Don’t Believe Government Numbers?
- Posted by TheArmoTrader
- on October 6th, 2012
Unless you’ve been under a rock or in hibernation mode for all of Friday, the BLS released the Non-farm payroll jobs numbers yesterday. We saw significant upward revisions to July and August and saw an in-line number for September. However, the big story was on the Unemployment rate which fell from 8.1% to 7.8%, a pretty significant drop for 1 month.
What really got the conversation rolling was former $GE CEO Jack Welch’s tweet in which he basically accused the Obama administration of making the numbers up, also called “fudging” or “cooking”. Personally, I think this is ridiculous. The BLS has a tough job at hand and does a wonderful job in getting it’s numbers.
However, lets forget the BLS. Let’s say they are Obama’s minions working to get him re-elected (By the way, if so, why is he still at 7.8% and only creating ~120K jobs per month?). So let’s throw the government numbers out the window. Let’s use numbers calculated by the private sector. My favorite and most reliable “jobs number” is the ADP Employment Report tabulated by none other than $ADP (Automatic Data Processing, Inc), a private corporation. As we know, the September Jobs report came in at +114K. However, the ADP Jobs report came in at +162K.
Here is a chart via Bloomberg. As you see, we’ve seen positive private payroll growth since early 2010.
Now, how about that pesky “controversial” unemployment rate. The question here isn’t why the UE rate is at 7.8%, the question here is that the 7.8% is fake. You can argue that people have dropped out the workforce thus leading to a lower UE rate via a lower Labor Force participation rate (however, you’d be mistaken). But you cannot sit there and say they “made/fudged/cooked” 7.8% out of thin air in order to help Obama.
So lets forget government numbers once again! Gallup, a very prominent, private research organization has been tabulating its own unemployment rate since 2010. Guess where they have their unemployment rate at (Answer below)? . Granted, their unemployment rate is unadjusted, however, I have 2 caveats for this.
For one, the NSA civilian unemployment rate is at 7.6%, suggesting that any unadjusted rate should be lower than any adjusted (seasonal) rate, which it is (Gallup adjusted is at 8.1%). The second caveat is the fact that Gallup seasonally adjusts its rate using the BLS seasonal adjustment. So in order to avoid mixing private data with government data, we should stick to looking at the unadjusted rate.
And what do you know, the unadjusted rate is at 7.9%. Not too far off from the 7.8% reported on Friday by the BLS.
Looks like them Chicago guys need to learn how to cook them numbers better.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Jerry Khachoyan is currently an undergraduate student at UCLA pursuing a degree in Political Science. He started trading in September of 2008. He concentrates on using technical analysis and reading the tape to enter the best risk/reward trades. The stock market to him is one of the greatest inventions by man.
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