"Dodgy Demand Data? The Oil Price Collapse Conspiracy" by Alex Kimani

[Tom Nolan + 2,443]

Dodgy Demand Data? The Oil Price Collapse Conspiracy

By Alex Kimani - Aug 07, 2022, 6:00 PM CDT

• WTI oil prices have given up nearly all their gains since Russia invaded Ukraine, falling roughly 9.5% over the course of the week amid fears oil demand is collapsing.
• Some oil pundits are now claiming that the Biden administration has been fabricating low gasoline demand data in order to drag prices lower.
• While Gasbuddy claims there was a 2% rise in gasoline demand last week, the EIA reported a 7.6% drop in demand.

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WTI crude oil prices fell to their lowest point since early February on Thursday, giving up virtually all gains since Russia invaded Ukraine. WTI crude for September delivery tumbled -1.5% to close at $89.26/bbl while Brent crude for October delivery fell -2.1% to $94.71/bbl. WTI crude has lost ~9.5% over the course of the week, marking the largest one-week percentage decline since April amid growing fears that oil demand will collapse when western nations descend into a full-blown recession.

While oil producers are certainly beginning to feel the heat, it’s refiners like Valero Energy (NYSE: VLO), Marathon Petroleum Corp.(NYSE: MPC), and Phillips 66 (NYSE: PSX) who have been hardest hit by the pullback thanks to a sharp decline in their refining margins aka crack spreads.

For months, refiners have been enjoying historically high refining margins, with the profit from making a barrel of gasoil, the building block of diesel and jet kerosene, hitting a record $68.69 in June at a typical Singapore refinery. The margin later settled in the high 30s a few weeks later, a level still nearly four times higher than the $11.83 at the end of last year, and some 550% above the profit margin at the same time in 2021.

But crack spreads have now gone into full reverse: according to Refinitv data, Asian gasoline margins plunged more than 102% in July to a discount of 14 cents a barrel to Brent crude, a far cry from a premium of $38.05 a barrel they reached in June. Asian refining margins have now crashed to just 88 cents a barrel over Dubai crude,  from a record $30.49 in June.

The effect: a sharp rise in inventories from the United States and Singapore to Amsterdam-Rotterdam-Antwerp.

Refiners are being forced to cut gasoline output to minimize losses and switch to producing more profitable fuels.

Indeed, Taiwan's Formosa Petrochemical Corp. (6505.T), Asia's top fuel exporter, is planning to reduce operating rates at its residue fluid catalytic cracking (RFCC) units by 5% in the coming weeks, with a Formosa spokesman telling Reuters that the company plans to sell more very low sulphur fuel oil (VLSFO) due to higher margins for those products. 

The Big Conspiracy

The collapse in oil prices has been so epic and unexpected that some oil pundits are now accusing the Biden administration of fabricating low gas demand data in a bid to hammer oil prices.

To wit, in late June the EIA shut down reporting for several weeks, ostensibly due to a server malfunction. But as ForexLive has pointed out,  gasoline demand data has been consistently bad ever since the EIA returned: "Maybe there's an issue with reporting or maybe it's a conspiracy", ForexLive has declared.

Even Wall Street has begun questioning the EIA data.

Bank of America energy strategist Doug Legate has published a note titled the "fall of gasoline demand appears grossly exaggerated.’’

"For the week ending July 22nd, implied gasoline demand rebounded to 9.2 million b/d - a 1 million b/d increase vs the last two week average, and the second highest level of 2022," BofA wrote in the note to clients. Curiously, the EIA reported a steep drop in gasoline demand shortly thereafter, prompting Piper Sandler global energy strategist to label the data "crooked", saying the methodology left “significant room for error”. 

Related: What’s Really Happening With Gasoline Demand?

“We are supposed to believe that in July, in the middle of driving season we are only using 8.6 million barrels per day. That would be down half a million barrels a day from May of this year; that would be below the Covid low of 2020,” Sandler noted. “So we ask all the refiners, we ask all the retailers, we ask everybody that reported earnings this season. Every single one of them tells you that their sales are not down materially from even pre-covid days. Some report record high sales,” he added.

