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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What's been said:

Discussions found on the web:
  1. johntron commented on May 24

    The BLS should start an off-the-books/underground market employment category. Anecdoteally, it seems that more people (whether ebay-ers, contractors, illegal immigrants) are working far away from the purview of the IRS/govern’t stats.

  2. Winston Munn commented on May 24

    Does anyone seriously believe that Robert Murdoch would have allowed such obvious distortions of the “official” truth to be printed in his paper, if he owned the WSJ?

    “…and when we act, we create our own reality…” unnamed neocon aide.

  3. Craig commented on May 24

    I think it’s more important to nurse this new category….NILF’s.

    If NILF’s get the same attention as MILF’s then it might be worthwhile. Would that be work with pay?

  4. Frankie commented on May 24

    Business investment is now back on track…+1.2%. This will continue to build. CAP EX IS COMING BACK…and the consumer will not slow as much as the “intelligencia” thinks. Hooha!

    Finally…Greespain should just STFU. He jumped the shark long ago!

  5. BDG123 commented on May 24

    Under the covers, capex was NOT a pretty picture. If you only read headlines, you are being massaged by the media. Capex has been dead for seven years and no company in its right mind is going to start a ramp up now.

    Barry, does it really matter if people are employed or not re the official data? I watched Bill Maher last night (always a great laugh) and John Fund, whom I think is generally delirious anyway, was on blathering about low unemployment as a sign the economy was great. That is, until Maher stepped in and said low unemployment doesn’t mean squat. People are living on sub par wages and just because you have a job doesn’t mean you are enjoying great prosperity.

  6. ManhattanGuy commented on May 24

    I am posting this because I am pretty sure BR will ignore this news.

    U.S. April new-home sales unexpectedly jump 16%

    By Rex Nutting
    Last Update: 10:00 AM ET May 24, 2007

    WASHINGTON (MarketWatch) – Sales of new U.S. homes unexpectedly surged in April, rising by 16% to a seasonally adjusted annual rate of 981,000, the Commerce Department said Thursday, far exceeding the 865,000 pace expected. Sales were boosted by plunging prices. The median price of a new home was $229,100 in April, down 10.9% in the past year. The inventory of unsold homes fell by 1.5% to 538,000, representing a 6.5-month supply. In March, the inventory was at 8.1 months. Sales in April were down 10.6% compared with April 2006. Sales in the first four months of 2007 were 20% lower than in the first four months of 2006. April sales were led by a 28% gain in the South and an 8.5% gain in the West.


    BR: Wrong. See this: New Home Sales Up (but watch the data)

  7. Fred commented on May 24

    Using the whining of Bill Maher as a Macro Economist source is akin to asking Paris Hilton for her views on Nascar. WHO CARES!?

    Capex is rising all around you. The telcom, internet, web 2.0, etc spending is just starting to ramp. These same naysayers were the ones dissing CSCO, GLW, ORCL, etc…proclaiming they’d be Ch 11 back in ’03. Look at companies like RVBD, BBND,and CRM to see the current pulse on capex. I’m very glad this is NOT a concensus view — YET!

  8. michael schumacher commented on May 24

    And of course Manhattan Guy……you left off the fact that the average price for said houses has decreased since the builders are giving them away at any cost.

    Obviously you have’nt done any research on how those numbers are calculated and where they come from…..

    Barry you can start a new thread on how all these homes sales reports are tabulated as well. Makes the BLS #’s appear somewhat truthful..


  9. ManhattanGuy commented on May 24

    So, what’s the big deal MS? people are buying right? Thanks for your super pessmistic view.

  10. michael schumacher commented on May 24

    I suppose you missed this little tidbit as well:

    There was also concern because all of the strength in sales came in one region of the country, the Northeast, which saw a surge of 43.1 percent.

    Sales were down 28.1 percent in the Midwest and 25.4 percent in the West. Sales fell a smaller 3.4 percent in the South.

    So one area of strength cancels out all others??

    nice try with only posting part of the release.

    And no thanks for your super bullshit perma bull view that does’nt have any support to it..only your headline.


  11. KirkH commented on May 24

    I’m in total agreement but I’d like to hear more about why the numbers are low. I’m convinced this is a permanent change due to automation and other advances which means the next jobless recovery will be even worse.

    As for Manhattan Guy’s off topic post on real estate have a look at this quote from Sacramento

    “At a recent courthouse auction, a five-bedroom, four-bathroom 3,500 square foot house on Richfield Way that sold in July 2005 for $526,000 was offered by the bank for $295,000. There were no takers.”

    Prices are down over 40% in some places so it’s not terribly surprising that sales are increasing. A lot of people that rented during the late unpleasantness are now dangling toes into the still overheated jacuzzi.

  12. michael schumacher commented on May 24

    I suppose it’s also a coincidence that these numbers that are suipplied to the gov’t by the homebuilders are released on a day that the Fed does yet another double-dipping repo.

    The dots are so easy to connect…….Why are they stil calling it temporary? that’s a rhetorical question BTW

    If I was a broker who just got a fresh pile of money,again……what would I do with it?

