Non-Farm Payroll: “Something Must Be Horribly Wrong For Them To Be This Blatant”
by Dave Kranzler, Investment Research Dynamics
When the propaganda gets so bad that Wall St. Journal readers respond with threats of violence [to the Hilsenrath editorial], you know the lies are getting extreme. Regarding today’s NFP, the numbers are beyond absurd. 57k jobs added in hospitality and leisure? No one has money spend and everyone knows that. We used to laugh at the propaganda numbers coming from the old Soviet Union. The numbers coming from the U.S. Government are a bigger farce than the old Soviet Union’s propaganda…Don’t hold your breath waiting for the Fed to raise rates. – John Titus, Best Evidence
The title quote comes from John Embry. I was going to do a detailed dissection of the Bureau of Labor Statistics non-farm payroll data to show why the numbers are simply can not be believed. But it’s become a pointless and repetitive exercise.
A colleague of mine thought that next to the October 2012 pre-election NFP, this was the most fraudulent report ever released. I disagreed because at least back then the GDP reports, for as rigged as they are, were at least showing “growth” would could be used to “justify” reported employment gains.
Today’s report was far more fraudulent than the October 2012 fairy-tale for two reasons. First, we expected the pre-election 2012 fictitious report for obvious reasons. But second, by the Government’s own numbers the economy contracted in Q1 2015. Moreover, almost all of the economic data released in April and May showed not only further economic contraction but also that the rate contraction increased. In Q1 2015 corporate profits dropped by the most amount since 2008 . Companies DO NOT hire people when their business is contracting. The non-farm payroll report is a complete fraud.
The non-farm payroll report is the poster-child for everything that is wrong with our country. The banks have been announcing 10’s of thousands of layoffs coming. Banks are downsizing because lending activity of all sorts is declining. When there is no economic activity to finance, it means that the economy is contracting and businesses fire – not hire – workers. Hewlett Packard, one of the countries largest business services companies announced yesterday that “more layoffs are coming” LINK. That means the same holds true for every other large technology/business services company. These companies did not hire 63,000 people in May only to turnaround and fire them in June.
The Government wants us to believe that the construction industry hired 17k new workers in May. Yes, construction spending showed a slight bounce in April but this was 110% driven by Government spending, which has been in a downtrend. Private residential construction spending continued its 3-month decline. As John Williams of Shadowstats.com summarizes:
The aggregate construction series remained near the recent low of a down-trending pattern of stagnation, with the real series holding at 32.9% below its pre-recession peak of March 2006. The private-residential series remained down-trending both before and after adjustment for inflation.
This implies that there were not any construction workers added in May. If anything homebuilders kept their payrolls flat or down-sized.
The BLS claims Financial services added 13k in May. But sadly, we know just the opposite is true from disclosures by HSBC and JP Morgan. My friend who works on Wall Street in NYC told me last week that fixed income trading floors all over the Street are like a morgue. Banks and finance companies fired, not hired, in May.
Leisure and hospitality reportedly added 57k workers in May. Again, this is a complete fairy-tale – an outright fraudulent data-point. Consumer spending has been declining for the better part of the last year. Every major consumer sentiment index reported the consumer sentiment and outlook crashed in May. This means that, to the extent that any consumers might have some disposable income to spend, they are NOT going to spend it. This means the leisure and hospitality companies – at best – kept payrolls flat. It is a lie of epic proportions to report that this sector was responsible to 57k in jobs added to the economy.
You don’t need me to explain just how fictitious today’s employment report is. Just look at the graphic below and decide for yourself if the numbers are justified by the economic reports released in May and by your observations in your surrounding environment:
One last point. The Birth/Death model showed 213k jobs created in May from new businesses being started minus businesses that closed. It is not a seasonally adjusted number so it is not mathematically accurate to simply subtract it from the headline 280k number. However, the likelihood is that, even seasonally adjusted, the B/D number was a source of at least 200k of the 280k headline report. By the Government statisticians own admissions, the B/D model is highly overstated when the economy is contracting. The more probable likelihood is that more businesses died than were born in May. This fits with the “for lease” signs I’m seeing in strip malls all over Denver. If anything, this component of payroll measurement likely should caused a decline in employment during May.
But this brings up the question: why does the Government report its payroll numbers on a seasonally adjusted basis but then releases the B/D model not adjusted? Of course it’s obvious: the Government wants its economic reports to be as opaque and misleading as possible.