The info/analysis at the bottom of this email is from John Williams (Shadowstats.com). He re-creates Government economic data in the same way it was reported in the past – before the Government decided to make significant changes to how economic data is collected and reported.
If you’re not familiar with the birth/death model – it’s a model that either adds or removes jobs to ‘official’ Government unemployment stats (it has nothing to do with the birth/death of people). The thinking behind this model is that the Government cannot account for new businesses or businesses that shut down – quickly enough in a given month – so instead of simply reporting the actual data (ADP employment report, etc.) each month – the Government ‘estimates’ how many new businesses started or businesses that closed in a given month with the corresponding addition or subtraction of jobs associated with those businesses. If you think this sounds like a very inaccurate way to track unemployment – you’d be right. No one really knows how this model works – it’s a mystery.
You’ll also notice that this model is never mentioned when unemployment data is released each month. Wonder why? The stock market dropped 200 points today because job losses were ‘worse than expected’ at 467,000 lost jobs in June. Imagine what would happen if the real number of 700,000 was released. Since February 2009 – the birth/death model has added 879,000 jobs to government unemployment data during one of the worst recessions in our history. It appears that someone is trying to make things look much better than reality.
Here’s a summary of June’s umeployment report:
1. The Government’s ‘birth/death’ model added 185,000 jobs to the June unemployment report. Note the industries where many of the jobs were added – and ask yourself if this makes any sense.
• 31,000 jobs were added in Construction
• 21,000 jobs were added in Trade/Transportation
• 25,000 jobs were added in Business/Services
• 87,000 jobs were added in Leisure/Hospitality
• 7,000 jobs were added in Manufacturing
2. If we disregard the birth/death model – almost 700,000 jobs were lost in June (consistent with previous months)
3. Annual payroll decline is now the worst since 1958.
4. Actual unemployment rate is 21% (if we consider all of the people who are looking for work – the government selectively removes ‘discouraged’ workers)
jg – July 2, 2009
– June Jobs Loss Was 513,000 Net of Concurrent Seasonal Factor Bias
Likely Topped 700,000 with Birth-Death Machinations
– Payroll Employment Growth Overstatement
Could Top 2.5 Million Per Year with Birth-Death Modeling
– Annual Payroll Decline Deepened to 4.2%
Equal to 1958 Trough and Near 1949 Trough
– SGS-Alternate Unemployment at 20.6%
“June Employment Reporting Showed Ongoing Economic Deterioration. The Bureau of Labor Statistics (BLS) released ongoing indications of deteriorating U.S. employment/unemployment conditions in June, with a worse-than-expected 467,000 drop in June payrolls, but a narrower-than-expected rise in unemployment to 9.5%. Net of the Concurrent Seasonal Factor Bias (discussed below) and net of distortions built into the reporting by the Birth-Death Model (discussed below), the June jobs loss likely exceeded 700,000.
“The severe recession continues to deepen. My broad outlook has not changed; the worst of the financial and economic crises remain ahead of us. Before getting into the detail of the June report, a variety of special considerations are detailed, as directly related to the reporting of employment conditions as well as to broader implications for economic reporting in general.”
The ShadowStats Team