Saturday, October 6, 2012

Why I Don't Believe the Goverment's Unemployment Numbers

         In order to estimate current national unemployment, the Bureau of Labor Statistics does two surveys, the household survey and the establishment survey (explained below).  Of the two, the household survey is traditionally the more volatile and unpredictable.  Because of the many ways its questions can be asked and the selection of those to whom those questions are directed, this survey is more susceptible to manipulation.  Right now, BLS asks those questions, by telephone, of 60,000 households.  From those telephone answers, it begins to extrapolate an unemployment percentage for the entire nation of more than 300 million persons.  As but a moment’s reflection makes clear, the data thus gleaned, extrapolated, and estimated are highly susceptible to manipulation before, during, and after their acquisition.  Not surprisingly, the great change in joblessness numbers comes from this survey, not the other
         This time through, without any precursors of an impending enormous change over the previous months, even years, we hear from that survey that 800,000 folks somehow suddenly found new jobs in September.  How September produced a roughly 600% rise in new jobs virtually overnight compared to previous months and years is not explained.  What specific policy change prompted this towering improvement?   Or if no new or even recent policy change was enacted, then why and how did old policies produce such a tremendous effect now and not at some other time?
         If the current establishment survey, which focuses on businesses rather than households, showed the same kind of unexpected growth, then I might be far less suspicious.  But it does not.  In the establishment survey, we find that only about 114,000 jobs were created, which, not surprisingly, is on par with previous months.  We also see that the manufacturing sector actually lost 16,000 jobs last month, also not surprising.
         Because of the wide discrepancies in these two reports, Steve Moore, of the Wall Street Journal, said, "This is the weirdest report I've seen in 20 years."  Charles Payne, of, said this is "extraordinarily fishy."
         Normally to see unemployment numbers like the ones just released would require an economic growth rate of around 4% per year, maybe more.  But last month our growth rate was just a shade above 1%.  That's another way of saying that I'm not buying it.
         Apparently others folks are having the same difficulty.  Earlier this week, the Wall Street Journalpolled 25 leading economists.  Their aggregate estimate for the upcoming report was 113,000 new jobs, which prediction was almost spot on.  On that basis, they also estimated 8.14% joblessness.  But instead, this report says joblessness fell to 7.8%, even though new unemployment claims actually rose to more than 340,000 for the week.  The difference between those two percentages is enormous.  What real-world explanation makes sense of it all?
         Here’s my guess:
         In the last two months, government hiring has increased by a little more than 600,000 jobs.  That massive increase happened not because the government just inherited lots of extra money and has lots of new shovel ready jobs to fill.  No; not even close.   To me, the recent enormous government hiring increase over the two months just before the election was meant to alter the outcome.   Its timing, just before the election and just after a crushing debate defeat, seems to me more than a little suspicious.  That suspicion gives rise to another:  Did the BLS change the way it asked its questions or changed the way it selected the folks of whom they asked them?  Did it alter the way it makes its estimates?  If so, BLS needs to tell us.  That second suspicion raises a third:  Is it no more than a mere coincidence that two of the most prominent BLS economic tabulators are Obama supporters and donors?
         I don’t know.  These are theories, just theories.
         But I do know this:  If you counted all those who are unemployed in America but don't want to be, the actual number is almost 15%.

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