Unemployment Figures Don't Lie, but the Obama Administration Will Figure

Remember the old joke about interviewing a prospective accountant?

"How much is 2 + 2?"

The accountant answers, "How much would you like it to be?"

Why do I get the idea this guy went to work for the Obama administration?

Have you ever heard of the Birth-Death Ratio as it relates to unemployment numbers? The Bureau of Labor Statistics takes essentially a WAG at how many businesses were "born" compared to how many businesses "died". According to Investopedia,

What Does Birth-Death Ratio Mean?
A figure that represents the net number of jobs provided from newly started businesses (births) and business closings (deaths) during a period of time, typically a month in conjunction with government-sponsored jobs reports. Birth-death figures are put out by the Bureau of Labor Statistics (BLS) as part of the monthly employment report; they use a rolling average to determine the monthly total based on historical averages over the past several years.

Although, it seems as if the birth/death ratios of the last couple of months have perhaps been inflated far beyond historical averages or common sense. More on that later.

The unemployment numbers are worse than reported. Last year the Labor Department admitted it over-counted the number of jobs by 1.4 million. Why? Because they used a computer program that tries to extrapolate how many new companies are being created during each month and then estimates the number of jobs these firms should be creating. They were wrong.

Since April, the Labor Department has counted 550,000 nonexistent jobs under this so-called birth/death series. Without these phantom jobs, the economy this year created virtually no jobs—certainly not the 600,000 the administration has been touting.

- Mort Zuckerman Aug, 16, 2010

Starting with February of this year, the Bureau of Labor Statistics changed the way they calculate these numbers, getting much more favorable numbers (to the administration) by making quarterly rather than annual projections. (See chart here.)

In April of this year, there was a Birth/Death adjustment of +175,000 jobs.

For May, the administration said the 54,000 net jobs created were far less than expected and far less than needed just to "stay even". What if someone in the government was spoofing those numbers? The BLS added something like 206,000 of these imaginary jobs to make that 54,000. Without them, there was a net loss of around 150,000 jobs in May.

Like a dishonest butcher with his thumb on the scale, look at how the imaginary jobs adjustment has grown since January of this year.



Larger image here.

According to the "calculation", the administration added 451,000 more jobs to the unemployment numbers in February than January, 5,000 more jobs in March than February, nearly 60,000 more jobs in April than March and 31,000 more jobs in May than in April.

How convenient! Nearly twice as many jobs, adjusted upward in May over February and yet, compared to the "historical average" of just a year ago, May was a record high (in adjustments, anyway) over the last two years, and April and May were both "assumed" to be higher than last year. Not bad for a Wild *ss Guess!

"they use a rolling average". Yeah. We've been "rolled" all right! Based on everything you know about the economy, the rising cost of energy and food, and the uncertainty of taxes, government regulation and health care mandates, do you really think that job growth due to new business creation is accelerating as much as the BLS says it is?

Yeah. Me, neither.