Free Markets, Free People

Labor Dept.


Phantom Jobs Support Fake Recovery?

John Crudele alerts us to a GIGO (garbage-in-garbage-out) statistic the Labor Department uses and has used for a long time that provides erroneous data.  Bad as it is in normal times, it is even worse in bad economic times:

In 11 of the 12 months, the government adds massive numbers of jobs — sometimes more than 100,000 — that it thinks, but can’t prove, exist.

This is because the Labor Department uses something called the birth/death model, which assumes that no matter how bad the economy is, there are itty-bitty, newly-formed companies — which can’t be reached by government surveyors — that are creating jobs.

So it pumps up its statistics with unconfirmed jobs created which hides the real extent of the jobs lost. And, of course, as Crudele points out, the stats are iffy in a good economy, but reliance on them in this sort of an economy is simply a travesty.

Even the Labor Department has now admitted that:

Right after Friday’s report came out, Bloomberg News called Chris Manning, the national benchmark branch chief at the Labor Department’s Bureau of Labor Statistics, and asked about the 34,000 probably non-existent jobs.

“In this period of steep job losses, the birth/death model didn’t work as well as it usually does,” Manning told Bloomberg. “To the extent that there was an overstatement in the birth/death model, that is likely to still be there.” No freakin’ kidding! This year alone, this model has added over 700,000 jobs that don’t exist to the government’s count.

The Labor Department is not only still using this model, but it nearly doubled the number of phantom jobs for this September compared with the same month last year.

So if you’re wondering how distinguished economists can get things so wrong, this provides a peek. After all, these are the statistics they’re stuck using. Phantom job creation stats based on an absurd assumption that says something’s happening that can’t be confirmed and, by the way, it continues to happen at the same rate even in the worst of financial times. Does that conform with your experience in the real world?

Mine either. Keep that all in mind when you hear the “experts” tell you that according to the latest unemployment stats, it just isn’t as bad as you might think.

[HT: Mark W.]

~McQ