Are the payroll numbers real or fictitious?
by Anthony Cherniawski, The Practical Investor, LLC | August 7, 2009
PrintThe Bureau of Labor Statistics reports, “Nonfarm payroll employment continued to decline in July (-247,000), and the unemployment rate was little changed at 9.4 percent, the U.S. Bureau of Labor Statistics reported today. The average monthly job loss for May through July (-331,000) was about half the average decline for November through April (-645,000). In July, job losses continued in many of the major industry sectors.”
Folks, this number is bogus. The way that the DOL was able to doctor these numbers is by reducing the Civilian labor force by 422,000 (see below). This may have been due to the large number of people losing their unemployment benefits and falling out of the statistical count. In effect, the “real” unemployed number could be as high as 669,000 in the month of July. This statistical sleight of hand also occurred in June to a lesser degree. In addition, there is no mention of revisions in the prior month’s payroll data. This has the statistical effect of keeping the real unemployment data from rising by as much as .5% this month.
| | |
| Quarterly | |
| averages | Monthly data | June-
Category |_________________|__________________________| July
| | | | | | change
| I | II | May | June | July |
| 2009 | 2009 | 2009 | 2009 | 2009 |
_________________________|________|________|________|________|________|________
|
HOUSEHOLD DATA | Labor force status
|_____________________________________________________
| | | | | |
Civilian labor force ....| 153,993| 154,912| 155,081| 154,926| 154,504| -422
What do insiders see that Main Street doesn’t?
--Insiders are still selling at a blistering pace, according to the latest post at ZeroHedge.com. Last week’s report shows 145 sells to 5 buys. In fact, insiders have been making an exit for over a month. They are not the most perfect timers in the world, but this is an extremely cautionary sign. The formation that I have bracketed is called the “broadening top” formation. The last one was found in October 2007. Take heed.
Treasury auction next week brings caution for bonds.
-- Treasury yields are headed for their biggest weekly increase since March 2003 as lower-than forecast job losses in July added to signs that the economy is recovering from its worst slump since the Great Depression. The U.S. will next week sell $37 billion of three-year notes, $23 billion in 10-year securities and $15 billion in 30- year bonds, the Treasury said Aug. 5. The department also signaled that issuance of inflation-indexed securities will rise in fiscal year 2010.
Analysts say rising gold prices dependent on falling dollar.
Gold declined on speculation investors are offloading holdings of the precious metal to lock in gains after it climbed to a two-month high yesterday and commodity prices slipped. Bullion, which touched $971.68 an ounce yesterday, is still on course for a fourth weekly advance as the dollar, as measured against six major currencies, traded near the lowest level in 10 months.
There are “profit-taking opportunities” in the Nikkei.
-- Japanese stocks fell after slumping earnings at Konica Minolta Holdings Inc. and Kubota Corp. fueled concern shares had risen too much given the profit outlook. “Many investors have been bullish on the stock, particularly due to growth prospects in Asia,” Shinji Kuroda, an analyst at Credit Suisse Group AG, wrote in a report. Given the weaker-than-estimated sales growth in China and Thailand, “we expect profit-taking opportunities ahead.”
The Chinese central bank is curbing loans to speculators.
-- China’s stocks dropped, driving the benchmark index to its worst weekly loss since February, as developers and materials producers fell after China Construction Bank Corp. said it will cut lending and metal prices slumped. The Shanghai Composite Index dropped 4.4 percent this week, its biggest loss since the five days to Feb. 27 and its first decline in two months, on concern the central bank will curb inflows into a stock market that had doubled from last year’s low.
The dollar is (finally) finding a bottom.
-- The dollar advanced to a seven-week high against the yen and gained versus the euro as employers eliminated fewer jobs in July than economists forecast. The problem with attributing the value of the dollar to employment statistics is that the correlation may only be casual. The strength of the dollar may be more in tune with the need for investors to reduce risk in other sectors of the market.
Is there something wrong with this picture?.
--Almost half of U.S. homeowners with a mortgage are likely to owe more than their properties are worth before the housing recession ends, Deutsche Bank AG said. The percentage of “underwater” loans may rise to 48 percent, or 25 million homes, as prices drop through the first quarter of 2011, Karen Weaver and Ying Shen, analysts in New York at Deutsche Bank, wrote in a report today. It seems odd that the housing index rallies in the face of this report, doesn’t it?
Hurricane season is late, but be prepared.
The Energy Information Administration Weekly Report suggests that, “When hurricanes disrupt power and refinery production on the Gulf Coast, shortages of gasoline and other petroleum products can develop more than a thousand miles away. Most refinery capacity in the United States is concentrated in just a few areas, with pipelines, tankers, and barges moving the product from those refineries to terminals near the final customers. The majority of that movement is through pipelines.”
Natural gas prices still modest.
The Energy Information Agency’s Natural Gas Weekly Update reports, “Natural gas spot prices posted robust gains in the last 3 trading days of the report week, failing to react to a decreased cooling load in some areas of the country. However, areas in the South, including the East and West South Central Census Divisions, which generally rely heavily on gas-powered electricity generation, saw robust cooling load during the week, undoubtedly lending support to the spot prices.”
The truth behind the BLS Report.
The confidence game in turbo boost mode. The market is oblivious of the underlying data behind today's "better than expected" BLS computer model output. Yet for the few remaining who do care about the increasingly irrelevant fundamentals, we provide some observations. Here are facts from John Williams' Shadow Stats:
July usually sees a regular pattern of planned automobile production line shutdowns to accommodate retooling for the new model year, but recent disruptions to the auto industry have changed pattern this year. Without the usual pattern of shutdowns, the government’s computers nonetheless responded by creating the usual offsetting boost in jobs, not only in the auto industry, but in supporting industries as well. The auto industry itself was alone among durable goods manufacturing industries in showing a reported, seasonally-adjusted monthly gain in July, up by 28,000 jobs. [Would anybody who recently got a job at Chrysler and GM please write us immediately]
And here’s another way to keep your nest egg fresh…
Copyright © 2009 Anthony Cherniawski
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Anthony Cherniawski | President and CIO, The Practical Investor,
LLC.
State Registered Investment Advisor | Mason, MI USA | Email | Website
The opinions of FSU contributors do not necessarily reflect those of Financial Sense.
