RALEIGH — Since as early as January 2011, and perhaps before then, Gov. Bev Perdue’s press office has received access to confidential employment data from the U.S. Bureau of Labor Statistics hours if not days before its scheduled release, quite likely in violation of federal law. The governor’s staff used its early access to massage the monthly employment press release that reported jobs data to the public.

Documents and correspondence obtained by Carolina Journal show that the Division of Employment Security, formerly known as the Employment Security Commission, sent a draft of the press release each month to Perdue’s press office. The governor’s spokesmen typically rewrote the text and added a positive spin, even if the data did not support Perdue’s talking points.

The glowing quotes were attributed to Lynn Holmes, director of the employment agency, but the documents show the quotes were approved and probably written by a Perdue press aide, either Chrissy Pearson or Mark Johnson.

In several instances, DES spokesman Larry Parker cautioned Pearson or Johnson against using extraneous or unverifiable information in a release to boost Perdue’s image. At times, the Perdue communications team would push back, and the release would undergo several revisions before final publication.

While the operation may sound like a harmless effort to add political spin to the release of jobs data, sharing confidential BLS estimates while they are protected by an embargo violates a federal law barring the early release of employment data. This is no small matter: A conviction for breaching the Confidential Information Protection and Statistical Efficiency Act of 2002 carries a fine of up to $250,000, up to five years in prison, or both.

The data, including monthly estimates for current job totals, the labor force, and the unemployment rate, are produced by BLS with some minor assistance from the Labor Market Information Division of DES.

Read more here.

I illuminated in my report that U.S. Bureau of Labor Statistics has been under-counting unemployment by at least 2%. For a nation reporting 154.4 million workers; this means the 13.9 million reportedly unemployed should actually be 17 million. Given only 12.8 million were unemployed at the 1933 peak of the Great Depression, when the undercounting and the Fed’s stress test are added the total is 23.2 million unemployed; almost double the Great Depression.

Formerly bullish top bank analyst Dick Bove in an Bloomberg interview commented on the Fed:

“By taking these draconian views of what could happen in the market, if they in fact force the banks to defense themselves against the outlook that they’ve put up, they’ll cause a recession,”

Consistent with my prediction that the booming production of capital goods would fall hard next year after the expiration of the 100% “bonus depreciation” tax credit; the bad news parade picked up steam this week with reports that U.S. durable goods orders fell 0.7 percent last month and initial jobless claims came in higher than Wall Street analyst’s predictions.

On the always dismal European front, interest rates on German “Bund” Treasury Bonds exceeded the interest rates on U.S. Treasury bonds for the first time as traders feared the financial turmoil of Portugal, Italy, Greece, and Spain (aka the “PIGS”) is causing a financial contagion that may implode solvency of German banks. Peter Cecchini, head of investment strategy at Cantor Fitzgerald in New York reporting on effects of the European financial crisis for the rest of the world: “Evidence is slowly mounting that containment is a pipe dream,”

In the delightful Middle East, the Aircraft Carrier George H.W. Bush left its traditional theater of operations watching Iran and the Persian Gulf, and moved to the closest point to Syria in preparation for implementing a “no-fly-zone” by American, European, and Arab League forces. CBS also just reported: “The U.S. Embassy in Damascus urged its citizens in Syria to depart “immediately,” and Turkey’s foreign ministry urged Turkish citizens on pilgrimages to “return home from Saudi Arabia to avoid traveling through Syria.”

During the month of November the equity shares of the 31 banks the Fed directed to begin their stress test have now fallen 13%; with Goldman Sachs and Bank of America trading at their lowest prices since the lows of the Great Recession in March of 2009. If the economy heads for a sharp recession and unemployment leaps, there will be hell to pay for politicians in November’s election.

Feel free to forward this Op Ed and follow our Blog at www.chrissstreetandcompany.com

Thank you all the success of Chriss Street’s latest book: “The Third Way”; now available on www.amazon.com and available through Barnes & Nobel on November 28. If you would like to order a signed copy contact The Forum Press at: www.theforumpress.com

On today’s edition of Coffee and Markets, Brad Jackson and Ben Domenech are joined by Francis Cianfrocca to discuss the dismal unemployment figures for August, the possibility of QE 3 and the possibility of another financial crisis.

We’re brought to you as always by BigGovernment and Stephen Clouse and Associates. If you’d like to email us, you can do so at coffee[at]newledger.com. We hope you enjoy the show.

Related Links:

Economy Gains No Jobs in August, Rate Holds at 9.1%
BLS: The Employment Situation – August
Stocks Plunge 2% After Dismal Jobs Report
Ghosts of Lehman And a Budding Bank Crisis

Follow Brad on Twitter
Follow Ben on Twitter
Follow Francis on Twitter

The hosts and guests of Coffee and Markets speak only for ourselves, not any clients or employers.

On today’s edition of Coffee and Markets, Brad Jackson and Ben Domenech are joined by Francis Cianfrocca to discuss the worsening job market, the stagnant economy and the effect it may have on Obama’s reelection in 2012.

