This is why I watch the market reactions more than then government numbers. they are telling us all we need to known today.
The point @minvestor, that I am trying to make is that estimates are not estimates if they are incorrect in the same direction 75 out of 78 times and the errors average 3000 with a low standard deviation.
Then they are willful distortions to create an impression favorable to the incumbent.
Re: More on B/D model
mInvestor
5/31/2012 9:59:04 PM
Birth/death model is just a statustical method. It uses survey to collect data. It's not that scientific or accurate. There are many things can affect the results. The data or calculated results are often revised afterward because some parameters are just estimate. To use this figure to predict future will sometimes be troublesome.
@Bargain Bin
In don't think there are any beneficial effects to phony news. At best there may be a temporary euphoria, but the big traders who move the markets, generally have the knowledge and ability to avoid being suckered.
There is often a quick spurt in one direction or the other after an economic report is released that is caused by the uninitiated taking positions. However, more often than not it is reversed very quickly and may be reversed a second or even third time as traders have the time to analyse a report thoroughly.
Look carefully at the minute by minute trading tomorrow just before and after the usually influential ISM announcement at 10 AM. You may see just what I mean.
Here's what may happen. The consensus for the ISM report to be released at 10 AM is for it to be lower -- a bearish event if it occurs. So let's consider that a group of floor traders, in anticipation of a negative result make a few big shorts in key stocks to drive them lower before the announcement in the hope that they can buy them back in the first moments after the news release. In doing so they amplify the volatility which permits them to make further trades in the opposite direction. We often see this around the time of the FOMC announcements every month or two.
The other effect of phony reports is to create an air of uncertainty and mistrust of the government by employers, which results in a decrease in hiring.
Potentially ignorant question, but is there any possible way this intentional distribution of erroneous employment numbers can actually affect the availabiltiy of jobs?
In other words, could the stock market boost brought about by these altered reports actually result in an atmosphere where job creation is more probable, or is the boost too ephemeral to actually make a difference?
Good points @Scott, I certainly can agree that the figures are both muddled and confusing. However, your approach is honest and straightforward -- you are looking for answers.
Contrast this with the lying idealogues who call themselves journalists and use the confusion to sway an ignorant electorate in the direction they have chosen for them.
It is that that makes me write as I do. I don't mind looking for answers and admitting to the difficulties. However, I am intensely opposed to interpretating data to suit an agenda and even more opposed to making up the numbers.
Interesting analysis Fred.
As we can see this situtation is complex and confusing. And we know the government's numbers are muddled at best. Personally I think the most ridiculous part of the government numbers are the so-called "Birth/Death" model where they add and subtract jobs based on guestimates about new businesses being created and destroyed. The B/D number can account for huge differences in the monthly jobs -- up to 50% of the number. So if you are going to cheat that is the place to do it.
I have written about this before but I think the biggest drivers of the job situation are 1) Outsourcing 2) demographics.
From people I talk to anecdotally there is no doubt that it's harder to get a job than it was 10-20 years ago, especially if you are young.
As far as the "out of the workforce" data it's very hard to decipher but my guess is that related to demographics, it's a lot of older people on the verge of retirement who just give up and decide to retire earlier and a lot of younger people who move in with Mom and Dad and also give up. I have seem some data that confirms this.
Okay @Noreen, let's agree that the numbers are inaccurate, but they are probably the best we're going to get. Then let's use the private numbers like those from Challenger, Chicago Business and even ADP (although the monkey with revisions every month too), to monitor what we are given by government agencies.
But after we look at the numbers let's at least be honest in our interpretation. The employment situation is getting worse not better, and tomorrow when the government tells us that unemployment has dropped from 8.1% reported in April to 8.0% in May let's realize that it is probably a campaign tactic and not reality.
Based on all the other employment information recently released and the deterioration of seven Federal Reserve reports last month we should expect the ISM Manufacturing Index to be down when it is released tomorrow at 10 AM, just as the GDP was revised lower today. If it is, expect the market to drop substantially so at least let's protect ourserlves from that possibility.
If the unemployment figures are reported to have improved when they are reported at 8:30 AM there may be a bounce in the market, but let's understand that unemployment is the only thing most of the electorate understands and looks at and realize that we are being lied to if they tell us things have improved.
Then, let's look for the rare journalist who states things as they are and follow that person in the future.
I'm just saying that the population numbers are probably not what they seem, either. Could be more, could be less. Maybe the employment ratio is even worse than it seems. Or maybe it's better than it seems, based on historical numbers. (Did we always include undocumented workers in the national population count? Or is the ratio worse now because we do?)
It's a big mess.
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