Piper Sandler’s allegations are buttressed by U.S. refining giant Valero. Asked about falling gasoline demand at the company’s earnings call last week, CEO Gary Simmons had this to say:

"I can tell you, through our wholesale channel there is really no indication of any demand destruction... In June, we actually set sales records. We read a lot about demand destruction and mobility data showing in that range of 3% to 5% demand destruction. Again, we're not seeing it in our system."

Further, alternate demand data from GasBuddy deviates considerably from EIA’s. GasBuddy tracks retail gasoline demand at the pumps in the U.S. According to GasBuddy, there was a 2% rise in gasoline demand last week, making it the strongest demand of the year. In sharp contrast, the EIA reported a 7.6% drop in demand for the same time period.

The Biden administration certainly is gunning for even lower fuel prices. In an interview with Bloomberg on Tuesday, Amos Hochstein, the White House’s senior adviser for global energy security, said that gas and oil prices need to go even lower while U.S. producers and OPEC+ need to raise output.

But as Adam Button, chief currency analyst at Forexlive, notes, it’s the Biden administration calling the shots now, and “at the end of the day, traders have to trade what’s in front of them”.

 "Right now it's a crude chart that's breaking support after a major period of consolidation -- that's not good. The calls for a recession are growing louder crude demand has a long history of following global growth. There are supply factors that will eventually be bullish -- like the SPR releases ending in October -- but that's months away and OPEC is still adding some barrels,” he said.

By Alex Kimani for Oilprice.com

More Top Reads From Oilprice.com:

• How Will Gazprom Fare Without Its Biggest Cash Cow?
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https://oilprice.com/Energy/Oil-Prices/Dodgy-Demand-Data-The-Oil-Price-Collapse-Conspiracy.html

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[Tom Nolan + 2,443]

 

[Tom Nolan + 2,443]

Keep in mind that Fed interest rates may hinge on this data...

EXCERPT

...there is no comprehensive explanation for the variation in data. Which, needless to say, is problematic because the "solid" jobs market is one of the very few things that is preventing the Fed from substantially easing back on its hawkish policies (now that peak inflation has clearly been reached... if only for the time being), and the Fed's sharply higher rates are already wreaking havoc on the housing market not to mention various stock sectors that have also gotten walloped.

But what if the BLS data is not merely "off" due to benign factors such as "residual seasonality" or a post-covid hangover? What if it is intentionally manipulated to make Biden's economy appear stronger than it is for midterm election purposes even if it means distortions across the entire market?

We bring up all these rhetorical questions because a new survey released by consultancy PwC confirms our previous observations about rampant mass layoffs in the US labor market, and suggests that the true state of the job market is far, far uglier than the alleged 528K job gain reported by the BLS in July would suggest....

FROM...

Just How Cooked Is The Official Jobs Data: PwC Finds More Than Half Of US Companies Are Laying Off Workers

https://www.zerohedge.com/markets/just-how-cooked-official-jobs-data-pwc-finds-more-half-us-companies-are-laying-workers

[Tom Nolan + 2,443]

UPDATE OCTOBER 2022...

https://www.zerohedge.com/markets/us-gasoline-demand-unexpectedly-soars-highest-five-years-inventories-crater

US Gasoline Demand Unexpectedly Soars To Highest In Five Years As Inventories Crater

by Tyler Durden

Thursday, Oct 06, 2022 - 01:46 PM

Two months ago, amid some major discrepancies in key points, the energy market was swept with speculation that the Biden admin - in this case the Department of Energy - was publishing "very crooked numbers" to artificially represent gasoline demand as much lower than it really was in order to depress the price of oil (considering the lengths to which the Soros administration has gone to keep gas prices low ahead of the midterms, even threatening OPEC+ that it had committed a "hostile act" for daring to put its own interest ahead of the Democrats' chances of winning the midterms). What made the manipulated "data" even more absurd is that gasoline demand had somehow collapsed below levels hit in 2020 when the US economy was largely shut down by covid.

And so, after we raised a big stink, and after the DOE was caught revising its weekly number substantially higher on at least two occasions, things are back to normal, and according to the latest DOE data, US gasoline demand is magically roaring back just as the US economy is actually sliding into a recession and just as OPEC+ moves to cut global oil supplies. As shown below, according to the latest EIA release, weekly gasoline supplied - a proxy for demand - hit the highest level this year, surging not only past the five-year average but also the highest level in the past five years...

