Lingering Questions About Last Week’s Jobs Report

“There are three kinds of lies: lies, damned lies, and statistics.”

–Benjamin Disraeli, as attributed to Mark Twain

The labor market looks strong but with some big asterisks next to it.

October 9, 2024 – We’re still scratching our heads over last week’s jobs report.

We saw unexpected growth. Generally, that’s good news.

But we’re skeptical of the government data. After all, in late August, the Bureau of Labor Statistics revised most of their numbers over the past year, causing over 818,000 jobs created since March to vanish without a trace.

Suddenly, jobs are on the rise again. The unemployment rate even ticked lower to 4.1%. There may have been a revision to the revision.

Either way, the market is now expecting interest rates to decline at a slower rate. 10-year Treasury Bonds roared back over 4% on Monday. The yield curve, which had un-inverted, re-inverted.

The markets don’t seem to mind yet. However, the whole report is suspiciously healthy. The jobs report indicates that the statistical lies are getting more outrageous.

Our first concern is with the truth, not the spin. We want to know what’s really going on. And the actual mystery relates to the surging number of government employee jobs.

To get answers, we turned to Andrew Zatlin. Andrew is an economist, analyst, and friend of Grey Swan, currently with SouthBay Research. He’s worked with several of our publishing endeavors over the years and is capable of picking up on trends well before they become obvious on Wall Street.

Our recent correspondence with Andrew regarding last week’s unusual jobs report is below. Andrew is the first to look at how the government may be on a hiring spree ahead of the election to help goose up the economy. Enjoy ~~ Addison

Lingering Questions About Last Week’s Jobs Report

Addison Wiggin & Andrew Zatlin, Grey Swan Investment Fraternity

Addison:

Hi Andrew, Maybe you can help me out with some of these numbers. Is unemployment going down? How does that jive with the jobs report?

We’ve got Record jobs -> record stock market close -> record government jobs, coincidence?

Andrew Zatlin:

First, two points:

Unemployment comes from a survey of homes
Payrolls come from a study of businesses

Unemployment showed an impossibly large (~800K) jump in government jobs. The jump made the denominator bigger (more people working), and the math meant a drop in the Unemployment rate. The reality is that, without this bullshit number, unemployment rose to 4.5%

You may not know this, but I was the first person to discover this.

Zerohedge even cited me for this on this point:

“Only not this time, because as noted earlier by Andrew Zatlin of Southbay Research, while historically the September adjusted number has been relatively tame, regardless of how large or small the unadjusted number was, this time something changed as the unadjusted number of government workers absolutely exploded by a record 1.322 million leading to a record September increase in adjusted government workers.

“It’s remarkable to see a one-month 3% jump in government jobs. Perhaps these are the hall monitors for the polling booths. Or perhaps these numbers are just wishful thinking. One thing is for certain: the Fed gets a hall pass next month when the ugly post-Hurricane numbers come out,” said Zatlin.

Curiously, it wasn’t just the Household survey that tracked an unprecedented increase in government workers: if one takes the Establishment survey unadjusted print (source Table B1 from the jobs report), one sees the same thing. Here, the number of not seasonally adjusted government workers soared by 918K (from 22.541 million to 23.459 million), while the number of not seasonally adjusted private sector workers plunged by 458K!”

Addison:

I’ve suspected and written as much since early ‘23 when trying to forecast rising consumer debt and interest on revolving debt trends. To me, they are a bigger problem than anyone in the financial media is giving credence to.

Thanks for hanging some meat on the bones.

How much of the headline numbers do you think is willful ignorance… spin… and incompetence?

Andrew:

It doesn’t matter.

October payrolls matter now because they come right before the next Fed rate cuts meeting.

And they will be strong, except for the hurricane impact. ~~ Addison Wiggin & Andrew Zatlin, Grey Swan Investment Fraternity

So it goes,

Addison Wiggin,
Grey Swan

P.S. Mr. Zatlin confirms a strategy I’ve long employed: it’s not my opinion of what the jobs report actually says; it’s only necessary to forecast how the market and the Fed interpret it.

Unfortunately, that leaves the door open for all kinds of misinformation and data manipulation. And dystopian social media narratives about how the government’s main objective is to destroy us and steal our wealth.

P.P.S. Hurricane Milton is nearing the West side of Florida. What a curious state. Doom of unknown proportions is arriving slowly. Without detail, other than barometric readings, wind speed and storm direction forecasts.

One quick way to determine how strong the storm will be is not from sophisticated weather modeling supercomputers, but from the restaurant industry – particularly the regional chain Waffle House.

The chain is now infamous for being one of the last places to stay open and the first to reopen after a storm.

As the Associated Press notes:

If a Waffle House stays open in town, even in a limited capacity, neighbors are reassured that the coming storm is unlikely to cause devastation. A closed location of the dependable diner chain has come to indicate impending disaster. The metric is known as the Waffle House Index.

What might sound like silly logic has become one of the most reliable ways for Southerners — and even federal officials — to gauge a storm’s severity and identify communities most in need of immediate aid.

On Tuesday, about two dozen Waffle House locations remained closed in the Carolinas and the chain’s home state of Georgia, nearly two weeks after the states were battered by Hurricane Helene. Several other locations were open but serving a limited menu.

There are more bizarre weather and economic indicators out there, but not many. The Waffle House Index is one worth watching for those facing wind and rain in the Sunshine State this week.

Thank you if you have also written in. Keep your ideas flowing here: addison@greyswanfraternity.com

“There are three kinds of lies: lies, damned lies, and statistics.”

–Benjamin Disraeli, as attributed to Mark Twain

The labor market looks strong but with some big asterisks next to it.

October 9, 2024 – We’re still scratching our heads over last week’s jobs report.

We saw unexpected growth. Generally, that’s good news.

