Friday, April 5, 2013

A Disastrous Employment Report Is Even Worse When You Look Behind The Headlines

In a time of universal deceit - telling the truth is a revolutionary act
        - George Orwell
The Bureau of Labor Statistics released its monthly employment report this morning.  The Wall Street brain trust consensus estimate was for an increase of 193,000 jobs.  The seasonally adjusted, highly manipulated for political purposes "actual" number was 88,000.   This was a stunningly large differential from what our best and brightest had pre-calculated.  For those of you who let some of the big Wall Street firms manage your money, here's a sampling of the individual firm estimates:  JP Morgan 210K, Bank of America 200K, Goldman Sachs 175K, HSBC 174K, Citi 175K, Barclays Capital 175K, UBS 190K, Deutsche Bank 160K (source,

If you strip out the 92,000 jobs that Government "estimated" were created on a net basis from the formation and termination of new businesses during the month of March and assume that the Government was egregiously wrong with this estimate - which it likely was - then in fact it's possible that employment - the way the Government guesstimates it - actually declined in March (here's the birth/death model report:  LINK).

But let's play "pretend" with the birth/death numbers and look at input behind the headline report, which is what most people in this country look at and assume as fact.  From February to March, the Government tells us that the "civilian non-institutional population" (people 16 years of age and older residing in the 50 States and the District of Columbia who are not inmates of institutions - penal, mental facilities, homes for the aged - and who are not on active duty in the Armed Forces) increased by 167,000.  BUT, the "civilian labor force" declined by a shocking 496,000.  That's half a million people who left the labor force.  Disappeared.  They don't matter anymore except that they get student loans, food stamps and social security disability.

Next the Government tells us that the "employed" number of people declined by 206,000.  So, how on earth, when you look at those numbers, can the Government tell us that employment increased by 88,000?  The numbers above come from the Household survey and are not seasonally adjusted.  In other words, they don't get put thru Government statistical meat grinder and spit out in the form some kind of unidentifiable "sausage."   It looks to me that based on the household statistical survey, our economy lost a lot of jobs in March.  Here's the household data:  LINK

Now, the Government also wants us to believe that the unemployment rate declined to 7.6%.  What a great looking number for the headlines and the idiots who report mainstream news.  But let's look under the "hood" of that number.  The unemployment rate is calculated by taking the number of people defined to be in the "civilian labor force,"  155 million and divides it by the "civilian labor force,"  244.9 million.  That yields a civilian labor force participation rate of 63.3%  Last month it was reported to be 63.5%.  In March 2012 it was 63.8%.  Hmmm.  I went and dug up the history of this number on the Federal Reserve website, LINK, this is the lowest percentage of the population of the U.S. that is "participating" in the work force going all the way back to May 1979.

The way the Government "engineers" a decline in the unemployment rate is it gives more people student loans to go to "college" and it gives social security disability benefits to more people who no longer qualify for jobless benefits (the jobless benefits people are part of the "labor force" number).  The unemployment rate is calculated by taking the number of unemployed and dividing it by the civilian labor force number.  The labor force participation rate hit a 34-year generational low.  Given that this many people dropped out of the labor force entirely, mathematically we would expect that the unemployment rate should decline.  But remember, there's really more like 500,000 people who completely disappeared from the Government's meat grinder.  That's the "sausage" that was consumed by the system and a high percentage of those people were moved from receiving jobless benefits to other forms of Government welfare assistance.

As you can see if you were able to stay awake while reading that dry analysis, there's a huge difference between the headline numbers that get fed to the general public and the actual facts about the number of workers employed in our system.  In my view, it's truly catastrophic that an opportunistic politician like Obama will likely later today get in front of the public and promote the decline in the unemployment rate and take credit for that. It's truly tragic that the truth is that our system continues to lose 100's of thousands of workers each month.


  1. Dave, I appreciate your drilling down and uncovering the truth. I could imagine if not for E.B.T. cards and the unemployed receiving S.S.D. what our streets would look like. Gerald Celente is also a straight shooter and predicts that by the end of this year the banks will be giving depositors in the U.S. a bail in tax.(A.K.A. Haircut)

  2. Dave,

    Bravo as always! Thanks for the expert analysis!!


  3. come on Dave, they did not really expect people to analyze the govt data

  4. Ciao Dave, la tua analisi è molto interessante. Se ho capito bene: il "trucco" per taroccare il tasso di discoccupazione consiste nell'espellere gente SIA dalla "civilian labor force" CHE dagli "unemployed", cioè SIA dal numeratore CHE dal denominatore della frazione in cui consiste il tasso di disoccupazione ... Ho capito bene ?



