SilverOz is an MPA specializing in local economic development and have worked in local economic development for a mid-sized midwestern county for over 10 years.  He has personally worked on/managed projects that have totaled over $500 million in direct investment into the county.


So today following an otherwise pretty darn good jobs report, we get the usual perma-pessimists at Zero Hedge and Rick Santelli over at CNBC proclaiming that the report showed a drop of over 1 million people from the labor force in one month. Of course, as ususal, both Santelli and Zero Hedge have a real reading comprehension problem and completely missed that this million+ people isn’t some new January phenomenon, but a result of the BLS using the 2010 census data to have more accurate data. In other words, the changes in the Household Survey to the various measures had taken place over the years prior to 2010, but for simplicity’s sake, the BLS incorporates these changes into one month (which they clearly point out). The relevant text from the report is below (bold is mine):

“Effective with data for January 2012, updated population estimates which reflect the results of Census2010 have been used in the household survey. Population estimates for the household survey are developed by the U.S. Census Bureau. Each year, the Census Bureau updates the estimates to reflect new information and assumptions about the growth of the population during the decade. The change in population reflected in the new estimates results from the introduction of the Census 2010 count as the new population base, adjustments for net international migration, updated vital statistics and other information, and some methodological changes in the estimation process. The vast majority of the population change, however, is due to the change in base population from Census 2000 to Census 2010.

In accordance with usual practice, BLS will not revise the official household survey estimates for December 2011 and earlier months. To show the impact of the population adjustment, however, differences in selected December 2011 labor force series based on the old and new population estimates are shown in table B.

The adjustment increased the estimated size of the civilian noninstitutional population in December by 1,510,000, the civilian labor force by 258,000, employment by 216,000, unemployment by 42,000, and persons not in the labor force by 1,252,000. Although the total unemployment rate was unaffected, the labor force participation rate and the employment-population ratio were each reduced by 0.3 percentage point. This was because the population increase was primarily among persons 55 and older and, to a lesser degree, persons 16 to 24 years of age. Both these age groups have lower levels of labor force participation than the general population.”

So Rick/Zero Hedge, unless you would like to argue that the population of the United States also grew by 1.5 million in one month (since that is from the exact same report/revision you quoted), I think both of you should retract your extremely misleading statements about those not in the labor force increasing by over a million in January and simply admit that you are either too stupid or too focused on selling a particular world view to read the data correctly.

At the very least, a reputable financial news organization like CNBC needs to set the record straight on data like this as while Mr. Santelli is entitled to his own opinion, he is not entitled to his own facts, and the fact is 1 million people did not drop out of the labor force in January 2012.

Category: Data Analysis, Employment, Really, really bad calls, Think Tank, UnGuru

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

31 Responses to “No Rick Santelli and Zero Hedge, One Million People Did Not Drop Out of the Labor Force Last Month”

  1. firesnyder says:

    Pwnage!!! ZeroHedge is soo “doomsday”. That does erk me, and it is the reason I stopped reading.

  2. ByteMe says:

    Hope you’re not holding your breath waiting for a correction or retraction, Barry.

  3. glodime says:

    Is it my computer or is there no text in Bold?

  4. BubbRubb says:

    A declining labor participation rate has been brought up by pundits repeatedly. It declines again in this report to the lowest its been since spring of 1983 to 63.7%. Klein, Krugman, and others are blowing it off as no big deal. That leaves people like me confused.

    Does the labor force participation rate matter?

    I have no dog in this fight. From where I sit, the economy IS getting better. There are more jobs, however, most of them do NOT pay livable wages for the average American family. There are plenty of jobs at the very top requiring advanced degrees and experienced as well of plenty of jobs at the bottom that require a smile and the ability to say, “do you want fries with that?”

  5. Frilton Miedman says:

    I know I’m going to get some excellent market insights when Santelli whines on air… because Steve Leisman will usually respond with the facts.

    I see humor that the Tea Party was founded on Santelli’s infamous rant that was based on a Santelli’s assumptions that the homeowner assistance plan was created to give tax money to home flippers and janitors who lied on mortgage apps to buy 5 bath homes.

    He was completely WRONG, and managed to refer to anyone who might need that help as “losers” on national network television.

