Houdini would be proud. The US government managed to keep the employment damage under cloak for a full year, but finally had to admit that there were over a million more unemployed in the US then previously acknowledged. Last month, 7.1 million people had lost their jobs in the US since the start of the recession. Now this month, because of "revisions and erros" it's now up to 8.4 million unemployed since Dec 2007. More examples of cooking the books...officially the job market shed 20,000 jobs in the US but the unemployment rate didn't stay or increase above 10% as you would expect but dropped to 9.7%. This hockus pokus was due to 850,000 people who stopped looking for jobs and are no longer counted and an adjustment to the births/deaths of new /old firms.
And conveniently, these revisions where release on a Friday, so most business papers will miss this significant news story. My local business newspaper...The Globe and Mail mentioned the new 8.4 million figure but made no mention of any revisions to the unemployment data...most readers likley missed this deception.
On Friday, BLS disclosed that its count of job losses from April, 2008 through to December, 2009 was in error and was being revised upward from an initial estimate of 6.0 million lost jobs up to 8.3 million- an upward revision of 38%.
Most economists recognize that the BLS monthly job reports are preliminary and subject to likely revisions. But surely, we can get better estimates than being nearly 40% off the mark…if you miscalculated sales forecasts by 40 % what would the consequences be?
That magnitude of error pretty well suggests a waste of government resources if not outright deception.
One only has to wonder -- by giving false impressions on the supposed improving state of the US economy, financial markets around the world may be mislead into an inappropriate over optimistic response. Specifically, would the stock market have rallied as much as it did if the stats came out closer to reality and in real time?
As it turns out, we apparently can get better estimates of job losses as they are occurring (and not 18 to 36 months after the fact, like BLS provides).
With all the millions of IT dollars spent by all companies, we should have dialy real-time access to real time sales data as well as real time employment stats.
One outfit, TrimTabs Investment Research publishes monthly estimates of U.S. job losses based on real-time daily income tax deposits to the U.S. Treasury from all salaried employees.
Their estimate of job losses over the period was 7.5 million, just 10% away from the revised BLS estimate. And the BLS number will "probably will be much closer [to TrimTabs' figure] after the agency's final benchmark revision February 2011," says TrimTabs.
For January, the BLS reported a job loss of only 20,000, which financial markets took as a sign that the job market is recovering. Meanwhile, TrimTabs' estimate that month was 104,000 losses, which suggests a rather different picture
Here is what one blogger wrote:
Unemployment Numbers: A Mixed Bag
January employment numbers are characteristically volatile, as the birth/death ratio numbers are typically the largest of the year. This month the birth/death model subtracted (rather than added) 427,000 jobs (yes, I wrote that correctly). This is a very large “adjustment” month, and the volatility gets smoothed over in the seasonal adjustments. It is part and parcel of the process, as making estimates about how many new businesses are formed or die is extraordinarily difficult at turning points in the economy.
As an acknowledgment of that, the employment level for March 2009 was revised down by 930,000 jobs, and by December it was a total of almost 1.4 million extra jobs lost. That means that the Bureau of Labor Statistics overestimated the number of new jobs significantly. December’s job loss was really 150,000, not the 85,000 originally reported. How would the markets have reacted to a number that large?
January saw a slightly larger than estimated loss of 22,000 jobs, which would have been 53,000 without new federal employees, 9,000 of whom were hired to perform the census. (By the way, federal employment is absolutely exploding!)
Now, the somewhat good news. I have been writing about how the household survey has been much weaker for almost two years than the establishment survey. For instance, the total number of unemployed rose by 589,000 in December, while the number of people not classified as looking for work rose by 843,000. No matter how you spin it, those were very ugly numbers.
This month the household survey showed the largest one-month turnaround that I could find. As The Liscio Report noted:
“Adjusting for the changes in the population controls, total household employment rose by 784,000 – and when further adjusted to match the payroll concept, employment was up 841,000. Moves of this magnitude (regardless of sign) are unusual, but not unknown – and frequently undone in subsequent months. The less volatile ratios were also up, with the participation rate up 0.1 point, and the employment/population ratio rose a nice 0.2 point, its first increase since last April. While it’s too early to say whether this strength in the household survey is a harbinger of an upturn that will soon show up in payrolls, it’s something to be filed under ‘tentatively encouraging.’”
The work-week hours rose slightly. Income growth was better than it has been. Temporary workers rose, which is typically a harbinger of an increase in full-time employment. The number of people working part-time for economic reasons plummeted by 849,000.
And finally, the unemployment rate fell 0.3% to 9.7%. This of course means that more people are dropping out of the labor pool, and it also means they will at some point come back.
On the negative side, a loss of 22,000 jobs is nowhere close to the 100,000 new jobs that are needed just to hold unemployment steady. 41% of those unemployed have been so for over 6 months.
And quoting David Rosenberg:
“While there will be many economists touting today’s report as some inflection point, and it could well be argued that we are entering some sort of healing phase in the jobs market just by mere virtue of inertia, the reality is that the level of employment today, at 129.5 million, is the exact same level it was in 1999. And, during this 11-year span of Japanese-like labour market stagnation, the working-age population has risen 29 million. Contemplate that for a moment; fully 29 million people competing for the same number of jobs that existed more than a decade ago. That sounds like pretty deflationary stuff from our standpoint.
“Not only that, but consideration must be taken that in 2009, we had a zero policy rate, a $2.2 trillion Fed balance sheet and an epic 10% deficit-to-GDP ratio. You could not have asked for more government stimulus. Yet employment tumbled nearly 5 million in 2009.”
Finally, a very sad chart, courtesy of David. Those in the 25-54 year-old male category have seen their total number of jobs fall back to the level it was in 1996. Fourteen years later, and the “breadwinners” who are supposedly in their prime have seen an almost 10% drop in employment.
As noted above, January employment numbers are very volatile, and are likely to be adjusted either up or down by a lot in coming months. But this report was not the disaster of December. It still shows a very weak economy that certainly does not need a large tax hike next year. I hope we start seeing some positive numbers soon, but I am not optimistic that we are going to see the 200,000-plus new jobs per month we need to really start denting the unemployment numbers, for some time. Not when the National Federation of Independent Business says 71% of small businesses do not plan to hire this year
But as far as long term unemployeed and people coming off benefits this graph tell the whole picture:
Walter Derzko
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