Posts Tagged
‘birth death model’
by ilene - July 10th, 2010 8:29 am
Courtesy of John Mauldin at Thoughts From The Frontline
Just how dynamic is the US job market? If I told you we created over 4 million jobs in April, would you believe me? I had a long conversation with Mohamed El-Erian of PIMCO yesterday. He is openly speculating that employment may no longer be just a lagging indicator but may also be predictive. It is an interesting insight, which we will explore as we take a very deep look at US employment. And I answer a few questions about my thought that there is a 60% chance for a recession in 2011, and why there is a 40% chance we won’t. What could change those numbers? We explore that and more, while I suffer from the injustice that LeBron will play with Wade and Bosh. Where’s a nonproliferation treaty when you need it?
First a quick commercial note. I want to let Conversations subscribers know that we will post on Monday a Conversation I recently did with Rick Rule and Marin Katusa. Rick is a decades-long friend and maybe the smartest and most successful resource investor I know of. Katusa writes a resource letter for Casey Research and is wicked smart on energy. This is a very good piece that you don’t want to miss, as Katusa identifies what he thinks are some of the really great new energy plays.
It’s More Than Just Birth/Death
Last week, I wrote about the Birth/Death Adjustment in the Bureau of Labor Statistics monthly employment numbers. Jeff Miller took me to task in his blog for not noting that the B/D numbers are not seasonally adjusted (which I know) and a few other items. I did some research on his work on employment numbers and came away with a few new thoughts that I think are worth sharing. Miller (a former professor and a nice guy) and I spent several hours on the phone talking about the BLS data and what he sees as an unusual divergence in the data, which I agree is far more interesting than the B/D Assessment.
To get to the interesting part, I am going to risk boring you with a few wonkish background paragraphs. First, let’s look at the basic process of how the BLS does its survey. Basically, the BLS tries to count every job in…
Tags: birth death model, double dip recession, John Mauldin, Recovery, unemployment
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by ilene - July 3rd, 2010 2:10 pm
Courtesy of John Mauldin at Thoughts from the Frontline
Some Really Dismal Numbers
Unemployment Went Down?
Earnings Take a Hit
Money Supply Concerns
A Central Banker’s Nightmare
Why Don’t You Reform Yourselves?
There’s a reason economics is called the dismal science, and weeks like this just give it further meaning. In economics, there is what you see and what you don’t. This week we are going to examine the headline data we all see and then take a look for what most observers do not see. Then we’ll try to think about what it all really means. With employment, housing, and the ISM numbers, there is a lot to cover. And this letter will print out longer than usual, as there are a lot of charts. Warning: remove sharp objects from the vicinity and pour yourself your favorite adult beverage. This does not make for fun reading.
Some Really Dismal Numbers
The unemployment numbers this morning were just bad, even though the spin doctors were out in force. Of course we knew that because of census workers being laid off the number would be negative, and it was, down 125,000. But the "bright spot" we were told about was that private payrolls came in at 83,000 new jobs. Let’s look at what you did not see or hear.
First, last month’s dismal (there’s that word again) private job-creation number was revised down from 41,000 to 33,000. So in two months, total private job creation is 116,000 jobs. We need 125,000 jobs per month just to keep up with population growth.
But it is worse than that. The headline number we look at is from the Establishment Survey. That means they call up existing businesses they know about and ask them how many people are working for them, etc. One of the first things I do when the employment numbers come out is look at the birth/death assessment on the BLS (Bureau of Labor Statistics) web site.
For new readers, the birth/death assessment has nothing to do with people dying, but rather is the BLS’s attempt to estimate the number of new businesses that have been created or have "died" within the last month, and they use these numbers to adjust the employment total. They use historical, seasonal numbers to create a model from which they make these estimates. There is nothing conspiratorial about the…
Tags: Ben Bernanke, birth death model, deflation, dismal science, earnings, Economy, Employment, inflation, Jobs, John Mauldin, Money Supply, Recessions, the Federal Reserve
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by ilene - January 6th, 2010 11:16 pm
Courtesy of Mish
Not only are personal bankruptcies soaring, U.S. business bankruptcies rise 38 pct in 2009.
