It’s Raining Jobs!

Wednesday, November 15, 2006 | 06:44 AM

On the Contrary:  I am a big fan of contrary analysis, looking for where the masses and the media are exactly wrong about a major issue. This is not easy to do, as it requires a level of objectivity, and the ability to pull yourself out of the society you are a part of, looking at things with a fresh eye. To do this well, you need what I call a "Martian's point of view."

However, there are often attempts to be contrary where that detached objectivity is lacking. Even worse, the pseudo contrarian may get certain facts or analytical approaches wrong. We can see this happening when an accepted meme starts to fall into disrepute. Rather than a true contrary approach, it can operate as an attempt to rescue a false and dying belief.

Such is the case in a botched Sunday New York Times article, A Boom in Jobs, and Fear. I do not know the writer, so I cannot attest to his motivations and biases. But the piece is such a smarmy, purposefully misleading column, that I find myself wondering about whatever happened to the editors and fact checkers at the New York Times. Perhaps they were lost in a recent round of budget cuts.

Let's have a look at the column, and see where it went wrong:

"Here at home, meanwhile, it’s raining jobs — an estimated 5.8 million new ones in just five years, according to a recent Labor Department report. The government’s household employment survey showed a gain of 437,000 jobs in October alone. Unemployment that month fell to just 4.4 percent, a 5½-year low. Jobs are so abundant that investors are worried that the Federal Reserve may delay making interest rate cuts, lest inflation revive. The concern is that all these new jobs may lead employers to bid up wages, heaven forbid."

Its rare to find a paragraph with that combination of intellectual dishonesty, misleading data, and what can only be described as knowingly false statements. Because its BSD (bull shit density) is so high, we need to take it apart sentence by sentence.

"Here at home, meanwhile, it’s raining jobs — an estimated 5.8 million new ones in just five years, according to a recent Labor Department report."

The number in that is factually accurate -- but the description -- raining jobs -- is hardly so. Private sector job creation in the present recession-recovery cycle is amongst the weakest recovery since World War II. In a nation of 300 million people, with a work force of 145 million, creating less than 1.2 million jobs per year for 5 years barely amounts to a drizzle. In simple math terms, job growth has been about 0.8% gains per year over that 5 year period.

Let's continue:

"The government’s household employment survey showed a gain of 437,000 jobs in October alone."

The Household Survey has become the last refuge of economic scoundrels. Whenever anyone trots out Household Employment Survey as proof of job creation, it is an admission that they are clueless hack, or a charlatan. This has been so clearly resolved that it tortures the imagination to understand WTF this is doing in the NYTimes. For posterity, I will repeat this for the umpteenth time: the Household survey IS NOT A SUPERIOR MEASURE OF JOB CREATION to the establishment survey. However, it is a reliable source of confusing data to the layperson that it can be cherry-picked by the disingenous. 

What it measures is UNemployment. No less an authority than the BLS, Alan Greenspan  and the Federal Reserve have said that the Household Survey is not a good measure of job creation. It was never designed to measure new job creation. For more information on this, see  BLS on Payroll vs. Household Survey, Redux: Household versus Establishment Surveys and this  Household versus Establishment Surveys, part 42.

Let's address another slice-o-nonsense in the column -- the issue rising wages. The grim reality is that Median incomes for households with people of working age fell for the fifth year in a row in 2005, and that's likely to be the case in 2006 also. Adjusted for inflation, the typical American household is bringing in about $3,000 less this year -- even with the late year drop in energy prices. Real (as opposed to nominal) income is actually negative for this group.

Compare this with how well the top income percentiles are doing, and you can see why taking average income data provides a very different picture than median income data: Newsweek reported that "In 2004, the wealthiest 1 percent of households (with incomes higher than $315,000) copped 53 percent of all the year's income gains."

While it may be technically accurate to say that total income increased, it is inaccurate to imply that it was a benefit to most families.

Since the column brings up October's jobs, lets take a closer look at them. As we noted on Saturday (Barron's: Bushwhacked), the actual mix of jobs -- private and public sector, high paying and low -- was rather poor. Here are some specifics from the 92,000 new hires in October's NFP data:

• 39,000, or 42% of the total gain,was local governments, mostly back-to-school hires.

• 27,000 of the additions were in bars and restaurants

• 23,000 were in entry level health care.

• Manufacturing shed 39,000 jobs in October and construction employment declined 26,000, weighed down by a hefty 31,000 shrinkage in payrolls connected to residential construction. The drop in homebuilding employment was conspicuous among the workers who finish houses, likely a preview of things to come.

The point of these numerical details is that the bulk of jobs being added are not big payers, while the bulk of those outsourced jobs being lost are. So even after we get past the fact that total number of new jobs has been relatively poor on a historical basis, the QUALITY OF THE JOBS added is even worse.


One last thing: I'm in favor of free trade and outsourcing. And so is most of America, judging by their spending habits. I've outsourced lots of software programming and tech support work overseas. A project I am presently in the midst of is being done exclusively in India, for about 8 cents on the dollar as to what it would have cost here.

I just do not feel compelled to misrepresent the facts about it . . .


On the Contrary: A Boom in Jobs, and Fear
November 12, 2006

The Economic Perception Gap
Jane Bryant Quinn
Newsweek, Nov. 20, 2006

Wednesday, November 15, 2006 | 06:44 AM | Permalink | Comments (16) | TrackBack (0) add to | digg digg this! | technorati add to technorati | email email this post



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It's great to hear that you're outsourcing software development. Imagine how much better off we'd all be if Bloomberg did the same.

Posted by: mentalmodel | Nov 15, 2006 7:11:48 AM

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