    Santelli finally admitted he hadn’t read it when Steve Leisman asked him.

    Zerohedge is a shambles, I decided to join this forum instead of theirs for the relentless comments relating to Obama being a socialist, or how Obama caused the recession, or how it’ Obama’s fault we have a deficit.

    It’s too bad, some of the data observations and factual dirt digging on REAL scandals at ZH have been groundbreaking.

    The problem is that at some point over the last year or so they lost their way, they went from uncovering Goldman Sachs prop scams and dark pools, HFT scandals, mortgage and derivatives fraud to constantly finding fault in the wrong parties for the sole purpose of being “Tea Party-like”….to emulate the original andry mood evoked by Santelli’s rant that was based on wrongful assumptions to begin with.

    BR may not expose charts of microsecond bursts of HFT alg’s scamming the market with sub-penny routines or latency arbitrage front-running fraud, but I’ll take fact based news over smoke and mirrors partisan blame games any day.

  6. Futuredome says:

    ZH and Santelli need to stop whining. The Austrian school still hasn’t recovered from the events of 1931. Stop trying to force your beliefs to a population that does not hold them.

    There is no economic boom, the economy has “not” recovered yet, nor may it for a while. Just like in 1985 the economy had not recovered from the previous recession as well.

    Just be ok with “some” recovery. That is all it is.

  7. Futuredome says:

    “Zerohedge is a shambles”

    Of course it is. Its whole goal is to shove the Austrian(think Mises, not Hayek) deflationist propoganda down your throat. Like I have said before, that part of the Austrian school won’t get anywhere by being crude. That is where post-keynesian side beats it.

    The only cruder side is new keynesian/neoclassical/supply sider element.

  8. BubbRubb says:

    @Frilton Miedman- I agree.

    In Zero Hedge’s defense as a Twitter follower of theirs, they mock Romney and Gingrich as they do Obama. I think they are in the Ron Paul camp politically to a large degree, but are not as overt in their endorsement of him as they have been in the past.

    I think a lot of us are suffering from recession fatigue. We went from a financial crisis to a meager recovery to Europe imploding to Europe is contained to the US Gov almost shutting down to the US Gov nearly defaulting on its debt to Europe almost imploding to currency swap lines being opened to Greece being saved or not to here we are today. Throw in the bankruptcy of American icons like GM, Chrysler, American Airlines, Kodak, on the heels of the 2008 financial collapse and it’s enough to leave many heads spinning. We’ve been through a lot these last 4 years.

    People have been lied to and for a lot of Americans that trust between government-markets-media has been broken. People were lied to about Iraq and the justification for invasion. They were lied to about the value of their homes. They were lied to about the safety of their jobs. They were lied to about the government’s commitment to get the economy growing at a reasonable rate in a reasonable amount of time. They also lied to themselves believing their declining wages over time could be substituted with credit cards at 20% interest that could take the wife and kids to Disney World in place of the annual bonus. Or that HELOCs on ever increasing property values could never go wrong.

    I see a culture in this country that repeatedly rewards failure, idolizes the absurd, and demands Americans live beyond their means regardless of their circumstances. Considering where we were, where we went, and where are now, it doesn’t leave a lot of room for optimism.

    Until that trust is repaired, it’s going to be a very long road ahead.

  9. jaymaster says:

    Bubb Rubb,

    As to your question “Does the labor force participation rate matter?”, well, yes, and no, IMO.

    If you are looking for signs in a turnaround in the economy, then no, it doesn’t matter.

    Neither does the worker/population ratio, or the unemployment rate.

    That fact that jobs are growing is all that really matters (assuming they are; there is still a lot of fudging around in these numbers). That means the economy is growing.

    If the population is increasing at the same time, any of those numbers can go in the bad direction even if the number of jobs is growing.

    If you are looking at things from a “how is the government managing the economy” perspective, then yes, those numbers certainly do matter. As those ratios decline, we are obviously running below optimal capacity. We’re not providing enough jobs to keep everyone who wants to work employed. So it’s not good from an efficiency/social stability perspective.

    But from an investment standpoint, that concern should be secondary.

  10. jd351 says:

    BR, thanks for re-posting , I have read this on several blogs. As for Santelli, just another mouth piece , or bet yet just an asshole. CNBC and the rest of the so called MSM is the reason why I cut my cable this month.

