At 8:30 Eastern time this morning, the US Bureau of Labor Statistics (BLS) released its monthly jobs report. The news headlines for the release of these reports say, for example, “Largest Monthly Jobs Gain In Past Decade!” But, if you actually read the details in the reports (there are over two dozen of them), and understand where to find the fudge factors, the BLS report actually showed a net loss of jobs for the month of May!
Here’s how I come to that conclusion:
|Monthly change in jobs|
|Employment Situation Summary Table B, Establishment date, seasonally adjusted||431,000|
|My revisions to increase the accuracy of the report:|
|Delete increase in workers temporarily employed by Census Bureau||-411,000|
|Delete May 2010 Net Birth/Death Adjustment, not seasonally adjusted||-215,000|
|Corrected change in employment in May 2010||-195,000|
The BLS news release acknowledges that the employment numbers are temporarily higher because of the more than a half million total short-term jobs created to handle the 2010 census. To my thinking, these should be listed in a separate category, so that the BLS does not have to report an equally large loss of jobs in the coming months when the 2010 census work is finished.
In the Employment Situation Technical Note part of the news releases, the BLS discussion of “Reliability of the estimates” reads, in part, “The second component is an ARIMA time series model designed to estimate the residual net birth/death employment not accounted for by the imputation. The historical time series used to create and test the ARIMA model was derived from the unemployment insurance universe micro-level database, and reflects the actual residual net of births and deaths over the past 5 years.”
In more understandable terms, the BLS’s position is that, simply because the population of the US is increasing, there are more jobs being created above and beyond those that they detect by surveying businesses and households. This theory has consistently proved to produce erroneous results. Individual statisticians at the BLS have acknowledged that the birth/death adjustment consistently overstates
unemployment employment. Once a year the BLS eliminates 1-2 million jobs from its reports, to undo the cumulative error caused by the monthly birth/death adjustments. By inserting this fudge factor each month, the US government is able to temporarily pretend that employment levels are better than they really are.
For the month of May it looks very suspicious that the federal government wanted to report a net jobs increase even if the surge in Census Bureau employment was ignored by analysts. Further, the feds wanted to see headlines like “Largest Monthly Jobs Gain In Past Decade.” It will be interesting to see how the employment statistics are twisted when the Census Bureau loses more than a half million jobs in the coming months.
Why are the US unemployment reports important for those tracking precious metals prices? Well, the monthly jobs reports for the past several years have almost always provided bad news. This kind of bad news reduces the confidence of investors who might consider holding US dollars, US Treasury debt, and US stocks and bonds. Poor jobs reports could lead investors to shift more out of paper assets and into tangible assets like gold or silver. Such a shift would cause the US government to have to pay higher interest rates on Treasury debt. Therefore, the federal government has a huge incentive to make the acquisition of gold and silver less attractive.
Suppressing precious metals prices right as the unemployment information is released is a tactic that has been successful at turning investors away from gold and silver. For more than the past four years (with only 2-3 exceptions), precious metals prices have been manipulated downward as each jobs report was issued. The action associated with today’s jobs reports was a textbook example of price suppression.
It is known by some top officials of the US government what the jobs and unemployment figures will be before they are released to the public. Since this month’s report, after excluding the impact of the short-term Census Bureau jobs and the birth/death adjustment, was really bad news, the administration had every incentive to pull out all the stops to push down gold and silver prices. So this time around, price suppression began a couple of days early rather than waiting for the moment of the announcement.
After all, for almost a year the federal government has been trying to claim that the US economy is in the early stages of a recovery. It wants to avoid the chance that the public may hear facts which contradict that pretense.
Because of the consistent track record of price suppression when the jobs reports are released, traders stand ready to short gold and silver at the same time, expecting that they will be able to cover in a few hours at lower prices. This magnifies the impact of the government’s efforts.
Once the point was made that gold was not strong at the time the jobs report was released, the manipulation ceased. In the hours since, the price of gold has jumped almost 2%! Silver has not yet staged a recovery, but it should next week. One surprising result was the decline in US stock markets supposedly because the “increase” in jobs was smaller than expected.
The point of this column is that people often don’t really understand what is happening just by looking at the headlines. I refer to misleading news headlines, like those for this month’s jobs report as “Things you ‘know’ that just aren’t so!”
Unfortunately, the news coverage and commentaries of the gold and silver markets are too often as misleading as was this month’s employment reports. What seems to be well hidden is that many people quoted about precious metals have a vested financial interest in seeing the prices suppressed. When you dig down to the truth, the real story often contradicts what is “commonly known.” The widespread public deception about the gold and silver markets is becoming ever more difficult to maintain. This is just one more reason why I expect far higher prices for those two metals in the coming months.
Patrick A. Heller owns Liberty Coin Service in Lansing, Michigan and writes “Liberty’s Outlook,” a monthly newsletter covering rare coins and precious metals. Past issues can be found online at http://www.libertycoinservice.com/ Pat Heller is also the gold market commentator for Numismatic News. Past columns online at http://numismaster.com/ under “News & Articles”. His periodic radio interviews can be heard on WILS 1320 AM in Lansing, www.talkLansing.net, and on www.yourcontrarian.com.