The Real Employment Numbers That Never See Headlines

When the employment report is issued each month, most people and, certainly the media, are only interested in two numbers: (1) the number of jobs created or lost in that month and (2) the resulting unemployment rate.  But, those two numbers are a result of some pretty heavy-handed massaging in what the Bureau of Labor Statistics calls "seasonal adjustments".  Seasonal adjustments have always come under fire, especially lately, from a lot of well-respected economists, because the "adjustments" seem to be very large and, thus, questionably accurate.

Take, for example, the latest jobs report.  The headline says that 113,000 jobs were created with a resulting drop in the unemployment rate from 6.7% to 6.6%.  Now, to any logical observer, this makes perfect sense in that a falling unemployment rate must mean that some number of jobs had to have been created to lower the rate. But, if you dig deeper into the January jobs report, you would see a completely different picture when it comes to the unadjusted numbers.

According to the raw data in Table A-2, whites, which make up 79% of the workforce,  saw their unemployment rate go up in January by 9%; from 5.7% to 6.2%.  Yet, after seasonal adjustment, whites  remained the same at 5.7% as in December.  The raw data also said that blacks also saw their rate go up by 9%; from 11.6% to 12.6%.  After adjustment, their final number was 12.1%. While there is no adjustment data available for Asians, their unemployment rate went up 17% from 4.1% to 4.8%.  All three groups added together represent 96% of the workforce and all saw substantial losses in employment.  Yet, the final employment number says jobs were created and the unemployment rate fell.

Lastly, I would be remiss if I didn't include an absolutely horrendous fact that our President wouldn't want you to know when he's out there touting the lowest unemployment rate during his presidency.  That fact is that teen unemployment among blacks now sits at 39% (raw) or 38% after adjustment.  In the city of Chicago, the President's hometown, black male teens are at a unbelievable 92% unemployment rate.  Maybe that's why gang membership has risen 40% since Obama became President. 


References:

Has The Fed Been Fooled By Phony Jobs Numbers?: http://www.bloomberg.com/news/2013-09-24/has-the-fed-been-fooled-by-phony-jobs-numbers-.html

Table A: January Employment Situation Report: Seasonally Adjusted Results:  http://www.bls.gov/news.release/empsit.a.htm

Table A-2: January Employment Situation Report: Raw And Seasonally Adjusted Numbers by Race, Age, and Sex: http://www.bls.gov/news.release/empsit.t02.htm

New Urban League study finds 92 percent of African American male teens are unemployed: http://www.myfoxchicago.com/story/24486694/new-study-finds-92-percent-of-african-american-male-teens-are-unemployed

FBI: Gang Membership Up 40% Since 2009: http://www.thegatewaypundit.com/2013/07/confirmed-gang-membership-up-40-under-obama-violent-attacks-on-whites-up-18/

Jobless Claims Fall Sharply On Seasonal Adjustments

This morning, jobless claims fell by 35,000 after rising by 36,000 in the previous week.  The Boston Globe (Boston.com) said this:  "benefits dropped by 35,000 last week, a figure that may have been distorted by seasonal factors".  The operative word in that statement is "distorted".  Then, the "Globe" went on to say: "Applications surged two weeks ago, reversing a big drop the previous week. But economists caution that the government struggles every July to account for temporary summer shutdowns in the auto industry."  In this case, the operative word is "struggles".

The problem with the government tinkering with the jobless claims number by using "seasonal" adjustments is that it is too open to tinkering for political reasons.  But, more importantly, in a day of widespread computerized data management, it seems impossible to believe that we are still having to estimate claims based on samplings and on seasonal adjustments.  Theoretically, there's no reason why the government couldn't have the actual numbers; on any day; and, in real time.  Why aren't all this nation's claims offices being locked into a single database?

The other problem I have is the concept of seasonal adjustments being singularly done for the auto industry.  These adjustments are probably not needed anymore.  They are hangovers from the days when the auto industry was the major employer in the country and at a time when almost every car sold was made here.  And, every year, the Big Three (Ford, General Motors, and Chrysler), for competitive reasons, would do a complete or major redesign of cars.  This, in turn, necessitated long shutdowns of the manufacturing facilities for retooling; every July.  The laid off employees would then apply for unemployment benefits. Also, today, many of our so-called American autos are made in places like Canada and Mexico.

Today, those major redesigns just don't occur with any regularity.  For example, the PT Cruiser, which was in production from 2001 to 2010, changed very little in all those years.  The Chevy Cruze and Volt, which share the same body style and frame, have not changed for the last three years.  Furthermore, automobile manufacturers are no longer following the tradition of introducing their "all new models" in the Fall of every year.  You can buy the "all new" 2013 Nissan Altima; right now. And, the Altimas are either made in Smyrna, Tenn. or in Canton, Miss. and I'm quite sure that the government didn't seasonally adjust when those plants were shut down for retooling; early this year.

The point that I'm trying to make is that these "seasonal adjustments" make no sense anymore; and, quite simply, they are as the Globe said: distortions.

Boston.com story: http://www.boston.com/business/markets/2012/07/26/jobless-claims-drop/kRT7wGdwrxQkRrtbkVgLDP/story.html