Episode 392: Keeping The Biggest Secret In The U.S. Economy : Planet Money How the federal agency that compiles the monthly jobs report makes sure it doesn't leak.

Episode 392: Keeping The Biggest Secret In The U.S. Economy

  • Download
  • <iframe src="https://www.npr.org/player/embed/158090937/158111172" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript


There is a number. Only a handful of people know the number, but millions of people want to know it because if they know it, they can make a lot of money. How do you keep that number secret?


You put locks on the doors of your office. You install a safe. You swear everyone who knows that number to secrecy. Don't talk about the number. Don't tell your husband, your wife, your kids - nobody. But what do you do about the trash? Do you let the trash collectors in?


WALK THE MOON: (Singing) What do you know? This house is falling apart. What can I say? This house is falling apart. We've got no money, but we got heart. We're going to rattle this ghost town. This house is falling apart.

KESTENBAUM: Hello, and welcome to PLANET MONEY. I'm David Kestenbaum.

KENNEY: And I'm Caitlin Kenney. Today is Friday, August 3. On the show today, the story of that number and the lengths that people will go to protect it.

KESTENBAUM: The number is the indicator of all indicators - actually, numbers. We're talking about the jobs numbers here. How many jobs did our economy add or lose? What is the unemployment rate? These numbers are out today. They come out every month, usually on the first Friday of the month. And everyone is watching - people who just want to know is, our economy getting better, people wondering, will I be able to find a job? And of course, it's not overstating the case to say that most of the financial world stops and looks when these numbers come out.

KENNEY: One of the people watching is Robert Pavlik. He's chief market strategist at Banyan Partners, an investment firm here in New York. You got to have at least a million dollars to invest with them. He showed me the computer screen he stares at while he's waiting for the numbers to come out.

ROBERT PAVLIK: On a negative report, the numbers are all red.

KENNEY: So when you say all red, that means they're down, right?

PAVLIK: Down, yeah. Red is bad. Green is good.

KENNEY: When the numbers come out, the markets go crazy. He says the jobs report is huge in his world.

PAVLIK: That news is the news of really the month because without jobs, we don't have jack. We don't have growth in the economy. We don't have retail spending. We don't have home buying. We don't have folks looking for jobs. And, of course, you know, we're seeing sort of all that played out right now in the overall economy.

KENNEY: If you knew this number in advance, it would be easy to make a lot of money. Good jobs numbers mean the economy might be getting stronger. The stock market might go up. So you could just buy some stocks. And if the numbers are bad...

MICHAEL SHEA: Look; if the market's going to go down 2 percent in 10 seconds and you sell before everybody else does, then you've just made a lot of money.

KENNEY: Mike Shea works on Wall Street for Direct Access Partners. His company trades for big pension funds and hedge funds.

How much money could you make?

SHEA: Well, I guess it would depend on how much money that you could put to work. If you had millions or billions, I suppose you could make millions or billions.

KESTENBAUM: Now imagine what would happen if these numbers somehow leaked out. Actually, you don't have to imagine because it happened. It happened to this guy.

RAYMOND STONE: Well, I was in my office. It was, oh, maybe 8 o'clock in the morning.

KESTENBAUM: This is Ray Stone. He's an economist at Stone & McCarthy Research Associates. And back in November of 1998, it was a Thursday, the day before the job numbers were due out. Ray was being nerdy. He was poking around at the Bureau of Labor Statistics website, and he stumbled on this thing he hadn't seen before.

STONE: There was just the tab saying analytical tables, and it had a little new button next to it. And I clicked on that and up came a page that had October payrolls.

KESTENBAUM: And did you think, that's weird; the October payroll numbers aren't out yet?

STONE: Yes. Now, (laughter) I was thinking, what do I do with this?

KESTENBAUM: Ray's first thought was not actually I'm going to make a billion dollars. He's an economist and a forecaster. And he said the actual thought that was running through his head at that moment was, hey, if that number is right, if that's really the jobs number, then, shoot, I got my forecast wrong. Maybe I should change my prediction so I look really smart. Then he talks to a colleague who says, you should tell people what you found.

