Behind the Phony Jobs Numbers

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How are they calculated? The BLS “uses the past history of the series to identify the seasonal movements and to calculate the size and direction of these movements. A seasonal adjustment factor is then developed and applied to the estimates to eliminate the effects of regular seasonal fluctuations on the data.” How large are these seasonal adjustment factors? The same BLS that estimated 243,000 jobs were gained in January also reported that nearly 2.7 million jobs were lost in January. The massive difference between the two figures? Seasonal adjustments.

The New York Post’s John Crudele explains that while seasonal adjustments “are intended to smooth out holiday bumps” the “unusual nature of the Great Recession” skews the numbers. “Let’s say there are rumors in your company that 300 people are going to be laid off,” writes Crudele. “Instead, management decides to fire just 200. Two hundred people, of course, have lost their jobs. But, adjusting it for expectations, 100 people didn’t get fired. Using this analogy, the government would say that, on an expectation-adjusted basis, 100 jobs were created.” He also asks and answers the bottom-line question. “Does that mean there really are 243,000 new jobs out there? Absolutely not.”

Charles Biderman, President & CEO of TrimTabs Investment Research, is even more skeptical. “Actual jobs outstanding, not seasonally adjusted, are down 2.9 million over the past two months,” he contends. “It is only after seasonal adjustments–made at the sole discretion of the Bureau of Labor Statistics economists that 2.9 million less jobs gets translated into 446,000 new seasonally adjusted jobs for January and December.”  Yet he is far more critical of the BLS’s use of past history to calculate their numbers. “BLS historic data is changed almost every month until the income tax returns for each year are available three years in arrears. In other words, the BLS currently has accurate data for 2008 and before.”

Steven Leslie, lead analyst for financial services at the Economist Intelligence Unit, amplifies this argument, noting that BLS adjustments could be “based on patterns in the past [that] may no longer be correct,” and that “BLS have this time made additional adjustment for recently received population estimates based on the 2010 census figures.” Does this amount to some sort of conspiracy theory as some on the right are contending? “[T]here is no reason to doubt the BLS statisticians who are civil servants following a complex, but transparent approach to calculating and publishing the numbers,” he adds. Complex, no doubt. Transparent? “No one I know has any idea as to how the BLS does this seasonal adjustment,” Charles Biderman counters.

Again, one’s ideology will color one’s thinking in that regard, but there is far less to be understood looking at one month of jobs data than there is looking at the overall economic picture. If one finds the BLS data genuinely optimistic, data from the Congressional Budget Office is a sobering counter-weight. Their report reveals that the national deficit will top $1 trillion for the fourth year in a row, servicing that debt will soon cost as much as paying for all of Medicaid’s expenses, economic growth will be 2 percent in 2012, falling to 1.1 percent in 2013, and unemployment could rise to 8.9 percent by this fall, and jump back up to 9.2 percent by the end of next year.

If one wishes to see only the positive aspects of an 8.3 percent unemployment rate–absent workforce participation–there are no arguments that will persuade otherwise. For the rest, a numerical reality: in January CBO projections expected workforce participation to be 65.3 percent. It was 64 percent. One month later it’s 63.7 percent, 1.6 percent points below the original estimate. And even if we grant the BLS the benefit of the doubt and concede that 243,000 jobs were created, the difference in the labor participation rates is the equivalent of almost three million “missing” workers. Maybe most, or even all of them don’t really want a job.

But I wouldn’t bet the 2012 election on it.

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  • Cameo Red

    I can the headlines soon: "Unemployment Hits 0%!" How could this happen? Simple: BLS defines anyone without a job to be out of the labor force. Hence if you are in the labor force, then, by definition, you are employed, and so there is NO unemployment.

  • Gunner57

    This is something that needs to be exposed. The American voters are stupid enough on economic issues without these blatant lies.

    The Washington Times has called for a congressional into these bogus employment numbers – http://www.washingtontimes.com/news/2012/feb/3/ob

  • BS77

    In 1984 the "news" is generated by the Central Authority., Big Brother……the proletarians are given whatever on a "need to know" basis….since they don't need to know anything, they are brainwashed, and never know it.

  • http://apollospaeks.blogtownhall.com/ ApolloSpeaks

    THE MOST TRANSPARENT ADMINISTRATION

    in US history keeps secret the method it uses in determining job growth in the economy. The Republican presidential nominee needs to challenge Obama to come clean and disclose this method to the public. Obama's Hoax and Blame 2012 Campaign is in high gear, and must be discredited and wrecked before Election Day.
    uu

  • BLJ

    The Smoke & Mirrors game continues. This and the race card are the only hope that Obama has. They need to keep enough people stupid and/or race guilty to get that 2nd term.

    Pretty pathetic if you ask me. Then again Barack Obama is as pathetic a human being that there is.

  • AICS

    To all those unemployed seeing these phony numbers…everybody has a job – except YOU!

  • kongMing

    Also consider the majority of new jobs come from Bakken shale drilling and its indirect industries like trucking, something Obama's EPA has tried everything to prevent.