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Employment Data Faked For Political Gain

Employment Data Faked For Political Gain

Employment Data Faked For Political Gain

I have been reporting on the “real” employment situation for the past couple of years as the data reported by the Bureau of Labor Statistics (BLS) did not relate to what was happening in the underlying economy.  I wrote in “Why The Unemployment Rate Is Irrelevant” that:

“From the lows of the recession there have been roughly 5.52 million jobs created.  However, there are only 270,000 more jobs today than there were in January of 2009.  However, during that same time frame 9.52 million individuals have simply fallen out of the labor force.  The argument has generally been that these individuals have slipped off into retirement.  If these was the case, there would not be record levels of food stamp participation.

The importance of these two specific points is that while the Federal Reserve has a target of 6.5% unemployment that the target could be achieved, not by increases in actual employment, but through further deterioration of the labor force and increases in population.  While the Fed could claim victory in achieving their ‘full employment’ target; the economic war will be have been soundly lost.”

However, in a “not so surprising” article by John Crudele at the NY Post it appears that the Census Bureau “fudged” the data to boost employment prior to the 2012 presidential election.

The decline — from 8.1 percent in August to 7.8 percent in September — might not have been all it seemed. The numbers, according to a reliable source, were manipulated.  And the Census Bureau, which does the unemployment survey, knew it.

And a knowledgeable source says the deception went beyond that one employee — that it escalated at the time President Obama was seeking reelection in 2012 and continues today.

The last point is the most important.  It is still continuing today.

This means that a vast majority of the optimistic analysis from mainstream analysts, economists and the blogosphere has been wrong.  It also means, as John points out, that:

“…manipulation of data like this not only gives voters the wrong impression of the economy but also leads lawmakers, the Federal Reserve and companies to make uninformed decisions.  To cite just one instance, the Fed is targeting the curtailment of its so-called quantitative easing money-printing/bond-buying fiasco to the unemployment rate for which Census provided the false information.”

Had the data not been falsified would it have changed the outcome of the Presidential election?  History suggests that if the unemployment rate had been above 8%, which it would have been just prior to voting, Mitt Romney would now be the President.  Does such a manipulation of data imply potential election rigging?  Does that change the history of debt ceiling debate and the affordable care act implementation?  The economic consequences could be significantly different.

Real employment near historically low levels

Despite the many possibilities that surround the impact of falsifying the data for political purposes, the reality is that real employment relative to the working age population still remains near historically low levels.  As I discussed previously:

However, the reality is that, despite better than expected numbers in the report, employment gains to this point have been nothing more than a function of population growth.  The chart below shows the 12 month average of the net change in both employment and population.   As you can see, there have been very few months since the turn of the century where employment has exceeded population growth.”

Employment-population-103113

“This explains two things:

1) Why the employment to population ratio has plunged along with the labor force participation rate; and

2) That employment gains, so far, have been a function of businesses hiring only to meet the demand increases caused by an increase in population rather than from a growing economy.

The latter point is very important and relates directly to an issue that has been lurking silently in the background called ‘labor hoarding.’

The problem that businesses are beginning to face currently is that while they have slashed labor costs to the bone there is a point to where businesses simply cannot cut further.   At this point businesses have to begin to “hoard”what labor they have, maximize that labor force’s productivity (increase output with minimal increases in labor costs) and hire additional labor, primarily temporary, only when demand forces expansion.

The issue of ‘labor hoarding’ also explains the sharp drop in initial weekly jobless claims.  In order to file for unemployment benefits, an individual must have been first terminated, by layoff or discharge, from their previous employer.  An individual who ‘quits’ a job cannot, in theory, file for unemployment insurance.  However, as companies begin to layoff or discharge fewer workers the number of individuals filing for initial claims decline.” 

This effect is clearly shown in the chart below which shows the level of full-time employment as a function of the working age population as compared to the 4-week average of initial jobless claims (inverted scale).

Employment-fulltime-joblessclaims-103113

There is little evidence that falling jobless claims is translating into full-time employment that exceeds the rate of population growth.

However, even this analysis is likely more optimistic than reality as this analysis uses the manipulated data.  More importantly it also appears that the Current Population Survey may also not be accurate. Via the Post:

“On one document seen by The Post, Crosby hand-wrote the answer: “Unable to determine why an investigation was not done for CPS,” or the Current Population Survey — the official name for the unemployment report.

With regard to the Consumer Expenditure survey, only four instances of falsification were looked into, while 14 were reported.

I’ve been suspicious of the Census Bureau for a long time.”

This revelation will likely result in massive negative revisions going back to 2010.  The implications of which are likely to prove that many of my suspicions regarding the disconnect between the real economy and a “statistical recovery” may well be vindicated.  We will see.

 

Courtesy: Lance Roberts

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