... while gasoline inventories plunged to the lowest since November 2014, according to the EIA.

Worse, petroleum inventories fell by -16 million bbl in the week to September 30 (reductions in crude (-8 million), gasoline (-5 million), distillate fuel oil (-3 million) and jet fuel (-1 million)). Including the SPR, total inventories have depleted by 480 million bbl since the start of July 2020 and are now at the lowest seasonal level since 2004:

While we are delighted to have gotten to the bottom of yet another government data "intervention" coverup, it goes without saying that surging demand in a time when supply is collapsing is a scenario that could intensify the Soros administration’s worries over pump prices heading into November elections.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

LINK TO PREVIOUS STORY...  https://www.zerohedge.com/commodities/very-crooked-numbers-biden-admin-accused-fabricating-gas-demand-data-hammer-price-oil

"Very Crooked Numbers": Biden Admin Accused Of Fabricating Low Gas Demand Data To Hammer Price Of Oil

by Tyler Durden

Thursday, Aug 04, 2022 - 01:03 PM

[Boat + 1,324]

Don’t export gasoline and diesel every day and N America has fuel out the whazoo. These guys with these articles have no clue on what’s imported, exported or US produced. You could argue the world is short in areas but not the US or N America. These guys have decades experience with disinformation. Just look at the EIA charts. That’s the real picture. 

[footeab@yahoo.com + 2,192]

8 hours ago, Boat said:

Don’t export gasoline and diesel every day and N America has fuel out the whazoo. These guys with these articles have no clue on what’s imported, exported or US produced. You could argue the world is short in areas but not the US or N America. These guys have decades experience with disinformation. Just look at the EIA charts. That’s the real picture. 

Genius, USA imports oil out the wazoo to make fuel out the wazoo to feed S. America mostly along with bits of Africa etc who do NOT have refineries. 

Your arrogance is frightening to any rational person... please tell us you do not vote

 

[footeab@yahoo.com + 2,192]

Yes, dodgy data to try and manipulate the public. 

Now add OPEC's cut of ~2Million barrels upcoming(though already cut it in effect and this is just  a characterization of reality) as they know they have one less competitor and USA is not exactly sprinting at the moment to drill more and will have to refill the SPR....  Uh, why the Hell does the President have ability to drain the SPR instead of Congress???  President's office needs a gargantuan cut in power. 

[specinho + 470]

caption: governments who are playing with a ball too large to the size of their feet might not be a good idea......

[Tom Nolan + 2,443]

EXCERPT

Alas, there is only so much the Department of Labor can hide under the rug....

https://www.zerohedge.com/markets/something-has-snapped-unexplained-23-million-jobs-gap-emerges-broken-payrolls-report

Something Has Snapped: Unexplained 2.3 Million Jobs Gap Emerges In Broken Payrolls Report

by Tyler Durden

Friday, Nov 04, 2022 - 10:18 AM

A simplistic, superficial take of today's jobs report would conclude that the red hot jump in nonfarm payrolls indicates a "strong hiring market" (just ignore the jump in the unemployment rate). Nothing could be further from the truth.

Recall that back in August and September, we showed that a stark divergence had opened between the Household and Establishment surveys that comprise the monthly jobs report, and since March the former has been stagnant while the latter has been rising every single month. In addition to that, full-time jobs were plunging while part-time jobs were soaring.

Fast forward to today when the inconsistencies not only continue to grow, but in some cases have becoming downright grotesque.

[Tom Nolan + 2,443]

https://www.zerohedge.com/markets/something-rigged-unexplained-record-27-million-jobs-gap-emerges-broken-payrolls-report

Something Is Rigged: Unexplained, Record 2.7 Million Jobs Gap Emerges In Broken Payrolls Report

by Tyler Durden

Friday, Dec 02, 2022 - 09:49 AM

A superficial take of today's jobs report would note that both jobs and earnings "blew past expectations, flying in the face of Fed rate hikes", and while that is accurate at the headline level, it couldn't be further from the truth if one actually digs a little deeper in today's jobs numbers.

Recall that back in August, September, and October we showed that a stark divergence had opened between the Household and Establishment surveys that comprise the monthly jobs report, and since March the former has been stagnant while the latter has been rising every single month. In addition to that, full-time jobs were plunging while part-time jobs were surging and the number of multiple-jobholders soared.