KENNEY: I got to say, the BLS is so lucky that this is the guy who found the numbers. Out of this sense of economic duty, he decided to call the Bureau of Labor Statistics and let them know, hey, do you know this number's out on your website? And you know how in spy movies when someone's trying to get through to the FBI or the CIA to report a plot against the president, and they keep getting put on hold, and they just can't get through? Yeah, that same thing happened to Ray.

STONE: I asked for a fellow I knew at the time. And sadly, he was in a meeting. And I asked for his assistant. And he, too, was in a meeting. And I explained to the woman I had on the phone that this was a very important call. And I pressed the woman. I said I have to talk to somebody. This is important.

And she transferred me to a fellow. And I said to him that I think I found the payroll numbers. And the impression he gave me is, come on, that's - you couldn't have. And I said, well, click here, click here, click here and up came the page that I was looking at. And it was, as if it came loud and clear through the phone, oh, no, this couldn't be.

KESTENBAUM: Ray tells the guy, look; I have to let our readers know about this. I mean, some big hedge fund might have already found this out already. The people who pay us for research - we have to let them know. Ray says to the guy, I'm going to give you, like, five minutes, and then I'm going to let the world know.

KENNEY: So he waits, and he waits. He waits a little longer than he promised just in case the head of the BLS wanted to call him and try to convince him not to do it. But he didn't get any calls, so he put the numbers up on his website.

STONE: And it went out over our site. It went out over the Bloomberg network. And the phone started ringing immediately.

KESTENBAUM: This was a huge day for Ray Stone. He was on three television networks. The Bureau of Labor Statistics ended up releasing the jobs numbers at noon that day, a full day earlier than planned.

KENNEY: The inspector general looked into the incident and published an 81-page report full of recommendations for how to prevent this kind of thing from happening again.

KESTENBAUM: All right, with that story as backdrop, Caitlin, you went down to the Bureau of Labor Statistics to see how they do it today.

KENNEY: Yes, I did. But I have to tell you, just getting into their building was really hard. I called up the BLS press officer, Gary Steinberg, and I said, hey, I want to come see how you guys do your thing. When can I come? And he said, well, you can't come this week because we have a release. You can't come the last two weeks of the month because we're on lockdown. And then...

KESTENBAUM: On lockdown?

KENNEY: Yeah, on lockdown. When the BLS is collecting and analyzing what they consider to be economically sensitive data, they go into what's called lockdown. And that means they don't allow any visitors in their building. So basically, I was talking to Gary, and he said there was just one week during the month that I could come in. So that's when I went. But even once I got inside, there was still a lot that was off-limits. Like, I met Megan Barker. She's an economist at the BLS. Here's what happened when I asked to see her office.

So can we see where you work?

MEGAN BARKER: I can't let someone who doesn't have the right clearance in.

KENNEY: What if I didn't have the microphone - could I go in?


KENNEY: And it wasn't just me who couldn't go in. Her co-worker, Karen Kosanovich, another economist here at the BLS - it was a no-go for her, too.

KAREN KOSANOVICH: I'm not allowed in Megan's office suite at this moment.

BARKER: Even with 1,500 people in here, not everyone has access to our suite. And even people within our suite don't have access to certain parts of our suite. So that's just the first level of defense.

KENNEY: Did you catch that? The first level of defense. The ladies explained to me that Megan's office suite is under lockdown. Unless you have related work inside, there's no getting in.

KESTENBAUM: Wait. But suppose I dress up as, like, a trash collector. I'm like, hi, sorry, need to come in, just need to get the trash.

KENNEY: Yeah, they're already prepared for that. Karen told me they don't let the trash collectors in.

KOSANOVICH: There is a giant trash can at the door to each of our offices. And everyone seems to be fascinated by the fact that economists do have to take out their own trash for at least one week a month.

KESTENBAUM: What if I say I'm the IT guy? That's what happens in the movies. Like, I got to fix your printer, toner, cartridge.

KENNEY: Nope, not happening. If you have computer problems, they have to fix them themselves.

KESTENBAUM: All right, so you couldn't get into the room. Can you describe, at least, what's happening in the room?

