luni, 5 mai 2014

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


Did Birth/Death Revisions Distort Friday's +288,000 Jobs Number? Reflections on BLS Competence

Posted: 05 May 2014 04:39 PM PDT

A couple of people emailed me last week wondering how the BLS birth/death model impacted last Friday's payroll report.

Recall that the payroll report came in a blistering +288,000 but the household survey showed the economy lost 73,000.

For detailed analysis please see Nonfarm Payrolls +288,000, Unemployment Rate Drops to 6.3%; Household Survey Employment -73,000, Labor Force -806,000.

2014 Birth/Death Adjustment



There it is, highlighted in red. The BLS Birth/Death Model added 234,000 jobs to the non-seasonally adjusted jobs number.

But what does that mean, and is it significant? To address that question, we need to understand what the model does.

Birth/Death Model Description

The births and deaths in question are the births and deaths of businesses, not people. When businesses start, there is a lag before they are incorporated in any job surveys. When businesses go out of business, people who worked for them are unemployed.

Given that not every business reports statistics every month, the BLS uses models to estimate the net number businesses (and people employed in them) that go in and out of business every month.

Mathematical Mistakes

People take the headline number and compare it to the birth-death adjustment. This month, the headline number was +288,000 and the birth-death number was +234,000. Some conclude the adjustment added 234,000 out of the 280,000 headline number.

The problem is 234,000 is a seasonally unadjusted number and 288,000 is a seasonally adjusted number. It is mathematically invalid (and horribly so) to subtract one from the other.

Moreover, in CES Birth/Death Model Frequently Asked Questions, the BLS notes "Months with generally strong seasonal increases such as April, May and June generally have a relatively large positive factor. Conversely, months with overall strong seasonal decreases, such as January, generally have a relatively large negative factor."

The BLS takes all of the unadjusted data, combines it, then applies a seasonal adjustment to the total. There is no seasonally adjusted birth/death model.

Birth Death History

YearJanuaryApril
2014-307+234
2013-314+236
2012-367+206
2011-339+172
2010-427+188
2009-336+126

January is uniformly negative, April uniformly positive. If one added back in the negative 307,000 results from the January data, jobs in January would have skyrocketed from the reported +113,000 to +420,000.

People seem to do these additions and subtractions only when the resultant number supports their point of view.

Realistic Way of Looking at Birth/Death Model

A more realistic way of thinking about adjustments is questioning if the adjustment is out of line with history or out of line with what one knows is going on.

The reported number this month is in line with what one would expect in an expanding economy. It is also in line with historical numbers. Unless this month was way out of line with what really happened, it did not impact the seasonally adjusted number in a major way, if at all.

Economic Turns

The BLS does admit that the birth/death model will be wrong at turns. And it was wrong in a big way in 2008, 2009, 2010.

Heading into the housing bust and recession, I was one of the biggest BLS critics you could find. It was clear their model was wrong. Housing died. So did commercial real estate. Yet, the BLS model added construction and financial activity businesses each month.

In October of 2009, the BLS finally admitted its birth/death model overstated jobs by about 800,000. That's quite an error, and I felt vindicated (See Reader Emails on Birth/Death Model and Unemployment Rate).

The BLS has since changed its model, and it also does twice-annual adjustments as opposed to annual. I have no strong beliefs now that their model is incorrect. Actually, recent adjustments have been of a positive nature, not a negative one.

This can change if the economy is at a turning point and that turning point causes businesses to go out of business (or expand at a significantly reduced rate vs. model expectations). Both conditions must be true for the BLS model to be way out of whack.

Unless there is some reason to believe both of the above conditions are true, focus on the birth/death model as a source of error is likely to be wrong. Since I currently have no strong viewpoint on possible model errors, I stopped reporting on the BLS birth/death model in my monthly jobs report.

Reflections on BLS Competence

My opinion on the BLS has changed over the years. When I have called them on the phone, they are eager to help, and my perception is they are highly competent.

Yes, their model was horribly wrong in the housing bust. Is it equally wrong now? I rather doubt it, even if this is an economic turn.

The thing that most changed my mind has nothing to do with their model per se. In some recent conversations, I wanted to prove that a reason for the discrepancy between the employment survey strength relative to the household survey was due to Obamacare artifacts and part-time hiring.

The person I talked to wanted to help. She couldn't help for the simple reason the BLS did not have the data. A brief conversation revealed the BLS does not have the data it wants or the data it needs to prove one way or another the question I asked (or many other equally important questions).

In defense of the BLS, some of the seemingly convoluted ways they do things (and the birth/net model is a prime example) is for the simple reason the BLS does not have the detailed data that analysts presume they do.

The person I talked to was desperate for more data, but for personal privacy reasons, and also because of burdens on businesses and various delays in reporting, they don't have it. Even if one presumes the data is somewhere in the system, one should not presume the BLS has access to that data.

