Selective Blindness: How the Market Stays Up

Market pundits are back to predicting a more hawkish Fed and a greater likelihood of rate hikes in the near term because the last two jobs reports were good. How many times can investors fall for the same story?

The pundits are saying you should only pay attention to the non-farm payrolls headline data because that’s what the Fed does. Ignore all the other data, they say. This is the number that matters.

LaTimes Jobs Chart -1470409540-snap-photo

Why do I not trust the Bureau of Labor Statistics to report accurate numbers in an election year? Are you kidding me?

As I wrote last March, the jobs report comes from two monthly surveys…one of companies (the Establishment Survey) and one by telephone of people at home (the Household Survey). Did you know that:

  1. In the Household Survey, if you work 1 hour a week, even selling trinkets on EBay, you are considered employed. If you don’t have a job and want one but didn’t look for one last month in the required manner, you are not considered unemployed, you have dropped out of the labor force. Looking for jobs on Monster does not count as “looking for a job”. Neither does calling employers. You need to have an actual interview or send out a resume.
  2. In the Household Survey, if you work three part-time jobs, 12 hours each, you are a full- time employee.
  3. But in the Establishment Survey, three part time jobs count as three jobs.

These distortions artificially lower the unemployment rate, artificially boost full time employment and artificially increase the jobs report every month.

Now, how would you like some real data?

U.S. Federal Tax Receipts are currently rising at just 1.2% year-over-year (YoY). This is a drastic slowdown from the most recent peak of 13.4% YoY growth in June, 2013. There have been no reductions in tax rates to account for this decline. This is hard data, dear reader. If all these new jobs are being created like the BLS says, why are they not paying taxes? It may interest you to note that the last six times tax receipts were this weak, the American economy was in recession.

Federal Government Receipts 12Mo Rolling YoY - Zero Hedge 20160811_receipts

Only a selective blindness would prefer BLS jobs data to real tax collections. Welcome to Wall Street, where life is beautiful all the time.