KENNEY: Right. So in this top-secret room, it's basically a bunch of economists with computers and spreadsheets. They've got data from thousands of businesses and people around the country. They talk to about 60,000 households and about 140,000 businesses and government agencies.

KESTENBAUM: Oh, yeah, I forgot. The government's obviously a big employer. Does the Bureau of Labor Statistics ever call up itself, the Bureau of Labor Statistics, and say, hey, how many people do we have working here?

KENNEY: You know, I asked and, again, it was pretty secretive.

Is the BLS in it? I mean, are you part of the data?

BARKER: Can I say that?

GARY STEINBERG: Right. Yeah, we wouldn't be able to comment.

KOSANOVICH: We're eligible to be included in the survey like all other businesses and government organizations. But who is and who isn't in the survey is not something we can comment on.

KENNEY: That was BLS press officer Gary Steinberg and the other economist, Karen, jumping in to tell Megan that, no, she couldn't tell me.

KESTENBAUM: So they calculate these numbers, right? They know them before the rest of the world. How early do they know these numbers?

KENNEY: So Megan Barker works on calculating the number of jobs gained or lost in the previous month. And she knows this number on Tuesday.

KESTENBAUM: That's three days before the rest of the world knows, right? She has this secret.

KENNEY: Yeah. And basically, she just has to be super careful because she knows the real number, but...

KESTENBAUM: Now she's dangerous, right?

KENNEY: Right. She can't hint at it. She has to be careful she doesn't let it show somehow.

BARKER: We keep it very secret. I know my parents ask me every Tuesday, so what do you think? I'm like, well, what do you think? So, I mean, I even have to be secretive with my parents.

KESTENBAUM: First rule of working at the Bureau of Labor Statistics - don't talk about the Bureau of Labor Statistics.

KENNEY: At least not until 8:30 on Friday.

KESTENBAUM: So take me to the day of the release, right? It's Friday morning. The sun rises over Washington, D.C. Journalists arrive at the Labor Department building. And this is a particularly delicate moment because before the rest of the world gets the numbers, the Bureau of Labor Statistics shares them with, like, the most dangerous, worst people you could share the number with - journalists - right? - because journalists, their job is to be first, to blab about what they learned as soon as they can to the world.

KENNEY: Yeah, people like us. And there's very strict rules for journalists who want to learn the number early. When the journalists arrive at the Department of Labor, there are these lockers they have to put all their personal belongings in - their cellphones, their laptops. All that kind of stuff gets locked up. And then they have to sign this form saying that they promise not to speak a word about the report till 8:30.

And then at exactly 8 a.m., they get led into this separate room. And that's where the report with the numbers in it actually gets handed to them. The BLS also has economists on hand to answer their questions, and they start frantically writing.

KESTENBAUM: All right, so the moment is approaching. We have minutes to go now. What happens?

KENNEY: What happens next - 8:28, there's three TV networks who get to go in the lockup. And their reporters get led outside by a Department of Labor employee to this special outdoor platform where they're given a code word.

KESTENBAUM: Why do they need a code word?

KENNEY: Well, they need a code word or a phrase - they've used happy birthday before - to test out their microphones.

KESTENBAUM: Oh. Is the worry that the reporters might somehow signal using their little mic check, mic check - whatever they're going to say - to signal what the jobs numbers are?

KENNEY: Yeah. That's exactly what they're afraid of. Jennifer Kaplan works at the Labor Department. She's one of the people who sometimes comes up with the code word. Here's what she's afraid of a journalist doing.

JENNIFER KAPLAN: I might have a code word with my friend. I could say that word. And my friend could be standing on a nearby balcony and be listening for that code word that means up or down, for example, and run off and, you know, make money off the numbers. So that's the reason the code words are used and that they're changed.

KENNEY: That seems like a really remote possibility to me, though.

KAPLAN: It may be. It may be. But when you're dealing with something as simple as numbers that have the potential to make people a lot of money, particularly if they have those numbers early, there's always the possibility that something like that could happen. And so we really do plan for any possibility.

KESTENBAUM: Caitlin, I have to say, even my limited brain can think of some pretty easy ways around that. Like, you could say happy birthday. Or you could say happy birthday.

