More puzzling information, again out of the US because, well, let’s face it. Whether we like it or not, the US is a significant driver of global money, markets and investments. Ignoring what’s happening there, on a global scale, is done at one’s own peril.
Heading into the monthly jobs report in early June, economists were predicting a loss of 7.5 million jobs for the month of May. Given any other time in history, this forecast would be egregious. Alas, we’re in the C-virus age so such a guestimate isn’t surprising. (1)
Then Friday, June 5th happened. The Bureau of Labor Statistics, or BLS, released its employment report.
Yes, that’s right. There’s a bureau for labor statistics. And it employs around 2,400, half of whom are economists and statisticians, as per the BLS website. Remember these numbers for a few minutes. (2)
The report is released and, low and behold, all those economists surveyed around the US of A, were wrong! Sure, a forecast is just a guestimate so I’m not holding feet to the fire here.
BUT, how wrong were they apparently? Why only by 10 million! And not the way you might think so don’t jump out the window because now you think the US lost over 17 million jobs in one month.
No, no, my friends. The month of May turned out to ADD 2.5 million jobs in the US. Yes indeed, in the midst of this viral age, when all hell seemed to be breaking loose, the all-mighty US ADDED jobs, all to the dismay of the forecasting economists of the world.
Here’s a couple more numbers for you. The surveyed economists predicted the unemployment rate to approach 20%, which would be the highest since the Great Depression of the 1930’s.
And what did the BLS have to say about this? INCORRECT! The unemployment rate apparently dropped to 13.3%. Put aside the fact that unemployment rates are sketchy at best, as I’ve mentioned before but this is just ludicrous!
2020 seems to be a year of records. First a record number of job losses in a month. And now this! A record number of jobs added in one month.
But, pray tell me, does something not smell fishy from the land south of the 49th parallel? Perhaps…
Then the calendar turned to Saturday, June 6th, with the Washington Post headlining:
“A ‘misclassification error’ made the May unemployment rate look better than it is” (3)
So, of the half of the employees at the BLS, that’s approximately 1,200 economists and statisticians, not one of them raised their head from their cubicle to inhale some fresh air and question such a massive discrepancy between the forecast and the apparent actuals?
Turns out that the BLS doesn’t actually crunch the numbers. They’re not looking at the real numbers of actual people with actual jobs. Such a job would be cumbersome and overly time consuming. I get it.
Instead, as most economists and statisticians do, they use models. The economists making the forecast before the report was released also use models.
Let’s remember, models are based on past experiences, trying to factor in as much information together to spit out a prediction. Black Swan events such as these are difficult to factor into these models because,well, they’re Black Swan events, meaning they’ve either never happened before or happen with such rarity that the models hardly give them any credence.
In any case, that means both the forecasting and reporting sides are not correct. Which one is closer is anyone’s guess.
Consider this, though, from the Washington Post:
“Economists say the BLS was trying to be as transparent as possible about how hard it is to collect real-time data during a pandemic. The BLS admitted that some people who should have been classified as “temporarily unemployed” during the shutdown were instead misclassified as employed but “absent” from work for “other reasons”.”
And what exactly is classified as “other reasons”? Back to the Post:
“The “other reason” category is normally used for people on vacation, serving jury duty or taking leave to care for a child or relative. These are typically situations where the worker decides to take leave. But in this unusual pandemic circumstance, the “other reason” category was applied to some people staying at home and waiting to be called back.”
But who cares, right? Obviously no one cares because the markets, rather than pausing and wondering what on earth is going on, proceeded ever higher. That’s right! While most commonsense people reading this information were running error messages in their brain, the markets marched up and up!
Who still thinks the markets are rational?
Who’s starting to wonder about all the other numbers we see released from government bureaus? Still not questioning those inflation numbers?
By the way, for those of you actually keeping score, this BLS error is another record! This near 10 million miss eclipses the former record miss of 318,000!
But I'm just a lowly Recovering Bankster. What do I know?