    As an aside…… long did it take Greenie to start signing Pimco’s tune? about a week……


  13. michael schumacher commented on May 24

    First it was “Stocks Soar on housing data”

    Now the link has been removed and shows:

    “Wall Street Fluctuates on Data”

    Had to scurry to get that up did’nt they??


  14. Craig commented on May 24

    Come on people, do your own footwork and stop relying on the lying liars in the government. There isn’t a single data point they haven’t fudged to make it look like they actually do something besides jerk it. I don’t care in what spectrum your politics resides, no one can argue in favor of governmental honesty, like unicorns it simply does not exist.

    I’ve been driving by the same tract of new D.L. Horton homes and the abandoned expansion of this tract for several years now. There are hundreds of brand new homes sitting there empty and unsold, price range of $285,000 up and an unfinished flood control system sitting there eroding while the equipment sits there unused.

    Take a drive to the new construction in your area and take a look for yourself. I’min Washingtom state and they SAY home values are still strong here, but who should I believe, the sellers or my lying eyes?
    Me thinks I have no dog in this fight, so I’ll believe my eyes.

    Anyone seen my friend Eclectic and his girlfriend Bondie? I hear she has porked up a few lbs since we last talked. What’s the date? Is it June yet?

  15. jlj commented on May 24

    RE: Overstated Job Market Growth
    It is a phone survey after all. How many people are going to say they have no job or have recently been laid off or fired? Very few – they will say that they are self employed or have started their own business. Interesting that the age group with the biggest% of new business startups is the 55+ age group! Also it is a phone survey – meaning landlines. Illegal immigrants and poor people are as or more likely to have no phone or cell phones on a pay as you go basis as a landline with deposit and hassle of monthly bill. As for the contruction workers, you have to wonder how many of them were originally added per their model, versus an actual count. Telephone surveys couldn’t predict the 1936 election and they would seem to have become inexact again.

  16. BDG123 commented on May 24

    It’s good to see Fred is still the parrot for the dimwits. Blathering the same horseshit as always. Hey Fred, look at the data. Computers and software DOWN! I’ll capex you. If the world was so great, why have we seen the Naz and S&P dribbling around single digit returns since the end of 2003? You are awfully confident simply biding time with sub par returns and tremendous risk. But, then you follow Don Hays. Don’s been squawking about technology since this market began in 2002 and his returns are pathetic. Oil, metals, basic materials……….That’s where he should have been. He’s been blabbering about about Texas Instruments for four years while the smart money was elsewhere. Christ, that company is last years news.

    You’ll learn some day. Likely after the thief has taken a substantial amount of your life savings. I don’t begrudge anyone an alternative view but you like to smear it in everyone’s face while following the advice of someone who has SUBstantially been wrong this cycle. For that, I knight you the Duke of Dimwits. How’s Baretta?

  17. GREG IP commented on May 25

    Not Your Father’s Pay:
    Why Wages Today Are Weaker
    By GREG IP
    May 25, 2007; Page A2

    American men in their 30s today are worse off than their fathers’ generation, a reversal from just a decade ago, when sons generally were better off than their fathers, a new study finds.

    The study, the first in a series on economic mobility undertaken by several prominent think tanks, also says the typical American family’s income has lagged far behind productivity growth since 2000, a departure from most of the post-World War II period.

    The findings suggest “the up escalator that has historically ensured that each generation would do better than the last may not be working very well,” says the study, which is scheduled for release today. The study was written principally by John Morton of the Pew Charitable Trusts, which is leading the series, called the Economic Mobility Project, and Isabel Sawhill of the Brookings Institution. Other participating think tanks are the Heritage Foundation, American Enterprise Institute and the Urban Institute.

    In 2004, the median income for a man in his 30s, a good predictor of his lifetime earnings, was $35,010, the study says, 12% less than for men in their 30s in 1974 — their fathers’ generation — adjusted for inflation. A decade ago, median income for men in their 30s was $32,901, 5% higher than 30 years earlier. Ms. Sawhill said she isn’t sure why men’s wages have stagnated. “It seems there’s been some slowdown in economic growth, it’s possible that the movement of women into the labor force has affected male earnings, and it’s possible that men are not working as hard as they used to.”

    The study suggests that absolute mobility — the rate at which an entire generation’s lot improves relative to previous generations — has declined. But within a particular generation, individuals can still get ahead if relative mobility, the rate at which the rich and poor trade places, remains high. Poor fathers may have rich sons, and vice versa.

    The report also found that between 1947 and 1974, productivity, or output per hour, and median family income, adjusted for inflation, both roughly doubled. Between 1974 and 2000, productivity rose 56% while income rose 29%. Between 2000 and 2005, productivity rose 16% while median income fell 2%, challenging “the notion that a rising tide will lift all boats,” the report says.

    Ms. Sawhill said several factors could explain the divergence: a growing share of income going to the highest-paid workers, or to profits; an increased share of labor compensation going toward benefits such as health care; or a decline in the number of wage earners in the typical family.

  18. Greg0658 commented on May 25

    Add the humanist design of shared wealth for mass stability thus the global outreach.

    America is just coming down a notch or two.

    Currency doesn’t like destruction … unless destruction is the force to create currency.

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