Saturday, November 3, 2007
Sooner or later, the Government will run out of ways to spin negative facts into positive ones.
According to the household survey, there was no growth in jobs last month. "The labor force contracted by 211,000, total household employment fell by 250,000, and employment adjusted to match the payroll concept was off by 55,000. The year-to-year gain in adjusted household employment is 0.7%, compared to 1.2% for the establishment survey, a gap of 0.5 point; just six months ago, the household measure was 0.6 point ahead of the payroll number." (The Liscio Report)
Let's put aside the fact that 166,000 jobs is not enough to keep up with growth in the population, and certainly well below the average for the past four years. Let's look at how the establishment survey found 166,000 jobs when the household survey says we lost 211,000. To do that we need to go to the birth-death ratio.
In October, the BLS added 103,000 jobs as an estimate of the BD ratio. They added 14,000 jobs in the construction industry. Does anyone really think that we saw an increase in construction jobs last month? Supposedly we saw an increase of 25,000 jobs in the financial industry. The reality is that financial jobs, especially in the mortgage industry, are being shed left and right.
The BD ratio estimate is based upon past history. While estimating the most recent month's employment picture is quite difficult, you can do a fairly accurate job when you go back a few years, using other government data, tax information, etc. And so you can create a trend for how many jobs you miss due to the birth and death of jobs in the small business area. Now, remember, that number is an average of many years of history.
But there is one flaw in this methodology: it will tend to underestimate new jobs when the economy is recovering from recession and overestimate them when the economy is slowing down. Thus, in 2003-4, the Democrats were beating up Bush about the jobless recovery. As it turns out, those employment numbers were massively revised upward a few years later. There was in fact a powerful recovery going on, just not in the statistics. However, nobody but a few economic geeks paid attention, as it was last year's news. - From My 2nd most favorite Texan - John Mauldin