Submitted by PM Fund Manager Dave Kranzler, Investment Research Dynamics:
THERE’S NO B.S. LIKE THE BLS – decide what you want you want the non-farm payroll headline number to be and then use the Birth-Death model “plug” function to make that number happen.
The first Friday of the month means it’s the Government’s Bureau of Labor Statistics turn to dazzle us with a statistical magic show. With 1st quarter GDP now revised into negative territory and the economic statistics reported for April and May showing even more economic contraction occurring in the first two months of Q2, the BLS statisticians will be forced to push the Birth-Dead plug number to a farcical extreme.
In fact, my bet is that on Friday the S&P 500 will scream to a new all-time high on an impressive “beat” of the consensus May payroll estimates that will have been fueled by a huge Birth-Death plug number.
My friend and colleague Mark Kellstrom has penned another amusing commentary about the Freak Show otherwise known as Non-Farm Payroll Friday:
It’s That Time of the Month Again: May Non-Farm Payrolls
For the 9,000 (or how ever many are left) viewers, the debate by CNBC “experts” over their Non-farm Payroll forecasts minutes before the release of the numbers on Friday morning can provide exciting theater. Viewers are treated to Steve Liesman’s detailed analysis used to back into an “estimate” based on a complex econometric model tracking monthly stats of all shapes and sizes. For the rest of us, the exercise is a waste of time and as laughable as anything found on the comedy channel: Watch Steve Liesman Bite The Head Off Of A Chicken
This Friday, June 5th, we get this ritual of the absurd again with the release of the May Non-Farm Payrolls and Unemployment data from the Bureau of Labor Statistics (BLS). Estimates for May seem to vary around the +/-220,000 jobs “created” number and if we go with MarketWatch, the consensus estimate is 210,000, down from 223,000 previously. Like the April NFP reported in May, Commentators have to be nervous eyeballing another month and another raft of soft economic data releases—the “expert” calls may surely be for a miss.
However, once again, if theory holds, the May Non-Farm Payrolls report will beat consensus expectations with no problem. In fact, if 210k is the consensus hurdle, a beat on the high side may be an easy slam dunk. History shows that the BLS “Birth Death” plug model will “add” – i.e. fictitiously create – at least 205,000 jobs this month. So unless the BLS actually “marks to market” the true number of oil patch jobs lost during May (a lot more than the supposed paltry 3,000 oil patch jobs lost in April), then count on another BLS “beat”….much cheerleading…..and a 1Q negative GDP print sent well into the rear view mirror.