  5. There you go from the boss. The Russians weren't taxed 10% they lost the lot. From the boss

    "Putin pointed out that Russian investors who have deposits in the Mediterranean island’s banks were being found guilty without proof of being money-launderers.

    “If we think that this country has been a machine for money laundering, then proof must be given,” he said.

    Russian companies and individuals have around 23.8 billion euros (31 billion US dollars) of deposits in Cyprus, according to Moody’s Investors Services and Monument Securities"

    The truth is of course the Russians have been money laundering through Cyprus because there are laws against the sale of the country's assets and resources below market prices and any skim to avoid these taxes are money laundering by definition. Just as Dr Roberts has pointed out repeatedly off-shoring is all about money laundering. The only difference is the Russians have a legal system that works and recognize economic realities into law so the money is legally dirty and can be confiscated. The Russians will have to shut up and the IMF and the BIS know it.

    Whereas the American system is totally owned by a kleptocracy and hasn't had a semblance of a legal system for a hundred years. The bunch of thieves running the place would be quite brazen about their legal operations if it happened to them. Every body who has studied the Kyklos in Plato or Socrates knows to get rid of a feudal aristocracy or oligopoly like the US you have to go French style revolution where money is theft. This is why the Department of Homeland Security is buying billions of hollow round ammunition because your rulers have read the Kyklos and know when the money goes so does the system. To create a revolution you must first destroy the country's money system to paraphrase brother Lenin. There is no other way, depressing isn't it to gain freedom you must be subjected to chaotic, violent mob rule

  6. Eric Sprott ~ Reality Check

  7. Social security taxes paid. No matter how the government fudges unemployment numbers with garbage in and garbage out data set...SS taxes paid is an incredibly reliable source of how much the employed are actually paying in.

    The government can't hide from those figures. It's a generalized approach. Employed people pay SS. Here's a fictionalized account of the SS fund as of 2010. I say fictionalized because the author actually thinks there is 2.5 trillion set aside for SS. There isn't shit, but who am I to tell her that Santa Claus is bullshit and the government spent any money they has set aside....long, long ago?

  8. Consumer Bureau Says 4 Insurers Made Kickbacks to Mortgage Lenders

    A federal regulator set up after the financial crisis to protect consumers announced enforcement actions against four insurance companies on Thursday, asserting that the firms paid kickbacks to mortgage lenders for more than 10 years.

    The accusations of the regulator, the Consumer Financial Protection Bureau, focus on mortgage insurance, a product that many borrowers were required to purchase if they didn’t make a sizable down payment when buying a house. The bureau claims that, because of the kickbacks, home buyers may have had to pay more for the mortgage insurance. The arrangements examined by the agency were the latest example of how murky insurance transactions could be used to cover up payments of questionable intent.

    “Illegal kickbacks distort markets and can inflate the financial burden of home ownership for consumers,” Richard Cordray, the bureau’s director, said in a statement. “We believe these mortgage insurance companies funneled millions of dollars to mortgage lenders for well over a decade.”

    Settlements with the four firms require that they pay a combined $15 million in penalties. The companies are the Genworth Mortgage Insurance Corporation, the Mortgage Guaranty Insurance Corporation, Radian Guaranty and the United Guaranty Corporation, a subsidiary of the American International Group.

    The consumer agency claims that the insurers made disguised payments to mortgage lenders in order to gain business.

    According to the bureau, the insurers made the kickbacks in the form of separate insurance payments back to the mortgage lenders, called reinsurance. These payments didn’t appear to provide real economic value to the mortgage insurers, according to Mr. Markus.

    Because reinsurance deals can be malleable and opaque, companies have been under scrutiny for using them to mask the real motivation for payments. One prominent case was a deal at the start of the last decade between A.I.G. and a unit of Berkshire Hathaway that made the former’s balance sheet look healthier than it was. In 2010, Berkshire agreed to a $92 million settlement with federal agencies over the arrangement.

    no jail time?

  9. Canada has also written these same haircut, bail-in provisions into the 2013 federal budget. How much evidence do we need that this is going to happen all over the place..?

  10. Growing shadow inventory of foreclosed homes driving up prices in Palm Beach County

    Palm Beach County’s shadow inventory increased 78 percent from the first quarter of 2012 to a current measure of 25,702 homes, according to a new report from the Irvine, Calif.-based RealtyTrac.