KENNEY: Yeah. But, you know, the reporters, they really don't want to lose this early access. And so they follow these rules to a T, even if it means a couple of seconds of dead air.


UNIDENTIFIED REPORTER: CNBC's Hampton Pearson joins us now from the Labor Department with the numbers. Mr. Hampton.

UNIDENTIFIED MAN: Four, three, two, one, transmit.

HAMPTON PEARSON: Up 200,000, December nonfarm payrolls...

KENNEY: That was CNBC's Hampton Pearson covering December's release. And that was a Labor Department employee you heard in the background. He was literally counting down the seconds until Hampton Pearson was allowed to speak.

KESTENBAUM: We go now to our very own Jacob Goldstein standing by with the numbers. Jacob.


KENNEY: Five, four, three, two, one, transmit.

GOLDSTEIN: Down 1.2 million. The U.S. economy lost 1.2 million jobs in the month of July, according to the big jobs...

KESTENBAUM: Wait, wait, wait, wait, wait, wait, wait. That is a completely different number than everyone else is reporting. Everyone else is reporting that the economy gained 163,000 jobs, didn't lose one-point-whatever million. Are you trying to scare the markets?

GOLDSTEIN: No. So I am actually playing games here, but I'm playing a game for a reason. I have the report in front of me. And, in fact, according to the government, according to the Bureau of Labor Statistics, which puts out the jobs report, the U.S. economy actually did lose 1.2 million jobs in July. In June, there was 134 million, and in July, it was just under 133 million. The number of jobs in this country went down.

The trick is, the game here is what I'm reading are the not seasonally adjusted numbers. So this is just basically, well, how many jobs are there? And what this report is telling us is there were actually fewer jobs in July than in June. But, of course, this is not seasonally adjusted. And what we always hear, the numbers we report, the numbers everybody reports - those are the seasonally adjusted jobs number.

KESTENBAUM: And this is one of the things that those economists are doing in that locked secret room, is they are correcting these numbers because the raw numbers, the raw jobs numbers, they go up and down throughout the year. Like around, you know, the holidays, the Christmas holidays, there's always a lot of hiring. It would be sort of confusing, you know, if every November the jobs numbers started to spike up, and you had to wonder, was that normal? Was it abnormal? So what they do is they try and correct for that.

GOLDSTEIN: And July is a particularly interesting month in this regard because every year, school districts all around the country, they have teachers retire and they have people who are just working during the school year. So you see this huge amount of job cuts, basically, from local public schools. And then, you know, they hire a lot of those people back in the fall. So there is this huge seasonal adjustment in July. And that's what we're seeing in these jobs numbers.

KESTENBAUM: So what actually happened this last month? The economy lost a bunch of jobs, but not quite as many as they expected, which is seen as slightly good news.

GOLDSTEIN: Right. And I think there is a sort of broader takeaway from this, and that is we pay all this attention to this one number. You know, the traders like the guy at the top of the show are sitting there waiting for this one number, which is 163,000, which is not even a real number, right? It's sort of this made-up number. And it's made up in good faith. It's like the best guess from a very good team doing, you know, really good work. But it's still a guess. And it's still not a real number.

And it's really important to keep that in mind with the jobs numbers because of seasonal adjustment and lots of other things. There's a lot of noise from one month to the next. And yeah, over time, the jobs report is really good. It really shows you the picture of what's happening. But for any one month, it's really important to take this number with a big grain of salt.


WALK THE MOON: (Singing) We got no money, but we got heart. We're going to rattle this ghost town. This house is falling apart.

KESTENBAUM: As always, we'd love to hear what you think of the show. You can send us email at planetmoney@npr.org.

KENNEY: You can also find us on Facebook, Twitter, Tumblr, Spotify. We're out there, people. Get in touch. I'm Caitlin Kenney.

KESTENBAUM: I'm David Kestenbaum. Thanks for listening.


WALK THE MOON: (Singing) Live my life without coming up for air. Now it's all a wash. I want everyone racing down the hill. I am faster than you. Wait for summertime.

Copyright © 2012 NPR. All rights reserved. Visit our website terms of use and permissions pages at www.npr.org for further information.

NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.