Friday, September 4, 2009
Jobs jobs jobs jobs jobs jobs jobs jobs jobs jobs jobs jobs...
(Today the BLS birth death model added 118,000 jobs. In addition 49,000 job losses were 'added' to the two previous months.
So results came in better than expected at -216,000 rather than -230,000.
Of course all things being equal - birth death model let us suppose, optimistically, should have been flat - the Federales pulled 167,000 rabbits out of their hat to make up the 14,000 'beat the numbah'.
Oh and adjusted for part-time employees that would rather have a full-time job and for discouraged workers that are no longer looking for a job but would take one if it were available, the jobless rate jumped to 16.8 percent in August from 16.3 percent.
Adjustments bah, we only care past the headlines when they become deadlines.
As the bullisht crowd eagerly awaits a jobless recovery, an oxymoron if there ever was one ... Okum's razor - without job growth at least equal to population growth you are contracting... reflection on just how ridiculous the worldwide fascination is with our 'meet my good friend Harvey' stats are best expressed by briefly delving into the Birth Death model. -AM)
For those unfamiliar with the birth/death model, monthly jobs adjustments are made by the BLS based on economic assumptions about the birth and death of businesses (not individuals). (For small businesses predominantly... obviously that would be what is occurring 'under the radar' that this adjustment is suppose to capture. -AM)
Those assumptions are made according to estimates of where the BLS thinks we are in the economic cycle.
The BLS has admitted however, that their model will be wrong at economic turning points. And there is no doubt we are long past an economic turning point.
Here is the pertinent snip from the BLS on Birth/Death Methodology.
The net birth/death model component figures are unique to each month and exhibit a seasonal pattern that can result in negative adjustments in some months. These models do not attempt to correct for any other potential error sources (Models and bottles. -AM) in the CES estimates such as sampling error or design limitations. Note that the net birth/death figures are not seasonally adjusted, and are applied to not seasonally adjusted monthly employment links to determine the final estimate.
The most significant potential drawback to this or any model-based approach (Don't blame us! I mean hey we type it in and the computer model spits it out. We would like to be more accurate but hey this model will be perfect more or less over time and after adjustments .. to the model of course not the data. -AM) is that time series modeling assumes a predictable continuation of historical patterns and relationships and therefore is likely to have some difficulty producing reliable estimates at economic turning points or during periods when there are sudden changes in trend.
(Sudden changes in trend such as equities falling under a past secular low(2002)? The last time that happened was in July 1932 when the market fell through previous secular lows until it found support at the April 1897 level. Did that signify a change in trend?
So how many jobs have been fabricated? -AM)
Bill King: ADP counts 2.5 million small biz job losses since January 2008. For the same period, the BLS’s Net Birth/Death Model, which is supposed to account for small biz job losses and gains, shows 1.507 million job gains. The difference is over 4 million jobs, which is substantial economically.
(Master of understatement there Mr. K. Since the recession began in December 2007, the number of 'headline unemployed' persons has risen by 7.4 million. It would have been half again as much if my friend Harvey had not made up those jobs.
So who are you going to believe? Federales fantasy or your lyin' eyes?
Look, matey, I know a dead economy when I see one, and I'm looking at one right now. -AM)