    Statewide, the increase was even higher, leaping 82 percent from 175,707 to 319,147. The hike puts Florida in second place for the biggest shadow inventory increase in the country, behind New York’s 129 percent. New Jersey had the third highest increase in shadow inventory at 49 percent.

    The report is the first time RealtyTrac has released its shadow inventory measure, something Realtors have speculated on at the local level throughout the market crash and recovery. The information is gained from a cross reference of the company’s foreclosure data and Multiple Listing Service records.

    Daren Blomquist, RealtyTrac vice president, said a restart of foreclosure filings following the National Mortgage Settlement, is part of the reason the shadow inventory has grown. The $25 billion settlement between the nation’s largest banks and its attorneys general penalized lenders for foreclosure wrongdoing and contained guidelines for banks on how to handle foreclosures — rules they were awaiting before resuming foreclosures full force.

    But the pileup in the shadow inventory is also a case of banks not wanting to take a hit on distressed properties, said Ken Thomas, a Miami-based banking consultant and economist. Lenders don’t want to reduce a home’s value by 40 percent on their books and pay thousands of dollars to rehab it for sale, he said.

    1. Thanks for the link. I plan on using it in my next piece on housing.

  11. America Is Ruled by Billionaires, and They Are Coming After the Last Shreds of Our Democracy
    America is a plutocracy through and through -- what are we going to do about it?

    The American version of plutocracy is noteworthy for its crassness. Subtlety, discretion and restraint are foreign to it. It has a buccaneering quality. That style has roots in the country’s history and culture. Much of the behavior is impulsive, grasping. Individuals are greedy for vivid displays that they are top dog, of what they can get away with, as well as the riches themselves. There is little interest in building anything that might endure – no ‘new order,’ no new party, no new institutions. Not even physical monuments to themselves. Why bother when the existing set-up works so well to your advantage, to that of your like-minded and like-interested associates – when you can turn ideas, policies and money in your direction with ease. And while the public is blind to how they are being deluded and abused. After all, the more things appear to stay the same, the more they can change in a country whose civic ideology imbues everyone with the firm belief that its principles and institutions embody a unique virtue. To challenge any of that would be to run the risk of raising consciousness – which is the last thing that the plutocrats want.

    There are exceptions. The most stunning is Wall Street’s biggest players’ audacity in coopting a part of the NYC Police Department in setting up a semi-autonomous unit to monitor the financial district. Funded by Goldman Sachs et al, managed by private ban employees in key administrative positions, and with an explicit mandate to prevent, as well as to deal with any activity that threatens them, it operates with the latest high tech equipment out of a dedicated facility provided by its sponsors. The facility for years was kept “under the counter” so as not to tempt inquisitive parties to expose it. This is the unit that coordinated the squelching of theOccupy movement’s Manhattan demonstrations. It represents the appropriation of a public agency to serve and to serve under private interests.

  12. The following exctract explains it all "The US has already put in place bail-in-like powers as part of the Dodd-Frank financial reform act passed last year. The law includes a resolution scheme that gives regulators the ability to impose losses on bondholders while ensuring the critical parts of the bank can keep running.

    Employees would be paid, the lights would stay on and derivatives contracts would not have to be instantly unwound."

    So that's it. The depositors get the haircut and restructure the banks and the derivative creditors hang onto their assets which are increased in value from zero in a wind up to face value because the depositors have lost all their money. The offshore derivative holders become heroes from zero and all the depositors go to zero. No wonder Citibank shipped it's derivative book into the domestic clearing operation.

    But don't worry these derivatives will eat the depositor base so the only outcome will be bail-in 2 and bail-in 3 just like QE 1,2 & 3.

    Great isn't it and if you are worried about the timing, well according to Roberts and Sinclair it will be when the USDX breaks 73 as QE can't continue on a falling currency. Talk about trading on the edge of a volcano.

  13. The golden truth. Your blog name was well chosen.

  14. The anti-drone hoodie that helps you beat Big Brother's spy in the sky

    I am wearing a silver hoodie that stops just below the nipples. Or, if you prefer, a baggy crop-top with a hood. The piece – this is fashion, so it has to be a "piece" – is one of a kind, a prototype. It has wide square shoulders and an overzealous zip that does up right to the tip of my nose.

