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David Stockman: The statistics coming out of the BLS and BEA are "The Economists' Truman Show"
Howard Richman, 2/8/2012

Writing in the Wall Street Examiner on February 5, Bruce Krasting and David Stockman (President Reagan's budget director) discussed the sudden fall in the labor force participation rate reported by the Bureau of Labor Statistics (BLS) in January. A full 1.177 million people who might otherwise have been considered as unemployed were reclassified as having dropped out of the labor force in a single month.

The BLS is not trying to hide their sudden change in the labor force participation rate, they discuss it in a table at the bottom of their press release. But with the exception of the business press, the mainstream press publishes the headline data that the BEA puts at the top of the press release and they ignore the rest.

Stockman calls the statistics coming out of the BLS and BEA (Bureau of Economic Analysis), "the economists' Truman Show." He writes:

I don’t particularly believe in tin foil hats, but all of these mainstream economists treat the BLS and BEA data like it’s holy writ—when it’s evident that the reports are so massaged, estimated, deemed, revised, re-bench marked and seasonally adjusted that any month-to-month change has a decent chance of being noise. What deep secret might they be hiding?

So on the labor force participation rate they say, “No it didn’t go down in January because the 2012 numbers are re-bench marked for the 2010 census,” but for some reason the BLS didn’t bother to update the 2011 civilian population numbers, including December. Thus, the BLS published apples-to-oranges numbers on this particular variable and the footnote says the December participation rate would have been the same as January, if they had revised it!...

But the mainstream narrative never gets to the trend. In this case, the plain fact is that we are warehousing a larger and larger population of adults who are one way or another living off transfer payments, relatives, sub-prime credit, and the black market. My suspicion is that this negative trend and many others like it get buried by the monthly change chatter from mainstream economists and on bubble vision, and that these monthly deltas are so heavily manipulated as to be almost a made-up reality. Call it the economists’ Truman Show.

Stockman is being unfair to the BEA, a branch of the Commerce Department. I haven't seen any attempt by them to portray their data in a false light. The BLS, a branch of the Labor Department, is the sole culprit here.

My father has been arguing on this website for weeks that the press should report the actual jobless claims data, published weekly by the BLS, because the headlined seasonal adjustment data is hiding the real trends. Earlier this week, I cited a Wells Fargo website pointing out that the January employment data, published by the BLS, was skewed by a seasonal adjustment which was not applicable due to the warm January weather. Now we know that the BLS is also massaging the announced unemployment rate by juggling the labor force participation rate numbers.

In the Truman Show movie, Truman finally breaks out and discovers that he had been living his whole life on the set of a television reality show. These days, the BLS is trying to manufacture a recovery with phony good news headlines. The real truth can be discovered in the footnotes, in the revisions to previous periods, and in the actual raw data. In a nutshell, it shows that the American economy is stagnating at the moment.

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Comment by Steven, 2/15/2012: You are right about the reports, I don't think any serious person trusts the headlines, we have learned to read the fine print. The media circus is just political bubble gum for the unwashed to chew on. But where is the solution? Balanced trade won't come by itself, the Congress must act on it. A good act of Congress? Hasn't happened in quite a while...




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  • [Trading Away Our Future] Examines the costs and benefits of U.S. trade and tax policies. Discusses why trade deficits matter; root of the trade deficit; the “ostrich” and “eagles” attitudes; how to balance trade; taxation of capital gains; the real estate tax; the corporate income tax; solving the low savings problem; how to protect one’s assets; and a program for a strong America....

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