For those who are not part of the so called FinTwit (Financial Twitter/X), political, or economic blogosphere a very important debate is raging regarding not only the quality, but the usefulness of data being provided to the masses by the US Government. Trillions of dollars ebbs and flows based on the information that is provided but there seems to be little value when monthly, quarterly, and annualized revisions indicate that the initial releases are pretty much useless.
For example, the biggest news in August was not the July employment data which triggered a panic in financial markets due to its weakness. It was this story as reported by one of the government media organs, CNN:
New data shows US job growth has been far weaker than initially reported
With 818,000 fictional jobs from April of 2023 to March of 2024 just revised away, this opens up the question about the usefulness of the information and the techniques used for collection of it from the Bureau of Labor Statistics.
The media headlines during that entire 2023-2024 time period tell the tale:
If it appears that there was a narrative and not just straight up reporting on the data one’s eyes are not deceiving them. Which means that all of the calculations, all of the data, and worse the short term investing decisions that much of Wall Street made were nothing but a mirage. A con. Voodoo Economics.
However, the US government is not the only entity guilty of this behavior.
Some Real Estate Reality
Check out these two stories from the New York Post less than 48 hours apart:
Pending home sales hit record low in July as high prices sideline potential buyers
That was on August 29, 2024. The next day, this article appeared:
Starter home sales surge 10% year-on-year — despite stubbornly high property prices
Why is that unusual?
Here is the data on Pending Home Sales provided by the National Association of Realtors:
If pending home sales are collapsing at that rate then how can the affordability index for a new home, aka “starter home” in the article linked above be higher?
What we are learning about the housing industry, again, is that narratives matter. In the case of the media, just because they say something is happening may not be the reality of what is happening on the ground.
For example, every Wednesday the Mortgage Bankers Association (MBA) releases data on mortgage rates, new mortgages for home purchases, and of course refinancing. The data this week is summed up in the chart below, which should shock anyone with a basic understand of demographics and finance.
So if it’s only narrative, is not narrative the same as propaganda to promote a false reality?
The Methodology Madness
Perhaps the real problem is not the individuals collecting the data but how they are interpreting the data. A famous quote comes to mind from Disraeli:
“There are three kinds of lies: lies, damned lies, and statistics.”
Sadly, the unreliability of American financial data has turned damned lies into truths, statistics into farces, and tiny white lies into “buying opportunities” on Wall Street.
My favorite whipping boy, the Job Openings and Labor Turnover or JOLTS report is no exception. The recent data is suddenly showing a rapid decline, months after many others joined the bandwagon and began to question the validity of the data.
The 2001, 2008, and 2020 drops are easy to explain considering the recessionary periods the United States endured. But during the Obama administration, despite stagnant growth on a real inflation adjusted basis, showed continuous demand for new employees per the JOLTS report.
After the pandemic of 2020 however, the data entered into the Twilight Zone with some serious reaches beyond reality from 2021 through 2022. Is that due to politics perhaps as some economists have warned or is it methodology, which has been the complaint for this author for over a decade as to how the information is gathered and the conclusions published every month.
It was not until June of this year that the methodology questions reached the public eye and broke through the mainstream media smokescreen to force the “public” talking heads to begin to raise questions. From CNBC, June 27, 2024:
4 in 10 companies say they’ve posted a fake job this year—what that actually means
This excerpt from Jennifer Liu’s excellent article highlights the problem:
As many as 4 in 10 companies say they’ve posted a “fake job listing” this year, and 3 in 10 companies say they’re currently advertising for a role that isn’t real. That’s according to a May survey of 649 hiring managers from Resume Builder, the career site.
Fake jobs, in this case, refer to online listings for roles the company isn’t actively hiring for but wants to use to collect resumes, among other reasons. (Fake jobs that turn out to be scams are another issue entirely.)
The emphasis above is my own, but if one does a cursory job survey of the most popular job listing services and then compares it to the career or hiring pages of the very same companies, one can understand how this problem is quite pervasive. More from Ms. Liu’s article linked above:
For example, temp agencies “constantly need new talent and are always running new job ads because, if a client needs someone, they need [a candidate] who’s already vetted,” Haller tells CNBC Make It. In these situations, agencies may contact and interview candidates to keep their information on file until a real vacancy opens up.
Now, however, she’s seeing that “more traditional corporate companies are doing this more.”
The money line from the article is this one:
Still, a majority, 7 in 10, hiring managers say the practice of posting fake job listings is “morally acceptable.”
In other words, posting fake job listings is acceptable from several perspectives. For the career search companies, they can engage in legal data farming as applicants rarely if ever read the terms of service regarding the use and resale of their personal data they submit to said services.
But on the darker side of this information being provided is that these service and the “open” job listings is part of the basis for the JOLTS survey which could mean that at any given time, 20, 30, or 40% of the “openings” listed via the BLS are ghost advertisements. This is nothing new as fake job ads were standard practice in newspapers classified sections for years.
The difference in this post-classified era is that the data has been given far more weighting regarding strategic financial decisions and economic policy. Of course that means the data is corrupted and corruptible, thus making the survey utterly useless even though the FOMC (Fed Open Market Committee) has admitted to using the data as part of their Fed Funds Rate action considerations.
The application of skepticism across all data being promoted and disbursed from the US Government, private entities, and financial institutions thus now should be part of standard operating procedure along with more in depth research before anyone makes any conclusions regarding their personal or corporate investing decisions.
Conclusion
Any data point or statistic can be dissected to find flaws with the methodology, data collection, or intent of the report provided. The problem for this generation in an era of instant gratification and lightning speed investing decisions is that the period of time it takes to dissect said data usually takes longer than the decision to move billions of dollars around the globe. With flawed data and mathematical assumptions, the magnitude of financial miscalculations expands exponentrially.
Perhaps opening one’s eyes to listen to the intent of the data provided by asking the question of six sigma outside the norm reports is “who gains and who loses” when this information is provided.
I simply remind my readers to keep their powder dry, don’t just follow the herd, and do your own research by using sources like MacroEdge and other analytical websites before jumping on the conspiracy bandwagon or just believing everything any government tells you that is the absolute version of “the” truth.
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When it comes to fake job adverts, the airline industry has been the kings. Simply put they often charge money to folks who apply to certain glamor positions, such as pilot. Airlines have been known to announce they are accepting applications for pilot, when they really have no intention of hiring. Then collect the cash windfall when thousands of hopeful pilots send in their applications with checks or money orders.