The Economy

Heh. I'm pointing to the beat because in my world, people are sitting next to computers at 8:30 a.m., listening for a headline number and comparing it to a consensus of about 80 Street economists who are putting out a forecast. And I have several monitors that start lighting up like pinball machines. All week, various rates, currency and other markets have been positioning based on those forecasts (well, it's a bit more complicated than that, there are always whisper numbers) and what it means for what Jay Powell may or may not do (which is all tha matters).

This number was more than 3 standard deviations from the distribution of their forecasts. It's as far off the graph as you ever get, and that is saying something, because these shit shows have become more and more of a common occurence.

I get that the forecasts aren't that meaningful to you, but it is indicative of something really whacked going on. I'm old enough to remember when several of these economists were consistently really good. Like Nostradamus good. That is why I am focusing on why the forecasts are so off. If you just adjust the way that they have in the typical year over the last decade, the number the reported would have fallen squarely within the forecasts.

Then I started trying to figure out what is really going on after reading that link I posted about the seasonal adjustment and I looked at their report to see what they specifically did this month. The magnitude of the adjustment is way beyond what they ever do.

 

I think you posted that cause you saw "Goldman," but I am not sure. Am I misunderstanding?

I wouldn't know Bernhard Rzymelka from Adam.

Jan Hatzius, I do know, just because he does something I am more interested in.

And before you go where you might go next, me "knowing" someone isn't the endorsement of the work they do. For example, Jeff Curie is their chief commodities guy, and I would generally tell you he sucks. ... at least the public him sucks, because I suspect what he says and what Goldman's book looks like might differ quite a bit.

Hatzius? He really has been a really good forecaster for a really long time. The history is there.

I know that Goldman put together a Crypto group a few years ago and hired a bunch of 12 year olds, some of whom have MD designations. But I honestly don't know any of them, what they do, or who is paying attention to anything they put out. They could suck (or it could just be that the public them sucks). And to that, I'd just shrug.

 

Also. ... a guy throwing out price targets on ethereum (or anything) isn't really the same thing as forecasting an employment number. Forecasting an employment number isn't even the same as trying to forecast GDP in 2023. It's the difference between trying to quantify what happened in the past and guess what is going to happen in the future. You should typically be able to do the former more easily.

 

Re: The seasonal adjustment we were talking about on Friday?

They turned a 2.824 million loss of jobs into a gain of 467,000 jobs in January. And I watched all day and on Saturday, while it became a politicized soundbite (on this board it was on the politics thead).

There is a strategist out of Singapore for Rabbobank who is pretty contrarian, and he began his most recent note with this:

I have repeatedly stressed how ridiculous it is to look at US jobs data when they are just estimates of the small monthly delta of a very large number
strained through an algorithm and seasonal adjustments. The ADP report saw a shock fall in jobs, then non-farm payrolls --whose methodology the ADP uses!-- saw a shock surge. Yet the adjustment was far larger than normal despite more unadjusted jobs lost as the Great Resignation continues and the working week shrinking. Worse, there were vast backward revisions for years. The million jobs created last summer now happened this winter. Economic history was just rewritten – and we are supposed to take it seriously.

He even pointed out that they took the million jobs "created" during the summer and rewrote them in their restatement as jobs that were created this winter, something I was saying on Friday. (So essentially, Biden came out and took credit twice for the same exact jobs -- once in the summer, which was then backwardly revised down, and then on Friday).

Here is a video from the weekend, where is being asked about the rates markets.

Rabobank's Every on Markets and Strategies

He prefaced his first answer with: "We can raise serious questions about the validity of the payrolls data that we saw last week. I don't think anyone who we just heard from speaking was doing a particularly deep dive into the seasonal adjustments and the backward revisions and the 'let's make it all up while we go along' methodology, from the BLS. But let's presume we just accept the headline, if we do then. ..."