  11. Frilton Miedman says:

    Bubb, I largely agree, however -

    On the topic of entitlement it bothers me to see ridiculous statements from the Einsteins at the Heritage Foundation saying that poverty level families still own refrigerators, TV’s or microwaves, so that means they aren’t really impoverished….meanwhile corporate banking exec’s, many whom fund Heritage, will justify $20 million per year at a 15% tax rate for having scammed the public with prop trading, futures manipulation and fraudulent real estate derivatives.

    Are those the “job creating” or “trickle down” tax rates Heritage Foundation endlessly rambles on about?

    I definitely think some live beyond their means, but it applies more so at the top end, the Mitt Romney’s of the world who feel they are somehow benefiting society by tax avoidance, and then buying my government to ensure more of the same.

    On the low income end, yes, we probably should start to discourage conspicuous consumption, but for all those microwaves and refrigerators not sold, it equates to lower consumption, less profits, lower growth.

  12. severinslade says:

    Really people? Bob PUSSani speaking the truth?

    Why is it that every time the market is surging, Pussani refuses to address the ridiculous lack of volume?

    If we are truly in the midst of a real economic recovery why is so much money parked on the sidelines?

    If we are in the midst of an economic recovery, why are banks slashing jobs left and right? Why are they cutting bonuses for the bankers they keep by 30-80%?

    The more accurate way to track job creation is to follow tax receipts. If we were generating more jobs, tax revenue would be increasing right? Well a quick glimpse at the facts will show you that YOY tax receipts just turned NEGATIVE. Meaning the US is losing jobs, not gaining them (or at the very least it is losing good, higher paying jobs in exchange for lowering paying ones).

    BESIDES, whether or not the US is “slowly” recovering is irrelevant either way. The US will surely be impacted by the European recession, ESPECIALLY once Greece defaults (and once Portugal edges closer, only to realize that it’s bondholders have much more protection than GGB owners).

    If the US was truly in recovery mode, the Fed wouldn’t have pledged ZIRP through 2014.

    You lemmings should put your money where your mouth is and aggressively buy MS, BAC, JPM, or any of the momo stocks. Me? I’m accumulating my shorts, as the low volume and declining NYSE shorts lead me to believe that the market is set for a major correction, especially the closer we get to March 20th.

    Wasn’t a Greek PSI supposed to be announced within hours a few weeks ago? Still waiting.

    It’s going to be interesting how far banks fall once those CDS are triggered. Europe is about to experience it’s own Lehman/AIG.

  13. BoboKnows says:

    So no one is the least bit suspicious that 1252/1510 (83%) of the “adjusted” population is NOT is the labor force? You all buy their “they were mostly too old or too young” bit?

  14. severinslade says:


    No one on this site apparently.

    The fact that posters refer to CNBC as a “respectable financial news network” proves how idiotic these people are. Didn’t almost all of the CNBC hosts and contributors say everything was fine just days and weeks before Lehman? Haven’t they also been saying Greece is fine since January 2010? Don’t they continue to praise Bernanke…a man tbat didn’t see the housing bubble bursting just 6 months before it did?

  15. GJR says:

    BLS Data shows an increase of 1,177,000 added to the Seasonally Adjusted Not In Labor Force (Series Id: LNS15000000). ZH and Santelli are only making mention of the BLS supplied data, they are not speculating or using some exotic formula. Apparently BR thinks he and the MSM, which TBP is working hard to align with, is allowed to use all favorable data printed by the BLS yet nobody had better dare bring attention to any data that is not so favorable. Because 2010 census data was used we are free to boast and celebrate any and all positive data results, yet no negative. How nice. Santelli and ZH are bad men, they are very bad men, and they keep thinking bad thoughts about the state of the US economy. Wish them to the corn fields Barry, please, wish them to the corn fields!

  16. alex west says:

    The vast majority of the population change, however, is due to the change in base population from Census 2000 to Census 2010.

    This was because the population increase was primarily among persons 55 and older and, to a lesser degree, persons 16 to 24 years of age. Both these age groups have lower levels of labor force participation than the general population.”


    only idiot could write this..