U.S. business bankruptcies rose 38 percent last year, to a record since bankruptcy laws were changed in 2005, according to a bankruptcy data firm on Tuesday.
There were 89,402 bankruptcy filings by businesses last year, compared with 64,584 the previous year, according to data compiled from court filings by Automated Access to Court Electronic Records, which is part of Jupiter eSources LLC in Oklahoma City.
Personal bankruptcies jumped to 1,357,565 last year, from 1,031,562 the year before.
The data included bankruptcy codes Chapter 7, 11 and others. Consumers often use Chapter 7 to get a new start on their financial lives. Chapter 13 lets people discharge some debts. Businesses typically use Chapter 7 to relieve themselves of debt and Chapter 11 to restructure debt and operations.
The numbers have been "steadily up," said AACER President Mike Bickford. "I don’t think (2010) will be less than 2009. I think what’s going to tell the tale for 2010 is the first quarter."
US home sales plummet, personal bankruptcies soar
Inquiring minds are reading US home sales plummet, personal bankruptcies soar
An important measure of future home sales fell far more sharply in November than economists had expected. The National Association of Realtors (NAR) index on pending home sales—contracts agreed upon but not finalized—dropped by 16 percent in November, more than three times what economists interviewed by the Dow Jones Newswires had anticipated.
The pending home sales index registered declines in every region: 26 percent in the Northeast and Midwest, 15 percent in the South, and 3 percent in the West.
The NAR report follows the release last week of a Case-Schiller report showing home prices were flat in October, in spite of the surge in purchases based on the home buyer tax credit and exceptionally low mortgage interest rates. This was not enough, a Tuesday New York Times editorial points out, “to overcome the drag created by a glut of 3.2 million new and existing unsold single-family homes—about a seven-month supply.”
“The situation, we fear, will only get worse in months to come,” the Times writes, citing increasing mortgage rates, the eventual ending of the home buyer tax, and
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Tags: Bankruptcies, birth death model, Employment, home sales, unemployment
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by ilene - December 4th, 2009 3:18 pm
The TrimTabs number is a mile (or 244,000) away from the government’s number – why the huge disparity? – Ilene
Courtesy of Joe Weisenthal at Clusterstock
Just about every time the monthly jobs numbers comes out, economic research firm TrimTabs comes out and slams the government’s methodology, usually honing in on the Birth/Death model of new businesses entering the market.
This week is no exception.
Frankly, we’re not sure what to make of their arguments. We’ve been hearing about this Birth-Death issue for a long time, but unless you believe they’re changing their methodology from month to month, then that issue only goes so far.
We welcome your thoughts.
————
TrimTabs’ Estimates 255,000 Jobs Lost in November, While BLS Reports a Decline of Only 11,000
BLS Revises September and October Results Down a Whopping 45%
Something’s Not Right in Kansas!
TrimTabs employment analysis, which uses real-time daily income tax deposits from all U.S. taxpayers to compute employment growth, estimated that the U.S. economy shed 255,000 jobs in November. This past month’s results were an improvement of only 10.2% from the 284,000 jobs lost in October.
Meanwhile, the Bureau of Labor Statistics (BLS) reported that the U.S. economy lost an astonishingly better than expected 11,000 jobs in November. In addition, the BLS revised their September and October results down a whopping 203,000 jobs, resulting in a 45% improvement over their preliminary results.
Something is not right in Kansas! Either the BLS results are wrong, our results are in error, or the truth lies somewhere in the middle.
We believe the BLS is grossly underestimating current job losses due to their flawed survey methodology. Those flaws include rigid seasonal adjustments, a mysterious birth/death adjustment, and the fact that only 40% to 60% of the BLS survey is complete by the time of the first release and subject to revision.
Seasonal adjustments are particularly problematic around the holiday season due to the large number of temporary holiday-related jobs added to payrolls in October and November which then disappear in January. In the past two months, the BLS seasonal adjustments subtracted 2.4 million jobs from the results. In January, when the seasonal adjustments are the largest of the year,
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Tags: birth death model, job numbers, unemployment
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by ilene - November 6th, 2009 3:23 pm
Courtesy of Mish
This morning, the Bureau of Labor Statistics (BLS) released the October Employment Report.
