Birth Death Model Fudges Employment Report

Employment Number Is Pure Propaganda

by Lou Scatigna
August 8, 2009

Yesterday the Bureau of Labor Statistics announced that a smaller than expected 247,000 jobs were lost in July. The pundits on financial TV and the main stream media hailed this as a wonderful development and signs that the worst of the recession was over. The stock market rejoiced as well closing up over 100 points at the highest level of the year.

I have been telling my radio audience and you as well for months that the government fudges every economic number they can to make things look better. The one they distort (lie about) the most is the employment report. How do they do this you ask? They instituted in 2001 the birth/death model. No it has nothing to do with people dying or being born, it has to do with an estimate of how many small businesses were being formed (or closed) and the estimated jobs that were created as a result. This is where the BLS does it's dirty work.

Let's take a deeper look into July's jobs report:

The headline number is 247,000 jobs lost which in other times would be a disaster but since it was averaging over 600,000 this spring it is hailed as an improvement and the coming of economic prosperity for all.

Historically July's B/D model is negative as it is a month were past over estimates are reconciled. This July number is the largest in the history of the series. Do you mean to tell me that in the midst of the worst economic environment in 70 years the most jobs were created by small businesses in any July in the history of the report? How could more jobs be created this July than in July 2006 when the economy was robust and growing? It simply did not happen but the BLS just decided to say so and presto the July jobs number is better than expected and the Administration can come out and say the stimulus is working and the recession is over. All praise to the king!

It is safe to say if the accurate number for birth/death was used it would have added at least a 100,000 more to the job loss number. Since Jauary the B/D model has added 879,000 jobs to the report. So in the worst 6 months since the Great Depression small businesses have created a whopping 879,000 phantom jobs. This is a big lie and the government knows it. Every week we see initial claims for unemployment in the range of 325-425,000. Every month we see the jobs report showing an average of 400,000 jobs lost since January so how could small business be thriving in that environment? It simply didn't but hey let's just make it up the sheeple won't even look that deep.

Now let's turn to the unemployment rate. The administration and their media minions had an orgasm over the fact that the unemployment rate dipped from 9.5 to 9.4%...whoopie! The recession is over, it's the first time the unemployment rate has dropped since April 2008. Man that Obama is one great steward of the economy.

How does the unemployment rate drop in July when every week the number of workers filing for unemployment run an average of 350,000 and (the even distorted) 247,000 jobs were lost in July? By the way, if over 800,000 workers filed first time claims for unemployment, how come they announced only 247,000 jobs lost, I have never been able to figure that one out. Were there 553,000 jobs created to offset the 800,000 lost (of course not)?

Anyway, back to the unemployment rate. How did the rate drop with all these first time unemployment filings and quarter million lost jobs according to the BLS? Simple the BLS decided that 637,000 workers became discouraged in July therefore they are not considered unemployed, just people not interested in finding a job. Abbracabra! The unemployment rate drops from 9.5 to 9.4% and the recession becomes a faded memory. The media was all hot and bothered by this figure touting the Administration's "things are getting better" mantra. So you can see that the government can make the employment report look anyway they like, it has become a political tool to be used to make the Administration look good and influence the President's popularity numbers which have been diving as of late.

This is also known as propaganda, this Administration is a master of it.

I know many people who are looking for a job and there are none to be had. If they are fortunate to get one it is a low paying or part time one.

Be careful making investment decisions based on government reported economic numbers most are distorted or worse yet pure fiction.