The January Jobs Are Statistical Artifacts

Last Friday the US Bureau of Labor Statistics reported that in the first month of this new year 243,000 jobs were created and the unemployment rate (U.3) fell to 8.3 percent. This good news is a mirage. It is due to faulty seasonal adjustments and to the BLS birth/death model. In a prolonged downturn, seasonal adjustments and the birth/death model produce nonexistent employment.

The unadjusted data show a rise in the unemployment rate. The birth/death model, which estimates the net effect of jobs lost from business failures and jobs created by new start-ups was designed for a normal growing economy, not for a prolonged downturn four years old. Statistician John Williams (shadowstats.com) reports that the BLS adds 48,000 new jobs per month to the payroll employment report based on the birth/death model even though the economy has not come out of the deep recession. In other words, over the course of a year, the birth/death model adds about 580,000 jobs to the reported jobs numbers. End of year benchmark revisions quietly take the nonexistent jobs out of the totals, but these revisions do not receive headlines and pass largely unnoticed.

The reported January jobs gains are contradicted by other official reports. For example, the January payroll jobs report shows 50,000 new jobs in manufacturing, but according to the recently released 4th quarter GDP, 81% of the reported growth consisted of undesired inventory accumulation. Normally, companies produce for sales not for inventories. Why would manufacturers be hiring people to produce goods for undesired inventories?

Most of the new reported January jobs are in services. The January jobs report has 24,500 new jobs in wholesale and retail trade and 13,100 in transportation and warehousing. However the data shows that inflation-corrected real retail sales are down. Why does it take more people to sell fewer goods?

The other remaining sizable components of the January jobs number are: professional and technical services (30,000), administrative and waste services (36,700), health care and social assistance (29,700), and leisure and hospitality (44,000) of which the largest component is food services and drinking places (32,800).

The leisure, waitresses and bartender employment numbers seen high for January. Perhaps it was an excellent ski month in the US. However, accommodation (hotels) does not support this conclusion as accommodation lost 3,900 jobs.

The BLS reports 21,000 new jobs in construction. However, the housing report says that housing starts dropped more than forecast in December, falling 4.1 percent. Why does it take more construction workers to produce fewer houses? Building permits, a proxy for future construction, were little changed.

As the adjusted data produce phantom jobs and employment, the BLS should headline the raw unadjusted data. With so many discouraged workers unable to find jobs, dropping discouraged workers out of the measure of unemployment seriously understates the true magnitude of the unemployment problem. If Americans were aware of the double-digit unemployment rate, would they be as tolerant of Washington’s multi-trillion dollar wars? Would Obama be facing a tougher re-election campaign? Would Republicans be pushing to reduce the federal budget deficit at the expense of the social safety net?

The phony data serve many interests, but not those of the American people.

About Dr. Paul Craig Roberts

Paul Craig Roberts was Assistant Secretary of the Treasury for Economic Policy and associate editor of the Wall Street Journal. He was columnist for Business Week, Scripps Howard News Service, and Creators Syndicate. He has had many university appointments. His internet columns have attracted a worldwide following.

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  1. avatar

    Well, shucks.

    When Robert Reich worked for Bil Clinton and got caught lying about the job statistics, a precident was set. WE DIDN’T HANG HIM. Now we’re paying the price.

    Fact is lots of higher-ups do not care about the numbers and whether they reflect reality or not. This is the price of living in a decadent society.

    By: Franz . February 7, 2012 . 3:48 pm | Flag this comment

    Reply
  2. avatar

    All the ropes were too big and thick for the little bastard.

    By: Dennis Morrisseau . February 7, 2012 . 5:34 pm | Flag this comment

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  3. avatar

    Friends,

    [Excerpts]

    Federal Reserve Chairman Ben S. Bernanke said the 8.3 percent rate of unemployment in January understates weakness in the U.S. labor market.

    “It is very [<] important to look not just at the unemployment rate, which reflects only [<] people who are actively seeking work,”

    “There are also a lot [<] of people who are either out of the labor force because they don’t think they can find work” or in part-time jobs.

    The percentage of the unemployed who have remained without work for 27 weeks or more rose to 42.9 percent in January from 42.5 percent in December

    From: "Bernanke: [Official] Joblessness Understates [Actual] Weakness"

    Feb 7, 2012 2:03 PM ET

    http://www.bloomberg.com/news/2012-02-07/bernanke-says-8-3-unemployment-understates-weakness-in-u-s-labor-market.html

    Cheers!

    Jer

    By: Jerry Aspar . February 7, 2012 . 6:06 pm | Flag this comment

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  4. avatar

    What the U.S. gov tells the media is nothing but propaganda. Then the media adds their own propaganda to the mix. The result is nothing but lies and distortion that would make the Goebbels blush.

    By: зачем . February 7, 2012 . 8:25 pm | Flag this comment

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  5. avatar

    Excellent article. It is so difficult finding anything but propaganda these days.
    This man, holding his cats, says much to me re. His character……a cat loving man is a man you can trust!
    Thank You

    By: Marsh . February 8, 2012 . 4:44 pm | Flag this comment

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  6. avatar

    Until the lower classes come out and hit the streets in huge numbers nothing will happen. the ny times today had a piece about ubumas staff intending to do a better job at presenting a more appealing face on the economy…TRULY incredible! frankly a national party on the white house lawn might be an idea – give out small bags of chips and soda and everyone can sing kumbya!
    Just repulsive living in this toliet bowl country!

    By: tom . February 9, 2012 . 1:36 pm | Flag this comment

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  7. avatar

    There is one problem with your analysis on Iran: The bloodthirsty mullah just said it was not enough to destroy Israel, but
    to kill every Jew on the Planet Earth. I take him at his word.

    By: Andy . February 12, 2012 . 11:00 am | Flag this comment

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  8. avatar

    some questions:
    Is this a correct assessment. The 1 trillion spent on the the wars in Iraq and Afghanistan was paid to corporate America, so this is a transfer of wealth, from the federal government to corporate America. The FED prints the money.
    next question:
    The 400 billion in gold England “found” down in the vaults, did it belong to Libya, Iraq, Iran, Syria, Tunisia, etc? How much more gold are they likely to “find” in the vaults if they take out Iran, Saudi Arabia, etc ?

    By: John Beasley . February 13, 2012 . 9:59 pm | Flag this comment

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