Fast forward to today when the inconsistencies not only continue to grow, but have become  downright grotesque.

Consider the following: the closely followed Establishment survey came in above expectations at 263K, above the 200K expected - a record 7th consecutive beat vs expectations -  and down modestly from last month's upward revised 284K...

... numbers which confirm that at a time when virtually every major tech company is announcing mass layoffs...

... the BLS has a single, laser-focused political agenda - not to spoil the political climate at a time when Democrats just lost control of the House as somehow both construction (+20K) and manufacturing (+14K) added jobs according to the BLS, when even ADP now reports that these two sectors combined shed more than 100,000 workers in November.

Alas, there is only so much the Department of Labor can hide under the rug because when looking at the abovementioned gap between the Household and Establishment surveys which we have been pounding the table on since the summer, it just blew out by a whopping 401K as a result of the 263K increase in the number of nonfarm payrolls (tracked by the Household survey) offset by a perplexing plunge in the number of people actually employed which tumbled by 138K (tracked by Household survey). Furthermore, as shown in the next chart, since March the number of employed workers has declined on 4 of the past 8 months, while the much more gamed nonfarm payrolls (goalseeked by the Establishment survey) have been up every single month.

What is even more perplexing, is that despite the continued rise in nonfarm payrolls, the Household survey continues to telegraph growing weakness, and as of Nov 30, the gap that opened in March has since grown to a whopping 2.7 million "workers" which may or may not exist anywhere besides the spreadsheet model of some BLS (or is that BLM) political activist. In fact, one look at the chart below confirms all one needs to know about BLS "data integrity."

Showing this another way, there were 158.458 million employed workers in March 2022... and 158.470 million in November 2022 an increase of just 12,000 over 8 months, a period in which the number of payrolls (which as a reminder is the number the market follows) reportedly increased by 2.7 million!

As an aside, it appears this is not the first time the "apolitical" Bureau of Labor Statistics has pulled such a bizarre divergence off: it happened right before Obama's reelection:

And then again: right before Hillary's "100% guaranteed election (because one wouldn't want a soft economy to adversely impact her re-election odds).

It gets better: digging in even deeper into the far more accurate and nuanced Household Survey, we find that the November drop in Employment was the result of a plunge in part-time workers, more than offsetting the modest increase in part-time workers which had declined in 3 of the past 4 months heading into November.

Further to this point, as shown below, since March, the US has lost 398K full-time employees offset by amodest gain of 190K part-time employees, while a whopping 291k workers were forced to get more than one job over the same period.

And while none of the above is really new - we have documented the record divergence between payrolls and employment for half a year now - there were two new developments: first, to facilitate its rigging of the data, the BLS has resorted to the oldest trick in the book, boosting the core goal-seek factor, the business "birth death" adjustments, which in October hit a record high 455K, and although it has since dipped to 14K in November, the trend in speculative BLS assumptions about the viability of the US economy (more businesses are created than are shut down only when there is economic solid growth) is clearly visible in the chart below.

One final point: a former Fed staffer Julia Coronado points out, we have reached the absurd part of the business cycle when average hours are declining in certain sectors even as hourly earnings are rising, prompting her to wonder if we are not in fact seeing a spike in hourly income courtesy of lump-sump severance payments.

Looks like we are getting a possible boost to average hourly earnings from severance pay--jobs and hours are declining in transportation and warehousing yet AHE jumped 2.5% m/m  [GRAPH]

So what's going on here?

The simple answer: as shocking as this may sound, there has been no change in the number of people actually employed in the past 8 months, but due to deterioration in the economy, more people are losing their higher-paying, full-time jobs, and switching into much lower- paying, benefits-free part-time jobs, which also forces many to work more than one job, a rotation which picked up in earnest some time in March and which has only been captured by the Household survey. Meanwhile the Establishment survey plows on ahead with its politically-motivated approximations, seasonal adjustments, and other labor market goalseeking meant to make the Biden admin look good and provide the Fed with ammo to keep rates high (thus forcing even more real layoffs, which unfortunately the BLS is incapable of capturing due to political reasons).

