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…

FRED-: January 2016 NonFarm Payroll NSA YoY % change

This matches most of the other data about the US economy: an acceleration of growth in 2014, an deceleration in 2015 — continuing in January. “Deceleration” meaning growth continues but at a slower rate, but still faster than during the first four years of the recovery.

Stockman goes on to make a great many other points, in a jumble. Some are valid. Yes, this is a weak recovery that has done little for most Americans. (But then America’s CEOs and politicians don’t work for us, so why should we expect more?) And he rails against the U3 definition of unemployment (Yes, there is no one magic number, which is why DoL provides six such measures).

The truth about economics is not exciting. It’s not supposed to be fun, just valuable information about our world. Stick to boring and reliable sources; find your entertainment in fiction — not the news.

This is a follow-up to Surprises in the January jobs report.

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