Thursday, October 11, 2012

Jobs Report Statistically Impossible

Jobs Report Statistically Impossible
Not to beat a dead horse, but let's do a statistical analysis of that infamous September jobs report that Rick Santelli tore apart the other day in his epic on-air rant. The report showed initial unemployment claims of 339K. That's nearly 6--six--standard deviations away from the mean consensus estimate of 368K. For those unfamiliar with statistics, that's a lot. It's so much, in fact, that the probability of such a statistical anomaly occurring is well below 1%. (6 standard deviations is about as close as you can get to 0% without reaching it.)

Jobs Report Statistically Impossible - chart 1

If that didn't knock you over the head, there's more: The divergence between the reported ("headline") weekly numbers and the revised numbers keeps getting larger. As of the last report, the BLS has added 200K initial claims to its revisions. This would suggest that when the September jobs report is revised, several thousand initial claims will be added to the reported 339K.

Jobs Report Statistically Impossible - chart 2
 
But there's still more: The last time we saw such a large month-to-month drop in initial claims was February 2006, when layoffs were unusually low (because we were at the peak of the mortgage bubble economy) following typical seasonal layoffs in January.

Jobs Report Statistically Impossible - chart 3

Add all this together, and you get a September jobs report that's not a statistical improbability, but is a statistical impossibility.

Tuesday, October 9, 2012

Rick Santelli's Epic Rant On Jobs Report

Rick Santelli's Epic Rant On Jobs Report
CNBC's Rick Santelli made a name for himself in early 2009 when he called for a "Chicago Tea Party" in response to the Homeowners Affordability and Stability Plan. Because of that epic rant, Santelli is widely regarded as one of the founders of the Tea Party movement.

Today, Santelli went on a tear about the BLS's September jobs report: