Tag Archives: employment

David Stockman explains “Why The Bulls Will Get Slaughtered”

Summary: Americans are so often ignorant because we learn from clickbait, as seen in this exciting but misleading article by David Stockman about yesterday’s jobs. When we decide to get information from boring but reliable sources we will have taken a big step to again governing America.  {2nd of  2 posts today.}



Clickbait rule #4: when you have nothing to say about new economic numbers, attack the seasonal adjustments.


From David Stockman today (bold in the original): “Why The Bulls Will Get Slaughtered“. Reposted, of course, at Zero Hedge. Opening…

Needless to say, none of that stink was detected by Steve Liesman and his band of Jobs Friday half-wits who bloviate on bubblevision after each release. This time the BLS report actually showed the US economy lost 2.989 million jobs between December and January. Yet Moody’s Keynesian pitchman, Mark Zandi described it as “perfect”

Yes, the BLS always uses a big seasonal adjustment (SA) in January — so that’s how they got the positive headline number. But the point is that the seasonal adjustment factor for the month is so huge that the resulting month-over-month delta is inherently just plain noise.

To wit, the seasonal adjustment factor for the month was 2.165 million. That means the headline jobs gain of 151k reported on Friday amounted to only 7% of the adjustment amount!

Any economist with a modicum of common sense would recognize that even a tiny change in the seasonal adjustment factor would mean a giant variance in the headline figure. So the January SA jobs number cannot possibly reveal any kind of trend whatsoever — good, bad or indifferent.

… Actually, it proves none of those things. For one thing, the January NSA (non-seasonally adjusted) job loss this year of just under 3 million was 173,000 bigger than last January — suggesting that things are getting worse, not better. In fact, this was the largest January job decline since the 3.69 million job loss in January 2009 during the very bottom months of the Great Recession.

This technically correct but misleading, a nice demonstration of how clickbait makes its readers dumber. Seasonal adjustments are large in volatile data like payrolls, difficult but necessary adjustments to the monthly numbers. Also, it is difficult to see the trend amidst the tiny monthly changes in the large US workforce.

There is an easy alternative to ranting: look at the percent changes in the non-seasonally adjusted year-over-year change (the population grows, so percent moves better show the comparable changes).  The graph shows a clear picture…

Continue reading

Surprises in the January jobs report

Summary: The monthly job numbers tell us much, but the headline number about which the press obsesses tells us almost nothing. This post looks at the trends that shape America as shown in this report, and especially the surprises.



Journalists and economists ask if we are in a recession. The tabloid investment media screams “yes”.  Last week Professor James Hamilton provided a clear answer: no.  It’s the wrong question. We should be like sailors, scanning the horizon to see the storm before it hits, taking incremental steps to prepare as the odds of a storm grow – eventually battening down the hatches and reefing the sails — before it’s too late to do so.

Macroeconomic data provides our best warnings of economic storms. The monthly payroll report — released today for January — gets massive attention, but we must dig to get the useful insights.

The headline job number is too volatile and too heavily revised for use (also, it is a lagging indicator), but the trend in the percent change year over year NSA tells us much – the rate of growth slows rapidly in the year before a recession, hence months before stocks roll over. Payroll growth peaked in February 2015 at 2.3%, steadily falling to 1.9% in January.

NonFarm Payroll - YoY percent change NSA

Let’s look below the headline number at some of the weaker sectors. Such as manufacturing, so far the center of the downturn. Manufacturing added 29,000 jobs in January, the second monthly gain and the largest since November 2014. What does this mean? I have no idea. It is an anomaly. Economists and journalists seldom point to anomalies in the data, although that should be a priority. Anomalies point to changes in trends and errors in our beliefs.

Continue reading

The Fed watches the jobs report. So should we.

Today the Bureau of Labor Statistics released the December jobs report, among the most important of the economic numbers. It is timely and describes one of the core engines of US growth. It tells us much about the US economy’s strength (growing or fading) and about wages — affecting inflation and interest rates, corporate profits and wage inequality.


Understanding these numbers requires a broader perspective than financial journalists use, so the emphasis of the major news reports tends to the almost meaningless “horse race” aspects: better than expected! — rather than strong or weak, faster or slower.

This report is important for us both as investors and citizens. To see what this report tells us go to my analysis at Seeking Alpha (post your comments there).

This is the second of two reports today. The first was Drugs and machines making people smarter & stronger: boon or bane?

Recession Watch: Hidden Insights in the Jobs Report

Summary: The headline number of November’s job report tells us something important. Digging into the numbers shows that this recovery is nearing its end.

This recovery has been slow and steady. It has frustrated the bulls who in 2009 predicted a “V” recovery — and since incessantly predicted a “take-off” soon (corporate profits, CEOs’ income, and asset prices have been the only booms). It has frustrated the bears, who predicted no recovery in 2009-2010, and since then frequently predicted either a fall back into recession (or inflation, or both).

