Friday, August 7, 2009

The Birth/Death Model Has Added 1.38M Fictional Jobs

The dirtiest secret concerning the Department of Labor's monthly jobs report is a dose of statistical smoke known as the Birth/Death Model. This bit of government chicanery is appropriately titled, as it seeks to gauge the number of new business openings (births) and closings (deaths) that may have been excluded from the business poll that determines the country's non-farm employment level. To compensate for these businesses that have apparently fallen through the cracks, the BLS runs it's birth/death computer model, and then either adds to or subtracts from the polling results; it is only after this adjustment that the public sees the headline number on the first Friday of each month. And yes, you have read this correctly; the BLS literally adds jobs to the report that it assumes - but does not know for sure - have actually been created. The funny thing is, the birth/death adjustments always seem to Contribute to the headline number, and never Detract from it. Factually speaking, for 15 out of the past 16 months, the birth/death calculation has Added fictional jobs to the employment report; and on average, statisticians at the BLS have added 86,000 jobs per month over the same period.

Even more bizarre is the fact that between April 2008 and July 2009, this calculation has added a net cumulative 1,380,000 jobs to the labor force. The chart above has been created with data provided by the BLS itself. As you can see, with the exception of one month, new job growth during this recession has been marching steadily upwards! What recession? Sphere: Related Content

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