[Marxism] Are the September Jobs Numbers ‘Cooked’ Controversy

Louis Proyect lnp3 at panix.com
Sat Oct 6 15:46:23 MDT 2012


Are the September Jobs Numbers ‘Cooked’ Controversy

October 5, 2012 by jackrasmus

With the release of today’s jobs report by the bureau of labor 
statistics, a public controversy has erupted over the veracity of the 
jobs numbers. Representatives on the extreme right claim the jobs 
numbers are being ‘cooked’ by the labor department. One of the two jobs 
report, the current population survey, reported some 870,000 new jobs 
were created last month. In contrast, the current establishment survey, 
the other labor department report, noted only 114,000 jobs were created. 
The right wing explains this by alleging outright falsification of the 
jobs report by the labor department. As is the tendency of the extreme 
right, they are not big on rational analysis. This writer does not buy 
the idea that outright falsification is the explanation. However, I do 
think there’s something wrong with the jobs numbers and have repeatedly 
been saying so on this and other public blogs for more than a year now.

I have been writing consistently about the problems in the jobs reports, 
pointing out that for last three years in a row, from 2010 to 2012, we 
see an interesting trend. Every fall and winter the jobs reports show 
extraordinary job gains well beyond averages, while every spring-early 
summer the jobs gains collapse. There is indeed something going on with 
the jobs numbers, though it’s not falsification.

Last month’s 870,000 CPS (current population survey), which determines 
the unemployment rate, included nearly 600,000 involuntary part time 
jobs created. That indicates either of two things: employers are laying 
off full time workers and hiring part timers; or hiring part timers 
instead of full timers because they, employers, do not see sustained 
economic recovery on the horizon and they are hiring more easily laid 
off in the future part time workers. The problem with part time hires is 
that the jobs reports considers them–for purposes of determining the 
standard U-3 unemployment rate–as full time workers. They may be working 
part time in fact but are considered fully employed when calculating 
unemployment rates. Hiring that many part timers, or even several 
hundred thousand less, represents a continuing very weak labor market 
and not an improving one. This view is supported by the more stable 
second labor department jobs survey, the establishment report, made up 
of 400,000 employers reporting each month (and thus not a real ‘survey’ 
in fact), which showed last month a continuing bare growth in jobs. In 
fact, 114,000 jobs growth is still well below what it takes to even 
absorb new entrants into the work force.

However there may be an even more accurate explanation why the 873,000 
number is a gross aberration (but not falsification) in the jobs 
numbers. I’ve been warning about this for some months now. It has 
something to do with the repeated exceptional jobs gains coming every 
year the last three years in the fall-winter period, followed by a 
repeated collapse in the jobs numbers in spring-early summer also for 
the past three years.  The explanation goes something like the following 
(bear with me, it’s a bit wonkish):

The current population survey (the 873,000) represents a statistical 
operation on raw jobs data that adjusts that raw (i.e. actual) jobs data 
by means of several statistical operations–i.e. seasonality, etc.—to get 
to the 873,000.  But before the raw data is statistically adjusted, 
another source of raw data is added to the initial data and only after 
that is the statistical adjustment carried out. This second source is 
jobs data estimated from assumptions about New Business Formation that 
are lagged up to nine months.

Here’s how it works. The labor department assumes net new businesses are 
formed nine months previous. That would be last November-December 2011. 
These data on new business formation are very inexact. It’s not actual 
new businesses but an assumed historical average of new businesses. So 
the past years in which new business formation was high is substitute 
for the more recent period when new business formation is in fact low, 
or even negative. It’s really a  shaky estimation process.

However, that shaky estimation, up to nine months old, ends up as 
additional new jobs created data that is then added to the raw data for 
new jobs created collected last month from the population survey. The 
assumed jobs created from new businesses created nine months ago and the 
raw data for new jobs from last month’s survey are then added together. 
Only then are the statistical adjustments made on that combined raw data 
to come up with the reported number of 870,000. That all sounds a bit 
technical, and it is. But some economists are highly critical of this 
process of adding raw data from historically averaged, assumed new 
business formation nine months ago to raw data from the survey, and then 
adjusting it and rolling it up into the publicly reported numbers. This 
writer is one of many skeptics of the methodology.

For a further clarification of this, readers should read my various 
reports on the jobs numbers in 2011 and early 2012 on my blog’s archive 
(jackrasmus.com) and other public blogs.

So there is definitely something wrong with the numbers on jobs. I don’t 
mean only last month’s jobs report. When there is so much divergence 
between the two jobs reports (870,000 vs. 100,000) something clearly is 
amiss. But more importantly, evidence of something out of the ordinary 
happening is reflected in the three years running of inordinate jobs 
growth in fall-winter followed by jobs collapse in spring-early summer. 
One year such extreme aberration can be disregarded. But three years in 
a row now is another thing. Something is wrong.

But this is not the same as saying the numbers are being ‘cooked’. The 
irrational right wing should do its homework instead of relying on 
emotional outbursts to explain the obvious anomaly in the jobs numbers. 
Likewise, the liberal-Democratic Party center should stop trying to 
apologize for the obvious terrible jobs creation record of Obama for the 
past three years–notwithstanding last month’s extreme divergence in the 
two jobs reports–and stop trying to paint a picture that the labor 
market is now rapidly mending, which it definitely is not. There are 
still 23 million jobless. That means after trillions of dollars in tax 
cuts to investors and businesses since 2009, and trillions more in 
subsidies and government spending, plus more than $10 trillion pumped 
into the banks by the Federal Reserve—we got barely two million net jobs 
created since June 2009.  That’s a costly, and horrible, jobs creation 
record. Period.

In the recent presidential debate last Wednesday it was abundantly clear 
neither candidate has anything remotely representing a jobs program, 
besides just giving more tax cuts for businesses (that just get hoarded 
and not invested) and lying about how more free trade (with the 
Transpacific Partnership free trade proposal) will create jobs instead 
of destroying them. But that’s in a nutshell the same program for jobs 
creation being offered by both candidates.

Dr. Jack Rasmus
Jack is the author of the book, “Obama’s Economy: Recovery for the Few”, 
April 2012. His blog is jackrasmus.com and website: 
www.kyklosproductions.com. He is the host of the radio show, ALTERNATIVE 
VISIONS, on the progressive radio network, PRN.FM, in New York, every 
wednesday at 2pm.

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