And since the Establishment survey is far slower to pick up on the nuances in employment composition, while the Household Survey has gone nowhere since March, the BLS data engineers have been busy goalseeking the Establishment Survey (with the occasional nudge from the White House especially now that the Biden admin needs something to hang its hat on after the GOP recaptured the House) to make it appear as if the economy is growing strongly, when in reality all they are doing is applying the same erroneous seasonal adjustment factor that gave such a wrong perspective of the labor market in the aftermath of the covid pandemic (until it was all adjusted away a year ago). In other words, while the labor market is already cracking, it will take the BLS several months of veering away from reality before the government bureaucrats accept and admit what is truly taking place.

As an aside, here we admit we were wrong: back in August we said that "we expect that "realization" to take place just after the midterms, because the last thing the Biden administration can afford is admit the labor market is crashing in addition to the continued surge in inflation." Little did we know just how stubborn and intent the White House is to stick to the broken narrative that all is well in the US.

Or, putting it otherwise as BofA's Michael Hartnett did earlier today (and as we will discuss in a subsequent post) - "unemployment in ’23 will be as shocking to Main St consumer sentiment as inflation in ’22."

 

[Tom Nolan + 2,443]

Anyone who trusts their government and its agencies is a fool. - Tom Nolan

 

[Tom Nolan + 2,443]

https://www.zerohedge.com/markets/here-comes-job-shock-philadelphia-fed-admits-us-jobs-overstated-least-11-million

Here Comes The Job Shock: Philadelphia Fed Admits US Jobs "Overstated" By At Least 1.1 Million

by Tyler Durden

Thursday, Dec 15, 2022 - 01:44 PM

Regular readers are well aware that back in July, Zero Hedge first (long before it became a running theme among so-called "macro experts") pointed out that a gaping 1+ million job differential had opened up between the closely-watched and market-impacting, if easily gamed and manipulated, Establishment Survey and the far more accurate if volatile, Household Survey - the two core components of the monthly non-farm payrolls report.

We first described this divergence in early July, when looking at the June payrolls data, we found that the gap between the Housing and Establishment Surveys had blown out to 1.5 million starting in March when "something snapped." We described this in "Something Snaps In The US Labor Market: Full, Part-Time Workers Plunge As Multiple Jobholders Soar."

Since then the difference only got worse, and culminated earlier this month when the gap between the Establishment and Household surveys for the November dataset nearly doubled to a whopping 2.7 million jobs, a bifurcation which we described in "Something Is Rigged: Unexplained, Record 2.7 Million Jobs Gap Emerges In Broken Payrolls Report."

Whether this divergence was due to wrong seasonal adjustments (a remnant of the overreaction taken by the Dept of Labor following the covid crunch to normalize for a new normal labor market), due to erroneous Birth-Death assumptions (here too, the Dept of Labor was assuming early cycle new business creation which clearly is wrong with the economy late cycle and millions of businesses shutting down, ignoring the open PPP fraud that took place in early/mid-2000s as everyone "opened up" businesses to get free money from the government), due to the Establishment Survey inability to tell the difference between full, part and multiple-jobs - as a reminder we first showed that since March, the US had lost 400K full-time jobs offset by far lower paying part-time jobs as well as double-counted multiple jobholders...

... due to the record high rate of estimation - recall the 49% Establishment survey response rate was much lower than the 70-75% rate typical in November, meaning the Dept of Labor was literally making numbers up to "complete" the survey...

... or some other reason, perhaps including the Biden admin tapping certain Bureau of Labor Statistics officials on the shoulder and advising them to show strong numbers if they want to keep their... well... jobs, we did not know, but we did know that according to the Household Survey, just 12,000 jobs were created since March, while according to the Establishment Survey - which moves markets and sets Fed policy - the increase in jobs over the same period was 2.692 million!

We bring all this up again because late on Dec 13, the Philadelphia Fed published something shocking: as part of the regional Fed's quarterly reassessment of payrolls in the form of an "early benchmark revision of state payroll employment", the Philly Fed confirmed what we have been saying since July, namely that US payrolls are overstated by at least 1.1 million, and likely much more!

First, some background.

As the Philly Fed notes, "estimates by the Federal Reserve Bank of Philadelphia indicate that the employment changes from March through June 2022 were significantly different in 33 states and the District of Columbia compared with current state estimates from the Bureau of Labor Statistics’ (BLS) Current Employment Statistics (CES). Early benchmark estimates indicated higher changes in four states, lower changes in 29 states and the District of Columbia, and lesser changes in the remaining 17 states.