    It does not, it's fair to say, make its wearer look especially cool. But that's not really what this hoodie is about. It has been designed to hide me from the thermal imaging systems of unmanned aerial surveillance vehicles – drones. And, as far as I can tell, it's working well.

    "It's what I call anti-drone," explains designer Adam Harvey. "That's the sentiment. The material in the anti-drone clothing is made of silver, which is reflective to heat and makes the wearer invisible to thermal imaging."

  15. Piercing the secrecy of offshore tax havens

    A New York hedge fund manager allegedly swindles $12 million from a prominent Baltimore family. An Indiana couple is accused of bilking hundreds of customers by charging for free trials of cosmetic products. A financial manager in Texas promises 23-percent returns but absconds with $33.5 million of his investors’ money in a classic Ponzi scheme.

    All three cases have one thing in common: money that ended up in offshore accounts and trusts set up in tax havens around the world.

  16. Saturday, April 6, 2013
    "As long as bankers live in a world free of consequence, our finance system is doomed to fail"

    In a must read Guardian column, Joris Luyendijk looks at the implications for our financial system of bankers being free of both market discipline and legal liability. When greed is not checked by the consequences of failure, you get a dysfunctional system where bankers privatize the gains and socialize the losses.

    The first step in subjecting the bankers to market discipline is requiring the banks to provide ultra transparency and disclose on an ongoing basis their current global asset, liability and off-balance sheet exposure details.

    It is this disclosure that bankers fear most.

  17. Jim Rogers: “I Suspect They’ll Take The Pension Plans Next; I For One Am Worried, And I’m Taking Preparations”

    Speaking towards the frightening implications of the Cyprus banking collapse, Jim said that, “It’s been condoned [now] by the IMF, the European union, and everybody else in sight; that a government in need, can take assets. We all knew they could tax us…but this is the first time that I’m aware of, that they’ve gone in and taken bank accounts. They took gold from people in the U.S. in the 1930′s…but I’ve never heard of them taking bank accounts. [Now] they’re doing it. So be careful [because], now they can take your bank account under this precedent.“

    With respect to which assets governments will likely be coming for next, Jim said, ”401k plans, IRA’s, and pensions plans which the government knows about [may be next]…They’re rationale would be, ‘Well most people haven’t been doing well in their IRAs and pension plans for the past several years, so we’re going to help you. We’re going to take your pension plan and give you government bonds so that you have a guaranteed return.”

    Jim further added that, ”That’s how they’ll rationalize taking our money. They know where all the pension plans are because we have to report it, so they’re easily accessible by governments. They know where they are, what they are, and they’ll be able to snatch them away. Who knows what they’ll do, but they’ll certainly find some way to take our money when things get worse, they always have.”

  18. As an unemployed "number", I agree with with this article except on this point:

    "The way the Government "engineers" a decline in the unemployment rate is it gives more people student loans to go to "college" and it gives social security disability benefits to more people who no longer qualify for jobless benefits (the jobless benefits people are part of the "labor force" number)."

    1) Just because I'm unemployed, that doesn't mean I want a Student Loan. I've seen on too many forums of people going to/back to college and maybe working only one year and cannot find a job for the last five years. It's just a form of "debtor prison". Student loans are simply being used to keep a debt-system going and is a form of slavery. Granted, they are being used to manipulate the numbers but I wonder how much of those loans are taking the "place of ingredient" that housing had and are being packaged as some sort of future-stressed assets. Since people can't declare bankruptcy on them, this might give such toxic assets more clout.

    2) If you have more than $2000 total in your bank, you can't get food stamps so I'm exempt. And I don't feel like chaeting the system by putting the money in a safe deposit box (but I can still get genetically-modified foods at my local food-bank once-a-month).

    3) In Nevada, you won't get disability without a disability lawyer and they require that you're under a doctor's care, i.e. workman comp. Older workers has no choice when they are being ousted of the job market - better than living on the streets. They may be added into the numbers but the disability place here in Nevada says the US Government is making it harder to get on. I know people who it took them 4 years and one with MS who keeps getting denied.

    Millions of Americans WANT to work but that work has to be created and our current economic system cannot do it. Every June, more high-school and college students enter into it. Companies are running on fast-pace skeleton crews like the article below:,0,7162845.story

    88,000 jobs. Is that jobs posted or filled? Is that full-time, part-time, or temp/contract work? How can we say it's because people stop working? Once you're no longer on the system, you're no longer counted. The only difference between when I was working and being unemployed is that i don't have a job. I still keep the same schedule. I don't watch movies, do drugs, etc. But the jobs are not showing and a lot of job posts gets repeated every 1-3 months. Sometimes the job center will have the same job listed 3 times undeer slighty-modified heading. So is one job post getting counted as three? I know that red rabbit computers, best buy, and microsoft gets "government welfare" to compete with each other in selling low-end computers to low-wage familes via tax-payer's monies (ever wonder where that old computer-you-traded-at-bestbuy-for-a-new-one went? yep, it gets resold under "recycling"). expect to see more of this.

