Friday, June 4, 2010

Lies, Damn Lies and Statistics

This morning, the Bureau of Labor Statistics release triggered news report to put up a huge headline:

431,000 Jobs Added in May

That sound impressive on the surface but the reality is much less than it seems. When you dig down into the numbers you can see just just how little really is there. First, the Census Bureau hired 411,000 temporary workers who were counted as part of the 431,000. The BLS claims 41,000 private-sector jobs were created, with the discrepancy likely coming from net layoffs at state and local levels of government.

Let's drill down a bit farther and take a look at the Birth-Death model that we have written about before. When we look there, note that the "model" has added 215,000 private-sector jobs for May. By backing out this estimate, we can conclude that the actual survey measured a net loss of 174,000 jobs in the real economy.

We can also dissect the Unemployment Rate in the same fashion. This statistic is based on the Household Survey, where the jobs created number is based on the Establishment Survey of employers. The Household Survey again shows that the number of people with jobs shrank in May - in this case the measured loss was 35,000 jobs. That is not as bad as the Establishment survey but still pointing in the wrong direction. The only way the BLS was able to report a lower unemployment rate was because they reduced the Labor Force by 322,000 workers, even while the pool of employable citizens rose by 170,000 people. Basically. BLS arbitrarily said 600,000 people ceased to exist for purposes of their calculations this month - so they could report a lower unemployment rate.

This is clearly a piece of propaganda designed to keep the ignorant public "confident" and spending despite reality. Like much else that comes from government, BLS reports have become riddled with accounting tricks that amount to fraud in order to paint a rosy picture. Don't be taken in.