The unemployment rate rose from 9.8 to 10.2 percent in October, and nonfarm payroll employment continued to decline (-190,000), the U.S. Bureau of Labor Statistics reported today. The largest job losses over the month were in construction, manufacturing, and retail trade..
Establishment Data
click on chart for sharper image
Highlights
- 190,000 jobs were lost in total vs. 263,000 jobs last month.
- 62,000 construction jobs were lost vs. 64,000 last month.
- 61,000 manufacturing jobs were lost vs. 51,000 last month.
- 61,000 service providing jobs were lost vs. 147,000 last month.
- 40,000 retail trade jobs were lost vs. 39,000 last month.
- 18,000 professional and business services jobs were added vs. 8,000 lost last month.
- 45,000 education and health services jobs were added vs. 3,000 added last month.
- 37,000 leisure and hospitality jobs were lost vs. 9,000 last month.
- 00,000 government jobs were lost vs. 53,000 last month.
A total of 129,000 goods producing jobs were lost (higher paying jobs). Retail and professional services contributed to to the plus side.
Last month I noted "The one cheery bit of news in the above numbers is the loss of 53,000 government jobs. Unfortunately, this trend is likely to reverse in a major way with as of yet unannounced son-of-stimulus and grandson-of-stimulus jobs packages."
On a month to month basis Government jobs were up by 53,000 even though they did not add any overall jobs. Government jobs, education, and to a lesser extent professional jobs accounted for all (and then some) of the improvement vs. last month.
Note: some of the above categories overlap as shown in the preceding chart, so do not attempt to total them up.
Index of Aggregate Weekly Hours
Work hours were flat at 33.0. Short work weeks contribute to household problems. Moreover, before hiring begins at many places, work weeks will increase.
Birth Death Model Revisions 2008
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Birth Death Model Revisions 2009
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Birth/Death Model Revisions
After the typical in January in which the Birth/Death Model revisions bore some semblance of reality, the Birth/Death numbers remain
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Tags: birth death model, Depression Level Statistics, Recovery, unemployment rate
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by ilene - November 6th, 2009 1:17 pm
Courtesy of Jesse’s Café Américain
Here is an excerpt from today’s Bureau of Labor Statistics Non-farm Payrolls report.
"The unemployment rate rose from 9.8 to 10.2 percent in October, and nonfarm payroll employment continued to decline (-190,000), the U.S. Bureau of Labor Statistics reported today. The largest job losses over the month were in construction, manufacturing, and retail trade.
Household Survey Data
In October, the number of unemployed persons increased by 558,000 to 15.7 million. The unemployment rate rose by 0.4 percentage point to 10.2 percent, the highest rate since April 1983. Since the start of the recession in December 2007, the number of unemployed persons has risen by 8.2 million, and the unemployment rate has grown by 5.3 percentage points…
The civilian labor force participation rate was little changed over the month at 65.1 percent. The employment-population ratio continued to decline in October, falling to 58.5 percent."
An astute reader noticed that the BLS press release says that 190,000 jobs were lost from payroll employment, but the number of unemployed persons increased by 558,000. What’s up with that?
The BLS report consists of two independent data samples. BLS has two monthly surveys that measure employment levels and trends: the Current Population Survey (CPS), also known as the household survey, and the Current Employment Statistics (CES) survey, also known as the payroll or establishment survey.
There is the "Establishment Survey" which is based on responses from a sample of about 400,000 business establishments, about one-third of total nonfarm payroll employment. The headline payroll number, the job loss of 190,000, is based on this data.
Then there is the "Household Survey" which is a statistical survey of more than 50,000 households with regard to the employment circumstances of their members, which is then applied to the estimates of the US population to obtain the unemployment number. This survey was started in the 1950′s and is conducted by the Census Bureau with the data being provided to BLS. It is from the household survey that more detailed information is obtained about employment statistics within population groups like gender and age, wages, and hours worked. It is this study that is responsible for the unemployment rate of 10.2%.
