Rob Schaap wrote:
>All very nice, except the BLS Report told us yesterday of ...
>
>"a little secret in the employment report that you should know about. The
>Labor Department said payroll employment fell 114,000 in June. What it did
>not tell you is that this reported change includes a "bias adjustment factor"
>that adds about 160,000 jobs a month. This bias factor is basically picked
>out of thin air, and is supposed to capture employment in newly started firms
>that Labor misses in its survey. In other words, Labor doesn't know how many
>new hires occurred at new companies, so it assumes a number. In its June
>report, it continued to guess that it missed 155,000 new hires. The problem
>is, that when the economy slumps, so do new business start-ups. A good
>indicator of new business starts is the Conference Board's index of
>help-wanted advertising. This index has plummeted back to levels last seen at
>the end of the 1990 recession."
>
>Which little statistical fib might mean these fatter consumer wallets will be
>counteracted by the fact there are fewer of them.
This is not a fib. The Wall Street Journal editorial page, where this
article originally appeared, predictably spun it as a bunch of lying
incompetents in the governemnt picking numbers out of the air, but
that's not fair. The BLS imputes this number because they've found
over the years that it's more accurate most of the time, because in
expansions - remember, the U.S. economy has expanded for about 75% of
the time since the end of WW II, though you'd never know that by
reading PEN-L - their employer survey underestimates actual job
growth, for just the reason mentioned, startup firms not covered by
their survey universe. It's an entirely reasonable thing to do, and
has proven more accurate than the raw survey number over the long
term. It's wrong at turning points; it underestimates job creation
early in recoveries, and overestimates it at peaks and early in
recessions. But that's not most of the time (which you'd never know
from reading PEN-L).
Doug
