Fudging the jobless numbers

October 13, 2008

THANKS FOR running Adam Turl's "Recession's mounting toll." It goes a long way to exposing the fact that, while economic pundits blather on about "fears" that the economy "might dip into recession," real workers are dealing with an actual recession on the ground.

Ordinary people have been feeling the toll for quite some time. Nine straight months of job losses are putting continued pressures on working people. Overall, approximately 600,000 jobs have been lost in the process, according to the official statistics and the official unemployment rate has risen from 4.7 percent to 6.1 percent.

But, as Turl argued, this actually massively understates the extent of the cuts. The Bureau of Labor Statistics (BLS) over the years has changed its methodology in ways that result in a systematic undercounting of the unemployed.

The BLS does, however, provide a table of "alternate measures of labor utilization" that gives a sharper sense of what the real job market is like. The broadest measure is U-6, which counts "total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers." By this measure, the unemployment rate is actually 11 percent--up from 8.4 percent a year ago.

Furthermore, the Web site Shadow Government Statistics (SGS) estimates that the true figure may be even greater than that. During the Clinton administration, the BLS stopped counting "discouraged workers" in the unemployment figures. So, according to SGS estimates, which adds this estimate to the BLS's U-6 figure, the true unemployment rate is about 15 percent.

And that's not the only trick the BLS pulls out of its hat. The agency also employs something called the birth/death model. Basically, each month the BLS takes an actual account of businesses and then adds or subtracts jobs to that number that for which it has no record. The BLS rationale is that it takes time for new businesses to show up and become available for its monthly sampling.

So it uses historic patterns of job creation and then estimates that new businesses and new jobs are being created even if it has no record that these jobs actually exist. The BLS has even admitted in the past that the model will be wrong at economic turning points--i.e., when the economy is moving from growth into a recession.

In 2008, in eight out of nine months the birth/death model adjustments have resulted in jobs being added to the BLS raw counts. The birth/death model has even been estimating job creation in the financial and construction sectors--areas that have clearly contracted this year.

Overall, the birth/death model has estimated the creation of 731,000 jobs during the first nine months of the year. Those jobs have been added to the BLS of Labor Statistics' real figures. The result is that the BLS has reported a net loss of 600,000 jobs--after the birth/death jobs have been factored into the equation. If you strip the birth/death model numbers out, it means the real number of jobs lost in 2008 is more like 1.3 million.

In all, the real picture for workers is a rough job situation, much worse than the mainstream media would leave you to believe. The real situation is something Turl's descriptions of what workers are going through captures much more accurately than the government's loaded statistics.
Petrino DiLeo, New York City

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