So which survey is correct? Neither. The truth is somewhere
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Tags: birth death model, consumer price index, job creation, long term data, manipulation, monthly jobs data
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by ilene - September 6th, 2009 5:58 pm
Since it’s such big news, I will report on the latest unemployment report by the BLS, but I dislike spending too much time on it because I consider it one of the weaker or murkier sources of data, at least on a monthly basis.
Often it conflicts heavily with other private or more reliable sources of data, which have been collectively telling a grimmer story than today’s headline news release of an additional loss of 217,000 jobs for August 2009.
Regardless, here’s the news, with my analysis:
Unemployment rate jumps to 26-year high of 9.7%
By Rex Nutting
WASHINGTON (MarketWatch) – The U.S. unemployment rate jumped to a 26-year high of 9.7% in August as nonfarm payrolls fell by 216,000, the 20th consecutive monthly decline, the Labor Department estimated Friday.
Of course, 9.7% would be dream rate to teenagers who are now suffering their own quiet depression with a 25% unemployment rate, and for blacks and Hispanics, who are pulling up an uncomfortable second and third behind the teens.
U.S. payrolls have dropped by 6.9 million to 131.2 million since the recession began in December 2007, the government data showed. Unemployment has increased by 7.4 million during the recession to 14.9 million.
As you probably know, unemployment is measured in two ways: the percentage rate is derived from the household data, while the actual number of jobs gained or lost is sampled from ‘establishments,’ meaning businesses. In the paragraph above, we might note that there is now a 500,000 job difference (7.4 – 6.9) between the number of jobs reported lost by households vs. establishments.
The 216,000 decline in payrolls was close to market expectations of a 233,000 drop, but the unemployment rate rose higher than the 9.5% level expected. The unemployment rate was 9.4% in July.
Payroll losses have moderated in most industries in the past two months. Payrolls declined an upwardly revised 276,000 in July. In June and July, payroll losses were revised up by 49,000.
Oops. A 9.5% rate expected, but 9.7% hit. That’s a miss. Also note the large downward revisions, totaling nearly 50k jobs for June and July. Downward revisions are a sign of weakness.
Government Jobs
By way of commentary, we might also
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Tags: birth death model, Employment, government jobs, unemployment
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by ilene - July 2nd, 2009 3:25 pm
More on the employment numbers from the Cafe, with very colorful charts showing a very discouraging picture.
Courtesy of Jesse’s Café Américain
The headline jobs number came out worse than expected, and the paint peeled off the US stocks tape from its recent run into the end of the second quarter.
The trend herd had been looking at the bounce off the bottom and before today’s number had some hopes that the leveling off or even a surprise to the upside would confirm a bottom in the economy. The sharp downturn threw cold water on those happy thoughts. [click on charts for larger images]
The actuals came in about as expected, a little lower perhaps, and as you can see there was a strong downward seasonal adjustment.
The "Birth-Death" model was in line with the usual swag that the BLS performs at this time of year. As you know this number is added to the "actual jobs number" before seasonal adjustment, so at this time of year it helps to inflate the headline number slightly.
With this regular repetition of the number without regard to the underlying economic activity over the years, and its feed into the actuals, one has to wonder why they don’t just roll this number into their seasonal adjustments? Do they feel the need to justify their tinkering with actual number beyond some limit? The Birth-Death model is certainly no viable rationale, but it does serve to employ a few analysts, and is likely some pet project of a past BLS director.
And here is the only chart worth watching, the long term trend. There has been no bottom yet reached in the jobs lost. This is not so much a reflection on the stimulus because of the lag, and the obvious data showing that consumers tended to use the stimulus to pay down their immediate debt which is a worthwhile endeavor, but does not give a quick boost to jobs.
The issue might be a bit of a red herring, because the economic stimulus pales by comparison with the enormous amount of stimulus provided to the banking sector, which is stimulating some operators like Goldman Sachs to pay their employees, on average, a record $700,000 in annual pay. Now THAT is stimulus, but perhaps one that is
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Tags: birth death model, Economy, unemployment
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
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