Biderman’s Daily Edge 5/2/2012: A Reason Not to Trust Friday’s BLS Numbers


This Friday the Bureau of Labor Statistics will release its guess as to how many jobs were created in April. The media nitwits will report whatever the number as if it were the gospel truth. Those who need the action will trade the number as if it means something.


It is sad to me that the BLS and everyone else but us ignores the fact that real time data is readily available on how many people are working and how much they are making. Where? Embedded in the withheld income and employment taxes sent to the US Treasury every day by all employers.


The truth is that the initial BLS new jobs number is a joke even in the eyes of the BLS. How do I know that? I just reread some BLS footnotes for the first time in several years.


By the way back in 1971, after getting a Harvard MBA, my first real job on Wall Street was as an investigative reporter working for Alan Abelson at Barrons Financial Weekly. Whenever Alan asked me to look for bad stuff at some company, what I did first was start in the footnotes. That is where the truth is usually hidden.


The BLS monthly job survey has a footnote called the Employment Situation Technical Note.


I doubt that very many of the press and particularly traders have ever looked at that footnote. What is in there confirms my worst fears about the quality of the data.


First of all the unemployment percentage number comes from a Census Bureau survey, snail mailed to 60,000 households the week of the month that includes the 12th. The footnote does not disclose how many actually respond by the end of the month, but I would guess that no more than half do. In other words the unemployment percentage number touted and argued about endlessly is the result of 30,000 responders out of millions of households. How accurate can that be? There is no way to even attempt to true that.


Then there is this Fridays payroll jobs number which is based upon a survey of 141,000 businesses and government agencies. The footnote says the active sample includes approximately one-third of all nonfarm payroll employees. However, the note does not say what percentage respond within two weeks of being queried? My understanding is that probably two-thirds or so respond, in other words employers of about a quarter of the workforce.


So, how accurate is a survey of about a quarter of all employers? The BLS footnote itself says not very. The BLS says that they have 90% confidence that their monthly estimate is accurate to within plus or minus 100,000 jobs either way. That means that if this Fridays number is reported as 100,000 new payroll jobs, in reality the job gain could be anywhere from 0 to 200,000. And the nitwits would treat the 100,000 number as the gospel truth.


This is nuts. We live in a real time trading world, and the government puts out data with an accuracy range wide enough to sink an entire trading portfolio. All this and real time data on jobs, income and spending is readily available and accessible.


While the bad news is the government puts out inaccurate economic data, the good news is that all the government economists still have jobs.


Charles Biderman
President & CEO TrimTabs Investment Research
Portfolio Manager, TrimTabs Float Shrink ETF (TTFS)


4 Responses to Biderman’s Daily Edge 5/2/2012: A Reason Not to Trust Friday’s BLS Numbers

  1. Katie on May 2, 2012 at 10:04 pm

    Thanks for telling it straight, giving the actual real time numbers. I chuckled to think that the good news is that gov economists still have jobs–they’re needed in order to spin data anyway shape or fashion to cater to the media’s allusion that we are in an economic recovery.

    I wonder if the big investment banking houses like Goldman Sachs/JPM/MS/Mellon already look at the real data and they use this to their advantage but don’t bother telling the media?

    So, I’m guessing tomorrow morning that weekly jobless claims will not change much (my guess around 382,000) and the market media talkingheads will say that’s surely a sign that the recovery is still strong since this has dropped from last week. On Friday, the markets will go gangbusters because the NFP for April will be slightly higher than it was March, I’m guessing around 167,000 and this will be the “cover” for rise in the markets on Friday. Anyone else care to bet what the fabricated BLS weekly jobless claims and Friday NFP numbers will be?

    Then the media will spin these figures around to show that we are still in the middle of a strong economic recovery and what’s his name the Feds very own Brian Sack overseas all those HFT algos and program trading that is used to pump up the markets without it appearing overly obvious that the only direction the markets can go, is up, up and away!

    Thanks again, I only wish I had known about your research and your interviews a few years ago. I wouldn’t have lost so much thinking that the market was going down when in fact it had its best returns in nearly 20 years the first quarter just ended.

  2. Heather Boyd on May 3, 2012 at 1:11 pm

    I really look forward to reading Charles’s weekly blog. I am a Canadian who is very interested in American economics, since when the US sneezes, we get a cold! We also have a deterioration of our standard of living here in Canada, since our government is too big and too involved in regulating our economy and our lives.
    Keep up the good work, exposing government incompetence. More people are starting to sit up and listen.

  3. joe on May 3, 2012 at 9:02 pm

    Skepticism is good, but your credibility is undermined by factual innacuracies. The BLS has a detailed description of the CPS survey methodology and they have not used snail mail surveys since 1994:

  4. Neil Jennings on May 5, 2012 at 12:54 pm

    I love the quote from the BLS Technical Notes that explains what the survey number means if the number falls below the 100,000 margin of error: “Since this range includes values of less than zero, we could not say with confidence that nonfarm employment had, in fact, increased that month.” Really? How about making it mandatory to post the BLS “margin of error” disclaimer under the nonfarm payroll number? Kinda like all the political polls do with their numbers? Can’t you just hear the explanations from the talking heads and politicians when they put up the number this month of 115,000 on the screen along with the “100,000 margin of error” disclosure. That would have been classic.

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Charles BidermanCharles Biderman is the Chairman of TrimTabs Investment Research and Portfolio Manager of the TrimTabs Float Shrink ETF (TTFS)

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