 up 617,000, or 14.8%.

While the BLS originally reported job losses of 4.2 million in 2009, TrimTabs reported 5.3 million, a difference of more than a million lost jobs. We consistently reported that based on real-time tax data, job losses were much higher than the BLS was reporting. This past January, the BLS revised their job loss estimate to 4.8 million, an increase of almost 600,000 lost jobs. The new total brought the BLS’ revised estimates much closer to TrimTabs’ original estimate based on real-time tax data.

Since July 2009, TrimTabs estimates and the BLS estimates have diverged again. While the tax data points to a weak job market, the BLS estimates point to a steadily improving job market. We believe the job market is much worse than the BLS is reporting and that in January 2011, when the BLS revises their estimates for 2010, their April 2009 through December 2009 results will move much closer to TrimTabs’ results.

The BLS has seriously underreported job losses for the past two years due to their flawed methodology...

No, not "flawed" - purposefully manipulated. Say that last word with me, class: man-i-pu-lated. The figures were intentionally falsified to mislead the public.

TrimTabs has identified the following four problems:

1. The BLS employment estimate is based on a survey, and not on an actual count of employees. While the BLS survey is large and supposedly designed to capture the complex nature of the employment market, it is still a survey and therefore subject to error. TrimTabs believes that rapid changes in an employment cycle cannot be captured by surveys.

2. Several times a year, the BLS applies enormous seasonal adjustments to their survey results to account for seasonal fluctuations in the job market. For example, this January, the BLS added 1.92 million jobs to their survey results to report a job loss of 20,000 to account for the layoff of retail holiday workers. In our opinion, the sheer magnitude of the seasonal adjustment which dwarfs the monthly result renders this month’s job loss estimate meaningless.

3. At the time of the first release, only 40% to 60% of the BLS survey is complete and is subject to large revisions over the next two months.

4. The BLS applies a mysterious “birth/death” adjustment to their survey results to account for business openings and closings. While the payroll data was adjusted substantially, the “birth/death” adjustments were left unchanged. In 2008 and 2009, the BLS’ “birth/death” adjustment added 904,000 and 882,000 jobs, respectively, for a total of 1.79 million. By way of comparison, in 2006 and 2007, the BLS’ “birth/death” adjustment added 964,000 and 1.13 million jobs, respectively. We find it highly unlikely that in 2008 and 2009, during the worst recession since the 1930’s, more businesses opened than closed netting 1.79 million jobs...

All anyone has to do is look around them at all the closed stores, factories and shops to know how "unlikely" those numbers were. Those who claim not to see such an obvious and blatant disconnect between statistics and reality are suffering from a very bad case of cognitive dissonance, at best - at worst they're delusional, so horrified at the prospect of downsizing and living a more modest lifestyle that they have become blind.

...Several other employment related statistics support Trimtabs’ conclusion that the labor market is weaker than what the BLS is reporting:

· Real-Time tax withholding data shows that wages and salaries declined an adjusted 1.0% y-o-y. In January 2009, wages and salaries declined 5.0%. If the labor market were improving, we would expect a positive year-over-year growth rate. The fact that tax withholding data is still declining year-over-year suggests that the labor market is still contracting.

· The Monster Employment Index declined further in January, falling 0.9%.

· The TrimTabs Online Jobs Index reported slightly higher job availability in January but remains at a low level.

· Advanced Data Processing reported a job loss of 22,000.

· Weekly unemployment claims edged up in the past month, rising 10.2% since the beginning of January.

· In January, a whopping 11.5 million people were collecting some form of unemployment insurance, up 27.8%, from 9.0 million in November.

For a complete analysis of the current employment situation and economic conditions, refer to TrimTabs Weekly Macro Analysis published this coming Tuesday, February 9, 2010.

Also at Business Insider was this article concerning the housing bubble bust - you may recall I posted a couple of different charts and added trendlines to them showing that housing prices still had a long way to fall, and we discussed what the pre/post bubble values should probably be. In fact, one of the trendlines posted here was plotted over an earlier edition of this very graph - the Case Shiller chart. As we had already ourselves discerned by July when this was originally posted, housing prices will end up at somewhere in the neighborhood of 40-50% of their peak price when it all comes out in the wash.

Business Insider
The Housing Chart Worth 1000 Words, UPDATED
Henry Blodget | Jul. 1, 2009, 8:27 AM

...Nationwide, prices are now down 33% from the peak. They'll likely be down 40%-50% before we're through. And they'll probably stay there for a while.

You'll notice on this chart the median home price is projected to fall sometime this year to less than $110,000 - and that's presuming unemployment stops increasing and holds steady at something near pre-bubble rates. Now, based on the above story, we know that's, frankly, impossible. The amount of shadow inventory and continual job losses guarantees that some of our worst trendline projections from last year - those showing median home values could dip under $100,000 - are actually in view, if not unavoidable, possibly by the end of this year, or perhaps in 2011.

This isn't over yet - not by a longshot. Anybody who says otherwise to you is simply lying. There are around 40 million unemployed and underemployed people out there in real life. There are NOT 40 million living wage jobs out there waiting to be created or even just waiting - when the Boomers die off and/or retire, their successors will NOT have anywhere near the same wages, hours and security that they had. We will continue to have (adjusted for inflation) 1970 wages and 20-teens expenses, until finally the expenses simply overwhelm the median wage earner (who only makes $55,000 a year - and there are some who now say that is overly optimistic) and they have to halt all discretionary spending. Many families are already at that point, having had their hours or wages reduced and stuck with a house payment that they can never get out from under, since their mortgage is FAR higher than they will be able to sell their house for the foreseeable future - probably a decade or more, maybe two. So now we will see the collapse of the "service" economy in earnest, because people who can barely afford to feed themselves certainly can't afford to hire other people to do their chores for them.

And that's not a lie.

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