When You Fiddle Data Series, Fiddle All The Correlated Data Series

Remember the startling unemployment announcement from the Michigan Department of Management, Technology, and Budget (DTMB) last month?

• That Michigan’s February 2015 seasonally adjusted (SA) U-3 unemployment rate had dropped to 5.9% from January’s 6.3%?
• That the 5.9% February 2015 SA U-3 unemployment rate was down 1.9% from Michigan’s 7.8% February 2014 SA rate?
• That 88,000 more ‘seasonally adjusted’ Michiganders were working in February 2015 than one year earlier?
• That the not seasonally adjusted (NSA) 12 month increase in Michigan employment was even better at 101,000?

Well, there is a little problem with these goal-seeked, U.S. Bureau of Labor Statistics (BLS) X-13ARIMA-SEAT massaged unemployment statistics. They simply are not true.

The Michigan State Budget Office just released their monthly financial report for February 2015. Pages 8 (left) and 9 (below) show Michigan’s receipts from income tax withholding for the months of February 2015 and 2014. Income tax withholding from Michigan workers’ paychecks dropped 6% year on year (YoY) over the 12 month period. Throw in the quarterly and annual income tax withholding remittances made during the period by Michiganders with irregular income and the income taxes paid to the State of Michigan during February 2015 still dropped 5.3% from February 2014.

Don’t remember getting that long promised state income tax cut over the last year.  The U.S. Census says there are only 11,684 new exemptions in Michigan over the last year, and you can safely bet that most of those are WIC and TANF so they would not affect withholding tax remittances.  The EITC rate hasn’t changed, even if its 27% chiseling rate is on the rise.  So what’s going on here? Five possibilities:

• A whole bunch of well paid Michigan workers got pink slips over the 12 month period and were replaced in Michigan’s workforce by a yet larger number of minimum wage and part time workers.
• The 88,000 or 101,000 or more growth in Michigan’s employment count was made up of undocumented Democrats and others working exclusively for under the table cash payments. And their employers were willing to acknowledge them in the BLS Establishment Survey despite the illegal nature of their employment.  And the undocumented Democrats were willing to acknowledge their employment in the U.S. Census conducted Household Survey, thus putting all those government benefits they collect at risk.
• The BLS X-13ARIMA-SEAT jiggery-pokery performed upon DTMB’s employment numbers was entirely false.
• The U.S. Census inspired, “substantial” BLS revisions applied in the February 2015 DTMB unemployment reports were fraudlent. Remember there was a note at the top of page 2 in the DTMB February 2015 SA employment report about these revisions
• The Michigan Department of Treasury cannot collect or count income tax withholding remittances correctly.

We can pretty well dismiss the rotation of well paid workers into lower paid or part time jobs by looking at the SA ‘Hours and Earnings’ data at the bottom of the last page of the DTMB SA February 2015 unemployment report. Transportation workers’ earnings increased 0.5% over the 12 month period. Michigan per capita income income supposedly rose 1.2% over the 12 month period, so earnings of the broader population of Michigan workers presumably did even better.

The under the table payment scenario is absurd on its face.  Even with President Obama’s Executive Orders impending, people do not volunteer information on illegal employment practices to government surveyors.  The U.S. and Michigan governments are still deadly serious in their efforts to collect every tax payment required by law.  President Obama is still deporting tax cheats, if not many others.

The Michigan Department of Treasury has never been accused of having trouble collecting or accounting for the income tax withholding dollars remitted by employers and workers across the state.  Usually Treasury gets criticized for being far too enthusiastic in collecting taxes due.

So we have a complete disconnect here between Michigan’s total employment count and income tax dollars withheld over the same twelve month period.  The DTMB derived U-3 unemployment rates are also completely disconnected from the income tax remittance data.  Very politically convenient disconnects which make certain politicians’ management of our economy appear remarkably successful.

Michigan’s illnumerate journalists are regurgitating the DTMB issued U-3 unemployment rates without question.  Beware of journalists spouting statistics which make their political darlings look good. Even when journalists know the truth, they lie to stay in practice.

The inescapable conclusion here is that someone is lying with numbers. DTMB? BLS? Census?

You decide.

Post Script: Sadly, there is some doubt that the attribution of the featured quote to George Orwell is correct. But it is entirely consistent with his body of work and a brilliant observation, so it leads regardless of its provenance.