WSJ: Overstated Job Market Strength?

We have long stated that the official BLS data was a rather artificially optimistic assessment of the actual employment picture. Our thesis, supported by many confirming 3rd party data, points to a bifurcated recovery since the 2001 recession.

Indeed, by nearly every measure, this post-recession jobs recovery is the worst in the post-War period. We have also noted the various issues with the unemployment rate — exhaustees, decreasing labor pool/not-in-labor-force (NILF!), the augmented unemployment rate. The BLS Household survey even considers you "gainfully employed," regardless of whether “Worked without pay.” (I guess those gains are spiritual)

Then, there is the other "missing factor" in NFP data — the Birth Death adjustment. As we recently observed, a whopping 317k B/D adjustment was in the April NFP report — the single largest "adjustment" on record for any single given month (despite that giant add, April’s NFP as merely 88k).

Even more astonishing, the B/D adjustment has become very significant to the BLS Non Farm Payroll total numbers. As we noted earlier in the month, in 2006, of
the 2.26 million new jobs that BLS reports as being created, 964,000 –
nearly half (42.6%) — were due Birth/Death adjustments.

Now, it seems that the idea of the official data being incorrect by a large margin  is gaining traction. A WSJ article today notes the growing disbelief over the official data:

"As the nation’s economic growth has slowed over the
past year, the labor market has remained robust, and the jobless rate
is hovering near a six-year low. But some economists believe the true employment
picture may be less rosy, amid new signs official data may have
overstated job growth.

Those signs are particularly stark in the
home-building industry, which has been hurt by the slump in the housing
market. Housing starts in April fell 33% from their recent peak in
January 2006. Yet, the number of residential-construction jobs has
dropped by only about 3% over the same period.

Economists cite several possible explanations for the
disparity. One is that layoffs have lagged behind the housing slump and
will weaken further. In addition, some economists say the monthly figures
from the Labor Department’s Bureau of Labor Statistics may be
overestimating employment, perhaps by misclassifying construction
workers or by failing to count large numbers of laid-off illegal

What other measures might be providing a more accurate count of actual employment? How about state unemployment insurance records, which should capture most  of the legally employed workers in the U.S. That paints a very different picture than the BLS data:   

"A lesser-known employment snapshot, based on a
quarterly census of state unemployment insurance records, shows the
economy created about 19,000 private-sector jobs in the third quarter
of 2006, the most recent data available. That contrasts with the
500,000 indicated in the monthly figures for that period. It also shows
the number of construction jobs dropped by 77,000, in contrast with the
increase of 19,000 jobs shown in the monthly surveys."

The bottom line remains that this jobs recovery has been on the low end of historical pattens, and remains far below average. Not that you would really know that if you listened to the official bull$@#t data releases  . . . .


Job Market’s Strength May Have Been Overstated
Sudeep Reddy
WSJ, May 24, 2007; Page A2

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