Wait, the Philly Fed tabulates jobs? Isn't that the jobs of the BLS?

Why yes, the BLS does that every month. The problem is that to successfully publish a report within days after any given month ends, the BLS report gives up in accuracy what it makes up in speed. Far more accurate reports are available elsewhere, they just come with a big lag. This is where the Philadelphia Fed comes in: from the latest quarterly report...

Our estimates incorporate more comprehensive, accurate job estimates released by the BLS as part of its Quarterly Census of Employment and Wages (QCEW) program to augment the sample data from the BLS’s CES that are issued monthly on a timely basis. All percentage change calculations are expressed as annualized rates. Read more about our methodology. Learn more about interpreting our early benchmark estimates.

Ok, ok, what did this "more accurate", "more comprehensive" report find? It found that...

In the aggregate, 10,500 net new jobs were added during the period rather than the 1,121,500 jobs estimated by the sum of the states; the U.S. CES estimated net growth of 1,047,000 jobs for the period.

Remember what we said in July when we first looked at the March-June divergence between the Household and Establishment survey: we said that "since March, the Establishment Survey shows a gain of 1.124 million jobs while the Household Survey shows an employment loss of 347K!" Said otherwise, we found that payrolls "calculated" by the Establishment Survey were overestimated by 1.5 million. Shockingly, the Philly Fed seems to agree, and reports that instead of the roughly 1.1 million jobs reported by the BLS, only 10,500 new jobs were added!

And some more data:

Payroll jobs in the nation remained essentially flat from March through June 2022 after adjusting for QCEW data:

• Less than the 3.0 percent growth indicated by the sum of the states
• Less than the 2.8 percent growth indicated by the U.S. CES estimates

This is shown graphically in the chart below: specifically, the analysis looks at the quarter in the red box, where the green line, or the more accurate "early benchmark" revision of official data, dipped decidedly below the CES trendline (i.e., the nonfarm payrolls).

For those who are too lazy to click on the source report, here is the summary page:

Of course, the above analysis only looks at the March-June period. What about subsequent months and quarters? Well, we will have to wait at least 3 months to get the June-Sept data, but using the same approach which we now know works, and which looks at the divergence between Household and Establishment surveys, it is safe to say that the job "overstating" which was 1.5 million in June according to Zero Hedge and 1.1 million according to the Philly Fed, has almost doubled to 2.7 million from March to November. The only question is what the final, far more accurate Philly Fed estimate will be when it is published some time in 6 months time.

But an even bigger question is when does the BLS realize (or rather admit) what is going on and engages in a shotgun backward revision of data? The most likely answer is that the BLS will simply wait until one of its annual historical data revision periods, when the Bureau of Labor Statistics quietly admits that historical data was higher by a few million, and re-benchmarks current months going forward as if nothing had happened. In the meantime, however, the Fed is shaping monetary policy using the clearly flawed assumption that the US labor market is "hot", "tight" and "strong", when in reality we now know that between March and June, monthly payrolls were overstated by about 350,000. This matters because this is what the BLS reported for payrolls for those months:

• April 368K
• May 386K
• June 293K

Now take those numbers and adjust them to subtract an average of 350K from each month (to get the revised Philly Fed payroll over this period) and you get this:

• April 18K
• May 36K
• June 57K

And visually.

Still think the Fed would be hiking 75bps this summer if instead of an average monthly job gain of 350K, Powell was seeing zero monthly payroll increases?

And even more importantly, now that the cat is out of the bag and the Philly Fed has introduced this huge credibility issue in all recent payrolls data, how long until this becomes a political issue, and how long until Republicans - who take control of the House in January - start hearings to demonstrate to the US that the collapse in the labor market did not start with the Republican takeover but was well in place last summer.

And finally, how long until the Fed - which made it clear that it is no longer focused purely on inflation numbers (which are sliding fast anyway) but will also be looking at clearly wrong jobs data - makes it a point that the US labor market is in far worse shape, it is in fact contracting, than it was when it decided to hike 75bps several times in a row?

