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stockholmer

(3,751 posts)
30. BLS and other models, the changes, and some issues
Fri Jul 6, 2012, 01:17 PM
Jul 2012
http://www.politicalforum.com/economics-trade/194459-bls-government-data-gospel.html

These models have changed over the last several decades so much - that to compare them over time is like comparing oranges to apples. This is not Republicans or Democrats - but BOTH parties. The biggest changes have come under both Clinton and Bush. Here is a brief reason why we can't use BLS and other government data to compare year-over-year data - because of these radical changes.

Employment/Unemployment: The U3 is the most highly watched number for unemployment, the problems with the U3 are numerous.

1. It is a poll. They call people and see if they have a job, looking for a job, unemployed, etc. Polling data traditionally has wide margins of error as well as you can create questions to generate the answers you WANT.

2. "Discourage Workers" - Clinton stop counting those people who are unemployed, but no longer looking for work. By labeling them, we no longer count them as unemployed.

3. Temp/Part time - Bush increase the use and definitions of temp and part time workers into the employment numbers, making it look better than it is.


All these changes (by both Republicans and Democrats) have made the current unemployment and employment numbers better than what they actually are. The U6, which is another BLS number - does not include many of these "label" changes. U6 is just as valid and is conducted by the same government organization that conducts the U3 number. However, politicans NEVER like to talk about U6 - as it is ALWAYS higher than U3. The fact is - U3 is beyond bogus if we are talking about the actual number of unemployed people in this country.



INFLATION


The CPI (Consumer Price Index) has traditionally been used to measure inflation. However, the model - again - has changed so many times over the last several decades that it no longer measures inflation, but rather the adjusted cost of living. A COLI (Cost of Living Index) measures the impact of inflation and reflects how consumer change their spending habit as they are affected by inflation. The government has changed our CPI model to a COLI model, however they didn't change the name nor have they told the public that they are no longer measuring inflation, but rather the impact of inflation to the consumer.The recent changes under Bush and Clinton are as follows:

Hedonics - this alters the price of a good, based on the technology benefit it has to the consumer. Example, you can use the iPhone to surf the internet, so it serves two purpose, so instead of reflecting the actual cost of product, they adjust it lower to reflect the technology benefit. However, the man on the street is STILL out of pocket for the full amount. Hedonics is one of the most highly critical change to the model.

Substitution - initaily this was argued that if the price of steak increase, the consumer can purchase hamburger. As the consumer is still meeting their utility effeiencys - steak and hambger are both protein. What subsitution reflects is changes in consumer spending habits as the cost of one good increases, they will select a lower cost good to meet a similar need. However, this is actually lowering the CPI number because of the impact of inflation. The BLS can use subsitutions to change the size of product, brand names, generic names, and even time when they measure the price. It reeks of manipulation. I am happy to provide the BLS text sample of what they can do with Subsitution - it is pretty shocking.

Geometric Weighting - goods have always been weighted in the index, but now geometrical weightings have pushed some goods higher that drop in value, while certain goods with higher volatility are weighted lower.

CORE - the Fed and other's like to discuss the CORE. This is the CPI minus FOOD and ENERGY. They argue that Food and Energy fluctuations are temporary and can distort inflation. The reality is that Food and Energy are the largest consumption factors that impact consumers and as they have shorter commodity cycles (1-6 months) they certainly do have higher volatility. However, to remove them to measure inflation - is ignoring the biggest expenditure for consumers. So far the Fed's pat answer is that Food and Energy prices are temporary - however we have seen a steady rise of a couple of years. What IS temporary - we don't know because the Fed will NOT define Temporary.


Commodities - Soft Commodities (Food and Energy) have shorter life cycles to market (1-6 months) that certainly impact the "head line" inflation number, even with all the model changes. However, Hard Commoditeis (Iron, Copper, and other raw materials) have a longer time to market (mining -> refining -> manufaturing -> finished goods -> inventory). It can take 6 -18 months (and longer depending on inventories) before higher commodity prices trickle down to the consumer (in the CPI measure). However we ARE starting to see it. The model will allow the BLS to keep rachetting it down lower, even Bush's new CPPI-U will even push it lower. So we may never see high inflation - if reported by the BLS and their model.



So why all these model changes? Several Reasons:

1. In order to attack Treasury Buyers, the rate of inflation must not be too far above the shorter-term yield curve on notes.