    HOW IS IT POSSIBLE TO HAVE INCREASE IN ‘civilian noninstitutional population’ among persons 55 and older and?
    WHERE DID THEY COME FROM? MArs /SUN/ another planet.. ? were they born already 50 years old?

    only stupid BLS could print this nonsense. if person got counted in Census 2010 , so its #UCKING by default
    he must have been counted in 2000 Census.. RIGHT? ( unless he came into country between 2000-2010 yy)

    person counted already in 2000 can only drop due death.. so as far as old folks are concerned there can be only downward revisions, not upwards..

    TRUE REASON IS : BLS DELIBERATELY held off size of civilian population to make unemployment rate lower..

  17. Frilton Miedman says:

    I don’t think Santelli is a “very bad person”.

    He’s an idiot who usually cites the most obvious, easiest to grasp concept that angrily/fearfully grabs the attention of viewers, then ignores the minutia that’s not as entertaining.

    There’s journalism, then there’s supermarket tabloid journalism…I half expect to tune in one morning and hear Santelli report that Keynesian Liberal space aliens have landed and taken over the stock market.

    Regardless how many times Steve Leisman has corrected him after the fact, he eagerly persists in angry Chicago style Austrian mumbo-jumbo with little regard to the details that don’t suit his whinefest…when proven wrong he just moves along to the next whinefest.

  18. Scott in Gibsons says:

    Hello Barry and fellow readers. This is the first blog of yours I’ve read since about ’09. I gained a lot of respect for you after you showed poise and rational behaviour by not becoming too bearish in the depths of the ’08 crash. I’m a little perplexed by the bad blood between you and Santelli and ZH. I respect Santelli for bringing the emotion of disgust to the MSM coverage of the financial crimes. I respect ZH for their irreverent views on the supposed Masters of the Universe and their political servants and military expoits. I’d say that, in the overall balance of things, Santelli and ZH are more on our side than on the side of the bad guys.


    BR: Santelli has allowed his politics to corrupt his economics — his worth to me as an investor (other than a contrary indicator) is approaching zero,

    ZH I like, despite their relentless negativity during the greatest rally in 30 years. However, I still find their CDO and HFT analysis outstanding — its just getting harder to separate the useful research from the lunatic fringe

  19. hangemhi says:

    @ alex west – they got 10 years older so it isn’t counting the same people

  20. Greg0658 says:

    alex west there is the fact of immigration – legal or not – that changes the count .. and maybe there is an angle

    onT overall – the show is the show – the world goes round – ground hog day is a story for a story

    I’m happy geek is coming back in vogue as seen on Charlie Rose and Bill Moyers tonight
    as we enter SuperBowl weekend with Cirque Du Soleil staging silver lining

    ps – Henry Kissinger – self esteem of Russia – good one

  21. SilverOz says:

    @GJR and alex west

    The answer is easy. If you read the actual jobs report, you will see a convenient table that shows what the Dec 2011 to January 2012 change would have been without the census adjustments. It really was nice of them to make it so easy for people who wanted actual data instead of just things to further their world views. The month-month change in “not in the labor force” was a whopping -75k without the census update.

    As for why most new people fell in the old group, a logical take would be that the BLS underestimated this group, likely by overestimating the death rate among the 55+ crowd. I could be wrong with that speculation, but it makes a lot of intuitive sense (and gets us to the answer).

  22. markwax says:

    I could care less about your opinions of Santelli or Zero Hedge. Everyone should only care about the data and how to get access to the unvarnished information. One can then form an “opinion” should it be warranted. As it were, Caroline Baum alerted me to the anomaly earlier in the day. She is the real deal. We don’t “agree” on many things. But, she ( and I) respect the facts. For the record, Mr. Liesman also chooses to ignore certain factors, but I don’t call him a “cheerleader” in a derogatory way. He has an “opinion” too.

    Here is another way to look at the data with all that said:
    It appears the surge in people not in the labor force is not the only outlier in today’s data. For the other one we go to the Household Data Survey (Table 9), and specifically the breakdown between Full Time and Part Time Workers (defined as those “who usually work less than 35 hours per week”). We won’t spend too much time on it, as it is self-explanatory. In January, the number of Part Time workers rose by 699K, the most ever, from 27,040K to 27,739K, the third highest number in the history of this series. How about Full time jobs? They went from 113,765 to 113,845. An 80K increase. So the epic January number of 141.6 million employed, which rose by 847K at the headline level: only about 10 % of that was full time jobs: surely an indicator of the resurgent US economy… in which employers can’t even afford to give their workers full time employee benefits.

