Lies, Damn Lies and Government Statistics

Via Dennis Gartman on the Bureau of Labor Statistics (BLS) Report:

The BLS says this about their employment estimates:

For example, the confidence interval for the monthly change in total employment from the household survey is on the order of plus or minus 430,000. Suppose the estimate for total employment increases by 100,000 from one month to the next. The 90 per cent confidence interval on the monthly change would range from -330,000 to 530,000. These figures do not mean that the sample results are off by these magnitudes, but rather that there is about a 90 per cent chance that the “true” over-the-month change lies within this interval.

Since this range includes values of less than zero, we could not say with confidence that employment had, in fact, increased. If, however, the reported employment rise was half a million, then all of the values within the 90 per cent confidence interval would be greater than zero. In this case, it is likely (or at least a 90 per cent change) that an employment rise had, in fact, occurred. At an unemployment rate of around 5.5 per cent, the 90 per cent confidence interval for the monthly change in unemployment is about +/-280,000, and for the monthly change in the unemployment rate is it about +/-.19 percentage points

Please re-read that statement again, and when done, read it again! Is this not shocking? Is it not idiocy; is it not true trading madness that The Street pays even a bit of interest to this report and tries to convince itself that there is a degree of difference between a -325 thousand non-farm payrolls number and -300 thousand? Is it not madness that real money is “bet” on this number from month to month? Is no one reading the BLS own comments? We have long argued that the randomness of this number makes it hardly worth our time and certainly makes it impossible to trade from it and yet The Street continues to do so. The BLS has its warnings in its report and yet The Street refuses to pay these warnings heed. If this were not so sad it would truly be comical, but it is so sad and it is not comical that Wall Street, Bay Street, Lombard Street, the 2nd Arrondissement in Paris et al seem to come to a grinding halt in the days prior to the release of the report, awaiting its release with bated, held breath. It is just too, too sad still to comment upon.

Dennis Gartman comments on the BLS as a trading indicator. The MSM treats these statistics as if they were graven in stone - and accurate. Let me repeat: the BLS has just said that the potential error in their employment report of plus or minus 430,000. So when the BLS says that employment increased by 100,000, there is a good chance that it actually decreased by 330,000. And if we take the 90% confidence factor into account, it's possible that unemployment increased by 1 million.