Source: Early Benchmark Revisions of State Payroll Employment

[Tom Nolan + 2,443]

8 hours ago, Tom Nolan said:

https://www.zerohedge.com/markets/here-comes-job-shock-philadelphia-fed-admits-us-jobs-overstated-least-11-million

Here Comes The Job Shock: Philadelphia Fed Admits US Jobs "Overstated" By At Least 1.1 Million

by Tyler Durden

Thursday, Dec 15, 2022 - 01:44 PM

Regular readers are well aware that back in July, Zero Hedge first (long before it became a running theme among so-called "macro experts") pointed out that a gaping 1+ million job differential had opened up between the closely-watched and market-impacting, if easily gamed and manipulated, Establishment Survey and the far more accurate if volatile, Household Survey - the two core components of the monthly non-farm payrolls report.

We first described this divergence in early July, when looking at the June payrolls data, we found that the gap between the Housing and Establishment Surveys had blown out to 1.5 million starting in March when "something snapped." We described this in "Something Snaps In The US Labor Market: Full, Part-Time Workers Plunge As Multiple Jobholders Soar."

Since then the difference only got worse, and culminated earlier this month when the gap between the Establishment and Household surveys for the November dataset nearly doubled to a whopping 2.7 million jobs, a bifurcation which we described in "Something Is Rigged: Unexplained, Record 2.7 Million Jobs Gap Emerges In Broken Payrolls Report."

Whether this divergence was due to wrong seasonal adjustments (a remnant of the overreaction taken by the Dept of Labor following the covid crunch to normalize for a new normal labor market), due to erroneous Birth-Death assumptions (here too, the Dept of Labor was assuming early cycle new business creation which clearly is wrong with the economy late cycle and millions of businesses shutting down, ignoring the open PPP fraud that took place in early/mid-2000s as everyone "opened up" businesses to get free money from the government), due to the Establishment Survey inability to tell the difference between full, part and multiple-jobs - as a reminder we first showed that since March, the US had lost 400K full-time jobs offset by far lower paying part-time jobs as well as double-counted multiple jobholders...

... due to the record high rate of estimation - recall the 49% Establishment survey response rate was much lower than the 70-75% rate typical in November, meaning the Dept of Labor was literally making numbers up to "complete" the survey...

... or some other reason, perhaps including the Biden admin tapping certain Bureau of Labor Statistics officials on the shoulder and advising them to show strong numbers if they want to keep their... well... jobs, we did not know, but we did know that according to the Household Survey, just 12,000 jobs were created since March, while according to the Establishment Survey - which moves markets and sets Fed policy - the increase in jobs over the same period was 2.692 million!

We bring all this up again because late on Dec 13, the Philadelphia Fed published something shocking: as part of the regional Fed's quarterly reassessment of payrolls in the form of an "early benchmark revision of state payroll employment", the Philly Fed confirmed what we have been saying since July, namely that US payrolls are overstated by at least 1.1 million, and likely much more!

First, some background.

As the Philly Fed notes, "estimates by the Federal Reserve Bank of Philadelphia indicate that the employment changes from March through June 2022 were significantly different in 33 states and the District of Columbia compared with current state estimates from the Bureau of Labor Statistics’ (BLS) Current Employment Statistics (CES). Early benchmark estimates indicated higher changes in four states, lower changes in 29 states and the District of Columbia, and lesser changes in the remaining 17 states.

Wait, the Philly Fed tabulates jobs? Isn't that the jobs of the BLS?

Why yes, the BLS does that every month. The problem is that to successfully publish a report within days after any given month ends, the BLS report gives up in accuracy what it makes up in speed. Far more accurate reports are available elsewhere, they just come with a big lag. This is where the Philadelphia Fed comes in: from the latest quarterly report...

Our estimates incorporate more comprehensive, accurate job estimates released by the BLS as part of its Quarterly Census of Employment and Wages (QCEW) program to augment the sample data from the BLS’s CES that are issued monthly on a timely basis. All percentage change calculations are expressed as annualized rates. Read more about our methodology. Learn more about interpreting our early benchmark estimates.

Ok, ok, what did this "more accurate", "more comprehensive" report find? It found that...

In the aggregate, 10,500 net new jobs were added during the period rather than the 1,121,500 jobs estimated by the sum of the states; the U.S. CES estimated net growth of 1,047,000 jobs for the period.