We’re brought to you as always by BigGovernment and Stephen Clouse and Associates. If you’d like to email us, you can do so at coffee[at]newledger.com. We hope you enjoy the show.

Related Links:

May 2011 Employment Statistics from U.S. Bureau of Labor Statistics
Paltry New Job Growth of 54,000 Sends Rate to 9.1%
‘Double-Dip’ in Housing Prices Even Worse Than Expected
US Manufacturing Growth Slowest Since Sept 2009
On the Maddeningly Inexact Relationship Between Unemployment and Re-Election
Boneheaded Stimulus Never Works

Follow Brad on Twitter
Follow Ben on Twitter
Follow Francis on Twitter

For 2010, the first full year in which the U.S. federal minimum wage was a constant value through the year since 2006, the U.S. Bureau of Labor Statistics estimates that an average of just 4,361,000 individuals in the United States earned the same equivalent of the current prevailing federal minimum wage of $7.25 or less throughout the year.

In terms of jobs lost, that means that 2,234,383 of the jobs lost in the U.S. economy since 2006 have been jobs that were directly impacted by the series of minimum wage increases that were mandated by the federal government in 2007, 2008 and 2009.

Interestingly, the average number of employed members of the civilian labor force in 2006 was 144,427,000. In 2010, the average number of employed members of the civilian labor force in the U.S. was 5,363,000 less, standing at 139,064,000.

So, in percentage terms of the change in total employment level from 2006 to 2010, jobs affected by the federal minimum wage hikes of 2007, 2008 and 2009 account for 41.8% of the total reduction in jobs seen since 2006.

Data Sources

U.S. Department of Labor. Bureau of Labor Statistics. Labor Force Statistics from the Current Population Survey. Characteristics of Minimum Wage Workers: 2010, Tables 1-10.

U.S. Department of Labor. Bureau of Labor Statistics. Labor Force Statistics from the Current Population Survey. Household Data, Historical, Table A-1. Employment status of the civilian noninstitutional population 16 years and over, 1976 to date.

Political Calculations. Estimating the Distribution of U.S. Hourly Wage Earners.

So the bad weather has distorted the numbers. The actual 36,000 increase in nonfarm payrolls and the 50,000 gain in private payrolls really don’t have a snowball’s chance at being accurate. The 1 million people in January who wanted a job but didn’t look for one because of “other” reasons hints again at the bad-weather distortion. So does the 4.9 million jump in the part-time workforce.

As for the 9 percent unemployment rate, it’s not likely to last as more people are recorded reentering the labor force in the months ahead. The household employment survey (on which the unemployment rate is based) increased 117,000 in January, following a near 300,000 gain in December.

On the plus side (if anything can be believed in these numbers), average hourly earnings increased by four-tenths of 1 percent — a much bigger gain than in recent months. Over the past year, wages are rising 1.9 percent.

But here’s a key point: Manufacturing jobs in January rose by nearly 50,000. That’s consistent with the blowout ISM manufacturing report for January published a few days ago. Manufacturing has been the biggest surprise in the recovery. Additionally, the ISM non-manufacturing services report was also gangbusters for January.

These reports are more accurate and more significant than today’s jobs calculation. And if you piece them together with record-breaking profits, which are the mother’s milk for stocks, business, and the whole economy, it’s hard not to conclude that the pace of recovery is actually picking up steam — despite the lackluster jobs performance.

The downside of the upside is mounting inflation pressure. Both ISM reports registered very strong prices paid. Those outsized price increases are picking up the huge commodity-price increases that Ben Bernanke continues to ignore.

Bond-market rates have moved up to 3.64 percent for the 10-year Treasury and 4.73 percent for the 30-year. Those rising yields are signaling inflationary growth. Along with soaring commodity prices, the abnormally steep Treasury yield curve is signaling the Fed to stop creating new dollars with its QE2 pump-priming.

Right now, stronger economic growth, higher profits, and rising inflation continue to help the stock market, which actually increased today after the weird jobs report. But the risk here is that reported inflation for the CPI may rise faster than anyone thinks. And that could take a bite out of stocks and the recovery.

THEN (April 4, 2010):
Administration officials say growing labor force is “a great sign”

Behind the high unemployment rate, “there’s just been a tremendous increase in the labor force,” Christina Romer, chairman of the president’s Council of Economic Advisers, said on NBC’s ‘Meet the Press.’  “Over the last three months, we’ve added more than a million people to the labor force. And that’s actually, that’s a great sign,” Romer added. “That’s a sign that people that might have been discouraged dropped out because of the terrible recession, have started to have some hope again and are looking for work again.”

NOW (February 4, 2011):
What will the Administration say now that the labor force is shrinking?

Facts reveal sharp declines in the labor force since the March 2010 data Romer described above, with especially steep drops in the last two months.  According to the Bureau of Labor Statistics, the labor force has shrunk by 709,000 since March 2010.  Given this reality, will the Administration now say this trend is a “not great sign” indicating people have “lost hope again”?

Doubtful.