2. It keep the value of the dollar from falling too quickly.

3. Most importantly - the CPI is used to determine the rise in Social Security Payments.
NOT a good # :-( n/t Inuca Jul 2012 #1
not good at all... n/t IamK Jul 2012 #2
Revisions of previous 2 months are mixed Inuca Jul 2012 #3
What friggin' cracks me up SoFlaJet Jul 2012 #13
120,000 non-farm payroll jobs a month need to be created just to keep pace with population growth stockholmer Jul 2012 #35
Some people remember more than 4 years ago. Igel Jul 2012 #42
Corporate hucksters sitting on 2 trillion BumRushDaShow Jul 2012 #4
Courtesy of a do nothing Congress! nt Firebrand Gary Jul 2012 #5
plus NAFTA, repeal of Glass-Stegall, & the Commodities Futures Modernization Act of 2000 all coming stockholmer Jul 2012 #11
If Clinton hadn't "gone Republican" maybe those acts would not have past, amandabeech Jul 2012 #33
Bill Clinton didn't "go republican" that's who he is. A governor of a failed small southern state Citizen Worker Jul 2012 #40
"Failed small southern state" totally sums up Arkansas and several other deep south byeya Jul 2012 #56
According to Lori Wallach the repeal of Glass-Steagall is enshrined in the WTO Agreement, which was Citizen Worker Jul 2012 #39
Obama in 2009: If I can’t fix the economy in three years, you can call me former President Obama Huey P. Long Jul 2012 #26
It's a good thing he has fixed the economy then! We are well on our way! Firebrand Gary Jul 2012 #36
the private sector is doing fine! BT021 Jul 2012 #59
Even with this rotten RePUKE House of Reps we are STILL seeing GROWTH. RBInMaine Jul 2012 #34
Early in the article, you refer to no President with over 7.2 getting re-elected karynnj Jul 2012 #6
That came from the WSJ. mahatmakanejeeves Jul 2012 #7
Actually if you google article titles alp227 Jul 2012 #15
Sorry - I was not intending to attack you - just to counter a meme that is harmful karynnj Jul 2012 #41
No problem. mahatmakanejeeves Jul 2012 #45
And it's inaccurate regarding FDR's reelection in 1936 when the rate was 16.9% 24601 Jul 2012 #51
Private payrolls miss even worse 84K on consensus of 106K, yet these numbers will not allow the Fed stockholmer Jul 2012 #8
August will change the number, as students return to school demwing Jul 2012 #16
the thing is, that is all taken into account by seasonal adjustments and the street's consensus stockholmer Jul 2012 #17
Sure, expectation will be higher demwing Jul 2012 #18
Why are all of the countries in the EU failing? Mayflower1 Jul 2012 #24
Not all (Sweden, Finland, Denmark, etc are ok- for now) but many. In a nutshell here's some reasons: stockholmer Jul 2012 #27
But bipartisan austerity seemed to be working so well MannyGoldstein Jul 2012 #9
The Repub argument is that Mayflower1 Jul 2012 #29
The data show the opposite MannyGoldstein Jul 2012 #43
How is it the ADP said 175,000 jobs were added in the private sector in June? Why so far off? flpoljunkie Jul 2012 #10
because the models that the BLS uses are extremely flawed, but at least take cheer that most of the stockholmer Jul 2012 #12
You didn't actually respond to the post pinqy Jul 2012 #20
BLS and other models, the changes, and some issues stockholmer Jul 2012 #30
Interesting Tactic pinqy Jul 2012 #38
Because ADP's number doesn't mean squat on a national level. Roland99 Jul 2012 #14
Different Statistical Universe pinqy Jul 2012 #19
PUBLIC SECTOR! Cosmocat Jul 2012 #31
Looks like republicans want to put a different spin on this one Kingofalldems Jul 2012 #21
One major cause of the unemployment crisis: ongoing cuts at the state and local level. SunSeeker Jul 2012 #22
Live in Pa - I have been posting this today Cosmocat Jul 2012 #32
TX did this last year. Igel Jul 2012 #44
Oh, boy......... Beacool Jul 2012 #23
Disability Ranks Outpace New Jobs In Obama Recovery TouchOfGray Jul 2012 #25
I noticed you defended Romney in the Bain thread Kingofalldems Jul 2012 #47
Looks like you are citing a right wing source Kingofalldems Jul 2012 #48
So you are saying that TouchOfGray Jul 2012 #49
This is the latest RW meme. Bill O'Reilly ranted about it on his show last night. SunSeeker Jul 2012 #52
Yes that the new theme of the RW Kingofalldems Jul 2012 #53
Which makes this the 28th consecutive month of job INCREASES ... SomeGuyInEagan Jul 2012 #28
It takes 125,000 new jobs/mo just to break even with rising population. Psephos Jul 2012 #46
Right. Down steeply '08 to '10, but increasing steadily for more than two years to make up half SomeGuyInEagan Jul 2012 #54
We are barely treading water, and way below the numbers in January 2009. Psephos Jul 2012 #58
I don't deny the numbers. But why go backward? SomeGuyInEagan Jul 2012 #60
Well, I can agree with that. Forward is the only way out. Psephos Jul 2012 #61
Yeah, we're on the same page. And I definitely agree with you ... SomeGuyInEagan Jul 2012 #62
Not good. emilyg Jul 2012 #37
Job growth has sucked for more than a decade now high density Jul 2012 #50
Wages and job growth..... Cronkite Jul 2012 #55
The fact that jobs can be added or lost without affecting the unemployment figures 4th law of robotics Jul 2012 #57
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