We can easily debate whether the BLS should have access to the data it wants. More importantly, we can step back and question whether those BLS jobs should exist at all! Most long-time readers probably know my point of view already.

Such debates aside, my current belief is the BLS does a good job with the data it has.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Symantec Says "Antivirus Software Is Dead"

Posted: 05 May 2014 10:07 AM PDT

Antivirus "is dead" says Brian Dye, Symantec's senior vice president for information security. Dye proposes businesses hire Symantec to minimize the damage once hackers break in.

The Wall Street Journal reports Symantec Declares Antivirus Software Dead, turns to minimizing damage from breaches.
Symantec Corp (SYMC) invented commercial antivirus software to protect computers from hackers a quarter-century ago. Now the company says such tactics are doomed to failure.

Antivirus "is dead," says Brian Dye, Symantec's senior vice president for information security. "We don't think of antivirus as a moneymaker in any way."

Antivirus products aim to prevent hackers from getting into a computer. But hackers often get in anyway these days. So Mr. Dye is leading a reinvention effort at Symantec that reflects a broader shift in the $70 billion a year cybersecurity industry.

Rather than fighting to keep the bad guys out, new technologies from an array of companies assume hackers get in so aim to spot them and minimize the damage.

Network-equipment maker Juniper Networks Inc (JNPR) wants customers to place fake data inside their firewalls to distract hackers. Shape Security Inc., a Silicon Valley startup, assumes that hackers will steal passwords and credit-card numbers so seeks to make it difficult to use the pilfered information.

Within six months, [Symantec] plans to sell intelligence briefings on specific threats so clients can learn not just that they are getting hacked, but why as well.

Mr. Dye, who has spent more than a decade with Symantec, says it was galling to watch other security companies surge ahead. "It's one thing to sit there and get frustrated," he says. "It's another thing to act on it, go get your act together and go play the game you should have been playing in the first place." Mr. Dye estimates antivirus now catches just 45% of cyberattacks.

International Business Machine Corp (IBM) on Monday plans to unveil its own security suite that looks for irregular behavior in computer networks.

If Symantec has an opening, it is that no security company has determined how consistently to defeat the most ambitious hackers from China, Iran and the former Soviet bloc. Hackers linked to Iran last spring breached the digital perimeters of energy companies and one of the U.S.'s five biggest banks but were caught before moving further into the systems.
Rather Curious Propositions

Symantec has a rather curious proposition that essentially boils down to this: Hire us to learn how to minimize the damage once hackers break through our software.

Juniper essentially says: Place fake data on your servers because hackers can break through our router security. Is doubling the data storage to "distract" hackers really a valid security solution? I think not.

Shape Security assumes data will be stolen. Wonderful. What's the message here? Don't put anything of use online? Double or triple encrypt everything?

The overall message from security providers is: don't expect the security systems we sell will work. 

Individual consumers obviously cannot afford to pay Symantec, IBM or anyone else to assess the damage when software fails.

The saving grace for individuals is that ambitious hackers primarily attack banks and retailers like Target, where if they break in, they can steal information on tens-of-thousands of credit cards or accounts at a time.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Damn Cool Pics

Damn Cool Pics


A Cheap Way to Fix Your Sneakers

Posted: 05 May 2014 06:18 PM PDT

A Photo Project of 100 Years of Fashion

Posted: 05 May 2014 11:39 AM PDT

Annalisa Hartlaub recreated 100 years of fashion from the 1920s to today with selfies for a school project.

1920s




1930s




1940s




1950s




1960s




1970s




1980s




1990s




2000s




2010s


Source

The Worst Pick Up Lines You'll Hear Today

Posted: 05 May 2014 10:47 AM PDT

There's no two ways about it. These pickup lines are just plain terrible.

















2,000 People at Brampton "Mansion Party" Raided by Police

Posted: 05 May 2014 09:51 AM PDT

If your idea of a great party involves thousands of people stuffed into a house, only to be broken up by local police, then Brampton was the place to be last night. The party was promoted on Twitter with the hashtag #MansionParty. Several comparisons were made to the 2012 film Project X which portrayed a similar event.

Police estimated between 1,500 and 2,000 people attended the party, either crammed inside the house or outside in the adjacent yards. If the organizer's intent was to simulate that movie's uncontrollable crowds, havoc and property damage, then mission accomplished.

The homeowner's son had permission to have a party, but "not of this magnitude," Peel Regional Police Sgt. Darcy North told the Toronto Sun. Police shut the event down after "one of the home's occupants" called. The party had apparently gotten out of control.

An estimated $70,000 in damage was inflicted on the house, but that number could increase as damage claims come in over the weekend.


The World According to Cats [Infographic]

Posted: 05 May 2014 09:20 AM PDT

In ancient times cats are considered guardians of the underworld. That is why they are considered sacred in many societies. For more information about these beloved felines, here's an infographic by Cheapflights about the world according to cats. You will be amazed the bulk of information that you will accumulate.

Click on Image to Enlarge.