WSJ: Overstated Job Market Strength?
We have long stated that the official BLS data was a rather artificially optimistic assessment of the actual employment picture. Our thesis, supported by many confirming 3rd party data, points to a bifurcated recovery since the 2001 recession.
Indeed, by nearly every measure, this post-recession jobs recovery is the worst in the post-War period. We have also noted the various issues with the unemployment rate -- exhaustees, decreasing labor pool/not-in-labor-force (NILF!), the augmented unemployment rate. The BLS Household survey even considers you "gainfully employed," regardless of whether “Worked without pay.” (I guess those gains are spiritual)
Then, there is the other "missing factor" in NFP data -- the Birth Death adjustment. As we recently observed, a whopping 317k B/D adjustment was in the April NFP report -- the single largest "adjustment" on record for any single given month (despite that giant add, April's NFP as merely 88k).
Even more astonishing, the B/D adjustment has become very significant to the BLS Non Farm Payroll total numbers. As we noted earlier in the month, in 2006, of the 2.26 million new jobs that BLS reports as being created, 964,000 -- nearly half (42.6%) -- were due Birth/Death adjustments.
Now, it seems that the idea of the official data being incorrect by a large margin is gaining traction. A WSJ article today notes the growing disbelief over the official data:
"As the nation's economic growth has slowed over the past year, the labor market has remained robust, and the jobless rate is hovering near a six-year low. But some economists believe the true employment picture may be less rosy, amid new signs official data may have overstated job growth.
Those signs are particularly stark in the home-building industry, which has been hurt by the slump in the housing market. Housing starts in April fell 33% from their recent peak in January 2006. Yet, the number of residential-construction jobs has dropped by only about 3% over the same period.
Economists cite several possible explanations for the disparity. One is that layoffs have lagged behind the housing slump and will weaken further. In addition, some economists say the monthly figures from the Labor Department's Bureau of Labor Statistics may be overestimating employment, perhaps by misclassifying construction workers or by failing to count large numbers of laid-off illegal immigrants.
What other measures might be providing a more accurate count of actual employment? How about state unemployment insurance records, which should capture most of the legally employed workers in the U.S. That paints a very different picture than the BLS data:
"A lesser-known employment snapshot, based on a quarterly census of state unemployment insurance records, shows the economy created about 19,000 private-sector jobs in the third quarter of 2006, the most recent data available. That contrasts with the 500,000 indicated in the monthly figures for that period. It also shows the number of construction jobs dropped by 77,000, in contrast with the increase of 19,000 jobs shown in the monthly surveys."
The bottom line remains that this jobs recovery has been on the low end of historical pattens, and remains far below average. Not that you would really know that if you listened to the official
bull$@#t data releases . . . .
Job Market's Strength May Have Been Overstated
WSJ, May 24, 2007; Page A2
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The BLS should start an off-the-books/underground market employment category. Anecdoteally, it seems that more people (whether ebay-ers, contractors, illegal immigrants) are working far away from the purview of the IRS/govern't stats.
Posted by: johntron | May 24, 2007 7:58:33 AM
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