Thursday, 9 February 2012

Paul Craig Roberts: The January Jobs Are Statistical Artifacts

Last Friday the US Bureau of Labor Statistics reported that in the first month of this new year 243,000 jobs were created and the unemployment rate (U.3) fell to 8.3 percent. This good news is a mirage. It is due to faulty seasonal adjustments and to the BLS birth/death model. In a prolonged downturn, seasonal adjustments and the birth/death model produce nonexistent employment.

The unadjusted data show a rise in the unemployment rate. The birth/death model, which estimates the net effect of jobs lost from business failures and jobs created by new start-ups was designed for a normal growing economy, not for a prolonged downturn four years old. Statistician John Williams (shadowstats.com) reports that the BLS adds 48,000 new jobs per month to the payroll employment report based on the birth/death model even though the economy has not come out of the deep recession. In other words, over the course of a year, the birth/death model adds about 580,000 jobs to the reported jobs numbers. End of year benchmark revisions quietly take the nonexistent jobs out of the totals, but these revisions do not receive headlines and pass largely unnoticed.

The reported January jobs gains are contradicted by other official reports. For example, the January payroll jobs report shows 50,000 new jobs in manufacturing, but according to the recently released 4th quarter GDP, 81% of the reported growth consisted of undesired inventory accumulation. Normally, companies produce for sales not for inventories. Why would manufacturers be hiring people to produce goods for undesired inventories?
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The BLS reports 21,000 new jobs in construction. However, the housing report says that housing starts dropped more than forecast in December, falling 4.1 percent. Why does it take more construction workers to produce fewer houses? Building permits, a proxy for future construction, were little changed.
http://www.activistpost.com/2012/02/january-jobs-are-statistical-artifacts.html

The figures for food stamp recipients are also a good measure of the employment rate. Currently there are around 45 million Americans on food stamps. This ties together well with a real unemployment rate of 22 percent (SGS).

[Posted at the SpookyWeather blog, February 9th, 2012.]

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