The slowness of the recovery is its most amazing characteristic.  ….

Non-farm payrolls

See the full report at Wolf Street.

Recession Watch: the economic indicators that show what’s coming

Summary: As the expansion ages and growth slows, we should begin to watch for signs that the next recession approaches. Here are some tips for doing so without spending much time at it — avoiding the complacency of Wall Street’s economists and the exaggerated darkness of the popular permabears (such as Zero Hedge). {2nd of 2 posts today.}


What should we watch among the blizzard of economic data? Journalists tend to focus on the numbers most frequently reported, usually about manufacturing and housing. Such as this week’s existing home sales volume (oddly, we don’t similarly obsess over NYSE volume). It’s important for people in that biz, but tells us little about the US economy.

Also big in the news are new home sales, building permits, mortgage applications, and many other housing datapoints. For a simple measure of this industry see total residential construction spending. It shows a continued strong expansion. Tune in next month to see if anything has changed.

Residential Construction Spending

What are the most important economic numbers?

But the often dramatic graphs don’t tell us the importance of those numbers. Here’s one perspective on the big picture…

  • Construction value added: 4% of GDP (housing is 1/3 of this).
  • Goods-producing value added: 19% of GDP (manufacturing is 12% of this).
  • Services value added: 68% of GDP.

Another way to see this relationship: manufacturing new orders were 15% of GDP in 1995; now they’re only 10%. Manufacturers employed 30% of all non-farm workers in 1955; they employ only 9% today. Manufacturing was once the key swing sector of the economy; now we are a services economy. Unfortunately there are few good leading indicators for the service sector. Creating Purchasing Managers Indexes for Services was a creative idea, but untested — and doesn’t make much sense to me: what do they PM’s of service corps do that gives them special insight about the economy?

Continue reading

We’re sending more kids to college, but does the economy create good jobs for them?

I will perform an unusual magic trick for you using the employment report. Rather than transforming something mundane (a bird, a hat, cards) into something spectacular, I will transform the spectacular October employment numbers (now sparking a thousand excited articles) into something mundane. The lessons learned from this will save you time in the future. Plus, at the end is a useful debunking of a myth about the employment numbers.

October’s non-farm payroll gain (aka the Current Employment Survey) was a blockbuster at 271,000, vs. the 3 month average of 187,000 and the 12 month average of 230,000. Better yet, it was a big “beat”, with Wall Street economists expecting 150-200 thousand. See this wonderful result on the graph showing the percentage change in jobs year-over-year, not seasonally adjusted (since the population grows, the percent change better shows the rate of improvement over time).

NonFarm Payroll

Not much change, is there?

See my full report at Wolf Street!

The US economy flies into the “coffin corner”, but we don’t mind!

Summary: Every year Wall Street economists see a spike in a few indicators and announce an imminent boom. This slowly fades away, leaving another year of slow growth — preventing full recovery from the crash. Readers of the FM website have seen this accurately reported since the crash, avoiding the boom-bust cycle of of crushed euphoria. Here’s a new update, as we start another slowing cycle. Eventually, inevitably, we will hit a bump that pushes slow growth to outright decline. Then, when we no longer can prepare, economic news will become exciting.



  1. Seeing the US economy as it is
  2. What might spark a crisis?
  3. Graphs: see the pulse of America’s economy
  4. For More Information

(1)  Seeing the US economy as it is

Slowly economists see the dilemma facing the Fed’s governors): they’re desperate to raise interest rates, but the US economy can grow only slowly, and so remains vulnerable to a shock that knocks it into a recession (probably a severe downturn, given its weakness).

Seven years of the Fed’s Zero Interest Rate Policy (ZIRP, since December 2008) have distorted America’s large and dysfunctional capital markets. Not just in the obvious bubbles in the stock market (e.g, biotech and social media stocks), in equity investors’ mad belief that bad news is good news (small cap stocks up 5% after the ugly jobs data), but also in ways we can only dimly see today.

Worse, ZIRP means that in the next recession the Fed will have to take America to negative interest rates — with consequences impossible to foresee (so far only small nations have crossed this Rubicon). Long experience in the US, Europe, and Japan has proven the ineffectiveness of their only other tool, quantitative easing.

On the other hand, the data suggests that raising rates now would be insane: near-zero inflation, a too-strong US dollar (already depressing exports), and slow growth (even slower on a per capita basis).

We’re in the coffin corner: can’t accelerate, can’t continue at this speed, and can’t afford to decelerate. All that maintains public confidence is the happy talk of the Fed governors and Wall Street’s gurus, at the long-term cost of destroying their credibility when it proves false. The only hint the Fed has given us is the slow downward ratchet in their forecast of US long-term growth.

Continue reading