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

The narrative for BTC and other cryptocurrencies is that every government around the world has high debt-to-GDP ratios. It means they are going to print more currency. It means there is a need for alternative currency. In the past, this alternative currency was gold.

Gold is not very portable. It’s a good store of value. It’s not as great of a store of value as BTC in terms of actually storing it. BTC, you can store it on a hard drive or at Coinbase. Gold, if you have bars you have to keep them in a bank or you have to dig a hole in your backyard. And you can’t send gold around the world as easily as you can send BTC.

I still think this rally has legs. If you go back to where the breakout happened, we were really in November of 2024 that was the beginning of this bull market in my mind because that was the first time we hit an all-time high in a couple years. Then we rallied. We pulled back. We tested that level again.

The uptrend, in my mind and with what I’m seeing, is still intact. We’re just in an oversold condition right now.

Nvidia’s $900 billion round-trip this week wasn’t about some revelation in Jensen Huang’s chip factory. The business is firing on all cylinders – and may yet be one more reason for the market to soar higher into 2026.

The culprit was the macro — one gust of wind from the labor market and trillions in valuation shifted like sand dunes.

Nvidia’s earnings lifted the market at the open, but the jobs report’s undertow snapped sentiment like a dry twig. As we pointed out this morning, the S&P notched its biggest intraday reversal since April.

The first half of the move was classic Wall Street choreography: blowout earnings, analysts breathless with adjectives, and every fund manager terrified of underweighting the patron saint of AI.

In April, following the “Liberation Day” low, the indexes took off in the morning only to crash later in the day. The first and only other time in history we have seen a strong bullish opening followed by a sharp bearish close was during the 2020 recovery from the Covid shock.

In both cases, the markets were rebounding from exogenous shocks.

That’s not where we are today. The index-level charts may look composed, but underneath plenty of individual stocks are trading as if they’ve already slipped into a private bear market of their own.

We’ll see how the day unfolds. It’s options-expiration Friday — the monthly opex ritual when traders roll positions forward, unwind old bets, and generally yank prices around like terriers with a chew toy.

Every major tech shift has followed a similar pattern. As information moves faster, the money follows.

The telegraph made news global and opened up a world of investment opportunities. Radio, and then television, ignited a new wave of prosperity for investors. And the internet made communication instant, creating fortunes for those who saw what was coming.

Now standards like x402 are doing the same for AI and digital payments, potentially putting Jamie Dimon’s empire in jeopardy.

If you have Coinbase building the payment rails, Circle handling settlement and projects like Worldcoin and Particle Network solving for identity and wallets — do you really need a bank to validate transactions and keep track of who owns what?

All of these companies are helping to build a new layer of fintech infrastructure. And they’re all working toward an economy that runs continuously, without the need for corporate scaffolding.

The uptrend, in my mind and with what I’m seeing, is still intact. We’re just in an oversold condition right now.

The culprit was the macro — one gust of wind from the labor market and trillions in valuation shifted like sand dunes.

The first half of the move was classic Wall Street choreography: blowout earnings, analysts breathless with adjectives, and every fund manager terrified of underweighting the patron saint of AI.

In both cases, the markets were rebounding from exogenous shocks.

Every major tech shift has followed a similar pattern. As information moves faster, the money follows.

Now standards like x402 are doing the same for AI and digital payments, potentially putting Jamie Dimon’s empire in jeopardy.

All of these companies are helping to build a new layer of fintech infrastructure. And they’re all working toward an economy that runs continuously, without the need for corporate scaffolding.