Remember what we said in July when we first looked at the March-June divergence between the Household and Establishment survey: we said that "since March, the Establishment Survey shows a gain of 1.124 million jobs while the Household Survey shows an employment loss of 347K!" Said otherwise, we found that payrolls "calculated" by the Establishment Survey were overestimated by 1.5 million. Shockingly, the Philly Fed seems to agree, and reports that instead of the roughly 1.1 million jobs reported by the BLS, only 10,500 new jobs were added!

And some more data:

Payroll jobs in the nation remained essentially flat from March through June 2022 after adjusting for QCEW data:

• Less than the 3.0 percent growth indicated by the sum of the states
• Less than the 2.8 percent growth indicated by the U.S. CES estimates

This is shown graphically in the chart below: specifically, the analysis looks at the quarter in the red box, where the green line, or the more accurate "early benchmark" revision of official data, dipped decidedly below the CES trendline (i.e., the nonfarm payrolls).

For those who are too lazy to click on the source report, here is the summary page:

Of course, the above analysis only looks at the March-June period. What about subsequent months and quarters? Well, we will have to wait at least 3 months to get the June-Sept data, but using the same approach which we now know works, and which looks at the divergence between Household and Establishment surveys, it is safe to say that the job "overstating" which was 1.5 million in June according to Zero Hedge and 1.1 million according to the Philly Fed, has almost doubled to 2.7 million from March to November. The only question is what the final, far more accurate Philly Fed estimate will be when it is published some time in 6 months time.

But an even bigger question is when does the BLS realize (or rather admit) what is going on and engages in a shotgun backward revision of data? The most likely answer is that the BLS will simply wait until one of its annual historical data revision periods, when the Bureau of Labor Statistics quietly admits that historical data was higher by a few million, and re-benchmarks current months going forward as if nothing had happened. In the meantime, however, the Fed is shaping monetary policy using the clearly flawed assumption that the US labor market is "hot", "tight" and "strong", when in reality we now know that between March and June, monthly payrolls were overstated by about 350,000. This matters because this is what the BLS reported for payrolls for those months:

• April 368K
• May 386K
• June 293K

Now take those numbers and adjust them to subtract an average of 350K from each month (to get the revised Philly Fed payroll over this period) and you get this:

• April 18K
• May 36K
• June 57K

And visually.

Still think the Fed would be hiking 75bps this summer if instead of an average monthly job gain of 350K, Powell was seeing zero monthly payroll increases?

And even more importantly, now that the cat is out of the bag and the Philly Fed has introduced this huge credibility issue in all recent payrolls data, how long until this becomes a political issue, and how long until Republicans - who take control of the House in January - start hearings to demonstrate to the US that the collapse in the labor market did not start with the Republican takeover but was well in place last summer.

And finally, how long until the Fed - which made it clear that it is no longer focused purely on inflation numbers (which are sliding fast anyway) but will also be looking at clearly wrong jobs data - makes it a point that the US labor market is in far worse shape, it is in fact contracting, than it was when it decided to hike 75bps several times in a row?

Source: Early Benchmark Revisions of State Payroll Employment

!!!  Over a million U.S. Workers become disabled since May 2021 and out of the workforce.  This has strong implications upon the economy.

Edward Dowd (Former Blackrock Portfolio Manager) and associate Josh Stirling (top-grade insurance research analyst) testified in Washington DC on December 7th before the Senator Ron Johnson Roundtable.  Wednesday December 7, 2022 – Washington DC – Senate Forum Roundtable Discussion
Their testimony followed Aaron Siri and the V-Safe data. TimeStamp: 16:55  - (3 hours for full forum, but other shorter clips available)
https://thehighwire.com/videos/senator-ron-johnson-hosts-expert-forum-on-covid-vaccines/

PHINANCE TECHNOLOGIES – Humanity Projects
https://phinancetechnologies.com/HumanityProjects/Humanity%20Projects.asp

On Edward Dowd’s webpage above, you will see different Projects.
For example:
On the “US Disabilities Project” are graphs and data.
The U.S. employed workforce starting May 2021 has essentially experienced a disability rate increase of 26% versus the general population of 11%. This translates to over a million workers becoming disabled.
Combined with other trends, the workforce data is valuable in forecasting economic activities (such as supply chain disruptions, lower productivity, and recession type scenarios.)