Wednesday, February 3, 2010

BLS confirms its uselessness, will subtract over 800,000 jobs from the workforce

Friday's BLS report on employment will make a big adjustment to their "birth/death" model, that will strip fake numbers out of the workforce.  It's backward-looking, to affect April 2008 through March 2009.  Rather than this being an example of a worsening employment picture, it's simply a confirmation that things are worse than the Bureau of Labor Statistics has been reporting - no shock to readers of this site.

I wrote on January 8th:

"The BLS is irrelevant."
Just ridiculous.  These employment reports from the Bureau of Labor Statistics are simply laughable.  What's unfortunate is that policymakers in Washington base all sorts of decisions off them.

The DJIA is off a bit today, as the BLS reports the economy shed 85,000 jobs in December.  Yet the unemployment rate held steady at 10%.

I've updated my charts of those "not in the labor force" and the monthly totals of those dropped from the labor force.  December, the 843k dropped from  the labor force capped off a ridiculous second half of 2009, in terms of people "dropped" from the denominator of the unemployment equation to make the picture rosier than it really is. 

Well, today they're confirming it.  Bloomberg is reporting that this Friday's Bureau of Labor Statistics report will be adjusted to take out the completely false numbers that were the "birth/death" model.  You can read about the model here, but in general it is an accounting trick that adds numbers back to the employment situation, due to the (wildly inaccurate) assumption that each closed business is replaced with a new business.

As Bloomberg shows in a TERRIFIC interactive image, skeptics of the birth/death model were correct, in that it was inflating employment.

Copyright 2010 AlphaNinja

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