November 18, 2010

THE GREAT JOB LIE, US EDITION

Why did all over sudden 150,000 new jobs appear in the October numbers? Read this.

THE JOBS REPORT FOR OCTOBER was released by the Bureau of Labor Statistics on Friday, and at first blush was surprisingly strong, much stronger, indeed, than expected. Payrolls expanded by 151,000 and the two previous months' were revised upward. But hold the hurrahs. The unemployment rate was stuck at 9.6%, and, toss in the underemployed and the rate remains at an elevated 17%.

Moreover, the household version of the employment picture was a real bummer, showing an employment drop of 330,000. That especially weird disparity between the household and the payroll reports made us do a double-take. Happily, the always astute Stephanie Pomboy of MacroMavens provided a quickie explanation:
"The seasonal bar which the payroll data must jump was (inexplicably and dramatically) lowered from prior Octobers."

Thus in October 2009, the BLS set the bar at 870,000 jobs, similar to the 840,000 it anticipated in October 2008. This year, by contrast, it lowered the bar to 768,000. Mumbo, jumbo, payrolls presented "an upside surprise" of 100,000.

According to John Williams at Shadow Government Statistics, the BLS' fiddling with the figures via what he calls "seasonal-factor games" actually created 200,000 phantom jobs last month. John cites such finagling as the reason his prediction of an October decline and a rise in the jobless rate was wrong. It also explains why seasonally adjusted payrolls were revised upward by 110,000 in September including 56,000 in August.

As we've observed before, those seasonal adjustments sure are magical: They can make it snow in the Sahara and be hot as blazes in the middle of winter in Siberia. 
Ah, yes. Change the baseline of your statistic, and you can create jobs. Even if there are none. But they sure will be on your statistics. Carry on, people. Nothing to see here.