by Aegidius25
The Bureau of Labor Statistics (BLS) released its report on the unemloyment situation for October recently. I’ve long had a problem with the numbers this government agency puts out. Over the years they have been brazenly manipulated and much of the data it purports to show isn’t much more than a glorified guess. The report is made up of at least two elements; first the household survey from which it gets the official unemployment rate (6.9% for October) and second a so-called establishment survey.
The first is just what it sounds like, an in person or telephone survey of US households compiled to figure out what proportion of workers in the labor force are employed. By contrast the establishment survey is a combination survey and guesstimate. The first element surveys about 144,000 business establishments and government agencies out of the about 32,500,000 businesses that used to be estimated to exist in the US; collecting data on numbers of workers at each firm, their hours worked and earnings. The second element is essentially a fancy formula used to guess at the number of new business establishments created or destroyed in the unsurveyed segment of the economy. (Note: It is likely the number of surveyed firms has declined with the downturn.)
From here the BLS comes up with an average number of jobs created or destroyed with all these firms, giving us by far the biggest part of this figure in the report (+638,000 for October). With last month’s supposed job gains being made up largely by positions in the leisure and hospitality sector (+271,000) then professional and business services (+208,000) and the retail trade {+108,000}among others. However when you take into account the methodology just described and the fact that about half the positions in the former two categories are in fields with only temporary staying power (eateries and bars and temporary help services) we see that even these paper gains are at best transitory.
There are other reasons this report doesn’t capture the whole picture. First because the household survey only calculates its data based on the number of workers considered in the labor force, which thanks to the bureaucratic machinations of a few purposefully exludes workers who’s jobless benefits have run out. This of course affects the overall laborforce participation rate (+0.3% at 61.7% in October).
Second all data in this report is SEASONALLY ADJUSTED; which sounds like a means to take seasonal factors into account when calculating these figures, but ts really a practice by which long-run averages are created to compare current data to. In these comparisons any deviation above the average is thus considered growth while any deviation below it is considered a contraction. . So for example, say the economy’s been in a slump for a prolonged period and the average of jobs lost each month is -300,000. Then any number above -300,000, even if still negative at say -100,000, because it’s above the long-run average is still counted as a positive number with 200,000 jobs created in this scenario. While if the number were really -400,000 for a given month it would be ADJUSTED to a loss of merely -100,000. The same goes for positive numbers; with an average of +300,000 jobs a month any number above that, say +400,000, is ADJUSTED to show a positive 100,000, while anything below that is considered negative. For example +200,000 jobs a month is actually ADJUSTED TO A -100,000. The same sort of averaging also applies to the unemployment rate and all other economic date from the government. So we can see how unreliable much of this is.
Additionally ”[s]ince March, household survey interviewers have been instructed to classify employed persons absent from work due to temporary, coronavirus-related business closures or cutbacks as unemployed on temporary layoff. BLS and Census Bureau analyses of the underlying data suggest there still may be some workers affected by the pandemic who should have been classified as unemployed on temporary layoff. However, the share of responses that may have been misclassified was highest in the early months of the pandemic and has been considerably lower in recent month.”
“For March through September, BLS published an estimate of what the unemployment rate would have been had misclassified workers been included among the unemployed. Repeating this same approach, the overall October unemployment rate would have been 0.3 percentage point higher than reported. However, this represents the upper bound of our estimate of misclassification and probably overstates the size of the misclassification error. ” (October BLS Report pg. 6)
A better if still imperfect measure of the current jobs situation can be found in the BLS’ Employment-Population Ratio. This number, if still seasonally adjusted, tries to compare the actual number of people with a job to the entire working age population of the United States. Unfortunately it fails to take into account the number of say stay at home mothers, who actually are not in the labor force, but in our modern world this is such a rarity that statistically it shouldn’t impact the overall data too much. However neither does it take into account the number of retirees. This is easily corrected by finding what percent of the population is retired and subtracting it from the remaining number of people without a job. In this month’s BLS report the EMPLOYMENT-POPULATION RATIO IS A SEASONALLY ADJUSTED 57.4 (+0.8 in October). THAT MEANS 42.8% OF PEOPLE 22 AND OLDER IN THE UNITED STATES ARE WITHOUT A JOB. IF WE SUBTRACT THE ABOUT 14% OF THE POPULATION THAT RECEIVES SOCIAL SECURITY WE GET A RATE OF JOBLESSNESS AT 28.8%. Though this figure isn’t modified to count disabled adults who’d like to work, elder workers collecting Social Security but who still have to work, or people who really aren’t disabled but added to the Social Security rolls during the Great Recession to keep them out of the unemployment figures. WHEN WE CONSIDER ALL THESE PEOPLE THE ACTUAL REMAINDER FROM THE EMPLOYMENT-POPULATION RATIO IS PROBABLY NEARER 31.8. THAT IS TO SAY ABOUT 32% OF WORKING AGE AMERICANS ARE WITHOUT A JOB. This is a far cry from the 6.9% unemployment rate reported by the government. www.bls.gov/news.release/pdf/empsit.pdf
Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence or consult your financial professional before making any investment decision.