    The above from Financial Armageddon. I for one are not in the “robust recovery” camp.

  23. Snowball says:

    Mr. Ritholtz, your article is ridiculous. It was written in the moment of emotion. Look at your headline. The facts in your article go on to disprove your own headline. There was a drop of labor force participation. You cannot get around
    that. Whether one believes it occurred due to a population aging shift or participation in welfare programs, or unemployment benefits, it does not matter, because the fact is that THERE WAS A DROP in labor force participation which directly coincides with the “improvement” in jobs. Moreover, all these projections and models of the BLS are nothing but fluff and conjecture, anyway, not based on real information.


    BR: Who could argue with such a finely crafted argument? Your obviously fine grasp of data analysis and statistics is not to be trifled with — I doff my cap to your vastly superior intellect and acuity!

    Oh, except for this:

    No soup for you ! Come back 1 year

  24. billporsche says:

    Well Mr. Ritholtz, that was a very good explanation and I agree with you that both Zero Hedge and Mr.Santelli are growling Bears. However, today people are staying in the workforce longer than ever before . Younger people have been virtually locked out of this market. I have watched the Jobs numbers every week and if you believe that these numbers are not being played with for political purpose or you believe the unemployment rate in this country is actually 8.3%; There is a beautiful bridge in San Francisco that you I am sure you would be interested in.

  25. jaymaster says:

    Some non-Obama fans spelling it out. I think you can trust their take on it.

  26. Frilton Miedman says:


    The entire premise of this blog was for Barry to point out the insinuative language used by ZH and Santelli asserting that over 1 million people were suddenly blotted out of the labor force in a single month.

    I don’t think anyone here is making an argument against the possibility that the BLS, Fed and numerous others botch numbers to suit agenda, but pointing to the fact that we should at least hear honest, unbiased reporting on it.

    Despite ZH’s absolutely eye-opening revelations on economic anomaly and errant market data (especially their work on HFT’s) over the last few years that most people wouldn’t think to scrutinize, they lose credibility when, even on occasion, they take it upon themselves to do exactly what they’re accusing government of.

  27. [...] from December to January in those “not in the labor force” was only -75,000. I wrote a post on this yesterday to correct both Zero Hedge and Rick Santelli, who made the same reading [...]

  28. number cruncher says:

    “The vast majority of the population change, however, is due to the change in base population from Census 2000 to Census 2010.”

    Okay.. lets just go on the raw data then and not worry about the uncertainty in estimates of the base population and the revision from 2000 to 2010 (which has probably an error of at least 0.5-1% anyway in the estimates, which means that the drop by 0.2% is meaningless and within the noise of the survey data, but we won’t even go into that)

    unemployment increased by 849000 people.

    Even if we used the revised population number the ratio of employed to total population has decreased. This is not good and such a ratio should be noted as it avoids statistical manipulation via spurious seasonal averaging and extrapolation methods between 2000 and 2010. The real unemployment rate has increased unless there were an abnormal amount of deaths, retirees or births in the last month.

    You also forget that the other attributable reasons for the change are:

    “adjustments for net international migration, updated vital statistics and other information, and some methodological changes in the estimation process”

    basically meaning they can make this swing anyway they want a few points and still justify the swing to sound statistical methods used. There’s lying, then there’s really lying an then there’s statistics…

    I am sorry but there is no doubt that the BLS is achieving a political modus here which is illustrate the unemployment rate trending to below 8% (which is Obama pledge), and I am an Obama supporter saying this.

  29. number cruncher says:

    Hilarious I just saw the article on seasonal adjustment.

    Statistics 101 please for the author?


    BR: Wait — you want to ignore the census, use the NON seasonally adjusted numbers in January — following Christmas?

    When your mom was pregnant with you, was she a heavy drinker — or were dropped on your head?

  30. todgor says:

    Here’s your rebuttal,

    You goofed.


    BR: Thats not a rebuttal, that was from Friday. Denninger is wrong.

    Here is today’s update —