    Still a very good article, Dave.

  19. Making the Truth Illegal – revisited

    It is possible – it happened in the Magnitsky case – for a criminal to buy a bank and be granted a bank license. Yet the law says it is the directors of such a bank who will be relied upon to contact the authorities about suspicious transactions. Criminals don’t often turn themselves in, yet in every country this is the non-system our leaders and financial experts maintain. In the UK the law is set up so that a company can be set up without any due diligence at all being done to determine the character let alone the actual identity of the owner. Because of this ‘loophole’ as the authorities coyly refer to it, the UK is home to tens of thousands of shell companies set up by criminals and used for criminal purposes. This may sound like a fantastic charge and one I cannot possibly substantiate. Yet almost every major case of fraud or money laundering will involve UK shell companies. Follow the Magnitsky money and you will see it pass thorough UK shell companies. The same goes for the $64 billion of state money stolen from Kyrgyzstan much of it then passed through UK shell companies. Or the on-going case of money laundered out of Ukraine by means of a fake oil rig purchase. That money too passed through UK companies.

    I could give you plenty of other examples but the important point is that NO ONE in authority can offer a shred of evidence to show that I am wrong no matter how many criminal companies I claim there are likely to be, for one simple reason. THEY HAVE NO IDEA WHO OWNS THE COMPANIES. The system is set up so no one knows. Companies register owners but they can be other companies in other jurisdictions. And it is easy to set up a company in such a way so that no one checks on the owner at all, ever. That is the system we maintain.

  20. Where Bank Regulators Go to Get Rich

    Among the members of Promontory’s advisory board are Arthur Levitt, like Schapiro a former SEC chairman (and now a senior adviser to Goldman Sachs Group Inc. and a board member at Bloomberg LP); Frank Zarb, a longtime Wall Street hand at firms such as Lazard, American International Group Inc. and Citigroup; Kenneth Duberstein, the former chief of staff to President Ronald Reagan and a member of the special committee of the board of directors of Dell Inc.; and Alan Blinder, a Princeton University economics professor and former Federal Reserve vice chairman.

    Blinder is a particularly interesting case study of how Promontory works its magic. According to the Promontory website, Blinder is a co-founder of something called Promontory Interfinancial Network, which when you cut through the gobbledygook says it helps smaller financial institutions get some of the same benefits of size enjoyed by our “too big to fail” banks. One of the products Promontory Interfinancial offers customers is Insured Cash Sweep, which according to a fancy video allows someone with more than $250,000 in cash on deposit in a bank -- the limit of what the Federal Deposit Insurance Corporation will insure -- to get federal insurance for any amount.

    What the company does is allow someone to hand over, say, $1 million, which is then broken up for him into four $250,000 pieces and farmed out to separate financial institutions so that, voila, each $250,000 is FDIC-insured. The depositor notices no difference on a daily basis -- he can still get his money whenever he wants, unless the money is in a savings account, where access is limited to six times a month -- but, like magic, $1 million is federally insured instead of just $250,000.

    Nassim Nicholas Taleb, the best-selling author of the “Black Swan,” describes in his latest book, “Antifragile,” how he ran into Blinder at the World Economic Forum in Davos, Switzerland, one year and thought he was going to engage the former Fed vice chairman on ideas about how to save the financial system. Instead, Blinder tried to sell him on Insured Cash Sweep. It quickly dawned on Taleb what Blinder was up to.

    “It would allow the super-rich to scam taxpayers by getting free government sponsored insurance,” Taleb wrote. “Yes, scam taxpayers. Legally. With the help of former civil servants who have an insider edge.”

    “Isn’t this unethical?” Taleb asked Blinder.

  21. I appreciate your drilling down and uncovering the truth. I could imagine if not for E.B.T. cards and the unemployed receiving S.S.D. what our streets would look like. Gerald Celente is also a straight shooter and predicts that by the end of this year the banks will be giving depositors in the U.S. a bail in tax.(A.K.A. Haircut) where to buy a computer