Suddenly, jobs are on the rise again. The unemployment rate even ticked lower to 4.1%. There may have been a revision to the revision.

Either way, the market is now expecting interest rates to decline at a slower rate. 10-year Treasury Bonds roared back over 4% on Monday. The yield curve, which had un-inverted, re-inverted.

The markets don’t seem to mind yet. However, the whole report is suspiciously healthy. The jobs report indicates that the statistical lies are getting more outrageous.

Our first concern is with the truth, not the spin. We want to know what’s really going on. And the actual mystery relates to the surging number of government employee jobs.

Lingering Questions About Last Week’s Jobs Report

Addison Wiggin & Andrew Zatlin, Grey Swan Investment Fraternity

Addison:

Hi Andrew, Maybe you can help me out with some of these numbers. Is unemployment going down? How does that jive with the jobs report?

We’ve got Record jobs -> record stock market close -> record government jobs, coincidence?

Andrew Zatlin:

First, two points:

Unemployment comes from a survey of homes
Payrolls come from a study of businesses

You may not know this, but I was the first person to discover this.

Zerohedge even cited me for this on this point:

Addison:

Thanks for hanging some meat on the bones.

How much of the headline numbers do you think is willful ignorance… spin… and incompetence?

Andrew:

It doesn’t matter.

October payrolls matter now because they come right before the next Fed rate cuts meeting.

And they will be strong, except for the hurricane impact. ~~ Addison Wiggin & Andrew Zatlin, Grey Swan Investment Fraternity

So it goes,

Addison Wiggin,
Grey Swan

P.S. Mr. Zatlin confirms a strategy I’ve long employed: it’s not my opinion of what the jobs report actually says; it’s only necessary to forecast how the market and the Fed interpret it.

One quick way to determine how strong the storm will be is not from sophisticated weather modeling supercomputers, but from the restaurant industry – particularly the regional chain Waffle House.

The chain is now infamous for being one of the last places to stay open and the first to reopen after a storm.

As the Associated Press notes:

If a Waffle House stays open in town, even in a limited capacity, neighbors are reassured that the coming storm is unlikely to cause devastation. A closed location of the dependable diner chain has come to indicate impending disaster. The metric is known as the Waffle House Index.

What might sound like silly logic has become one of the most reliable ways for Southerners — and even federal officials — to gauge a storm’s severity and identify communities most in need of immediate aid.

On Tuesday, about two dozen Waffle House locations remained closed in the Carolinas and the chain’s home state of Georgia, nearly two weeks after the states were battered by Hurricane Helene. Several other locations were open but serving a limited menu.

There are more bizarre weather and economic indicators out there, but not many. The Waffle House Index is one worth watching for those facing wind and rain in the Sunshine State this week.

Thank you if you have also written in. Keep your ideas flowing here: addison@greyswanfraternity.com

A generation ago, a single income could support a family, buy a house and pay for a vehicle or two in the driveway.

Today, even two high earners are struggling to purchase a new home.

According to a recent report from Bankrate, a household earning $80,000 a year is now priced out of 75% of all new homes on the market. A family now needs to earn at least $113,000, and in some major metros, it’s closer to $200,000.

Meanwhile, the homeownership rate has slipped to a six-year low, with further declines expected next year. Families are being squeezed from every angle.

The point I want to make here is that the so-called affordability crisis isn’t just about the cost of homes or other assets. It’s about the cost of money.

In just the first two months of Fiscal Year 2026, the deficit already totals $458 billion — the second-largest start on record.

More troubling still, the net interest expense hit $179 billion, outrunning Medicare, defense, and healthcare. At this pace, interest will again be the fastest-growing line item in the federal budget.

At the absolute peak of the dot-com boom — routers stacked to the ceiling and PowerPoint masquerading as profits — Cisco’s market capitalization topped out at roughly 4.4% of U.S. GDP.

Nvidia today? Roughly 16% of U.S. GDP.

That’s not a rounding error.

Measured against the size of the economy, Nvidia is in a category Cisco never visited. Which means that any serious disappointment in the AI build-out would scale 2000–01 – geometrically.

America has consistently reinvented itself in times of crisis. The founders survived monarchy. Lincoln survived disunion. We’ve survived bank panics, oil shocks, stagflation, and disco. We’ll survive deplatforming, too.

The Second American Revolution won’t be fought with muskets or manifestos. It won’t be fought with petty violence and street demonstrations. It will be written into code. And available to those who wish to take advantage of it.

Russell Kirk called the first American Revolution “a revolution not made, but prevented.” The second will be the same. We’re not tearing down the house — we’re going to rewire it in code.

The result may not be utopia. But it will be freedom you can bank on.

A generation ago, a single income could support a family, buy a house and pay for a vehicle or two in the driveway.

Today, even two high earners are struggling to purchase a new home.

Meanwhile, the homeownership rate has slipped to a six-year low, with further declines expected next year. Families are being squeezed from every angle.

The point I want to make here is that the so-called affordability crisis isn’t just about the cost of homes or other assets. It’s about the cost of money.

In just the first two months of Fiscal Year 2026, the deficit already totals $458 billion — the second-largest start on record.

At the absolute peak of the dot-com boom — routers stacked to the ceiling and PowerPoint masquerading as profits — Cisco’s market capitalization topped out at roughly 4.4% of U.S. GDP.

Nvidia today? Roughly 16% of U.S. GDP.

That’s not a rounding error.

Measured against the size of the economy, Nvidia is in a category Cisco never visited. Which means that any serious disappointment in the AI build-out would scale 2000–01 – geometrically.

Russell Kirk called the first American Revolution “a revolution not made, but prevented.” The second will be the same. We’re not tearing down the house — we’re going to rewire it in code.

The result may not be utopia. But it will be freedom you can bank on.