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Flying Blind

Greg Hunter

Last Friday, the Bureau of Labor Statistics (BLS) reported the economy created 192,000 new jobs and the unemployment rate fell to 8.9%. The good news was reported almost everywhere as a turning point in the U.S. economy. For example, CNBC said, “U.S. employers hired more workers in February than in any month since May last year and the unemployment rate fell to a near two-year low, the strongest sign yet the recovery has become self-sustaining. . . . “We have moved into the expansion phase of the economic cycle and the economy is self-sustaining,” said Brian Levitt, an economist at Oppenheimer Funds in New York.” (Click here for the complete CNBC story.)

But if you look deeper into the numbers, as John Williams does at Shadowstats.com, you don’t see the turnaround picture. In fact, just the opposite is going on. In his latest report, Williams estimates the government is routinely overstating job growth by “230,000 jobs” a month. Using simple math, 192,000 created jobs (according to BLS) subtracted from 230,000 overstated jobs gives you an actual net loss of 38,000 jobs. I called Williams to check my analysis, and he told me it is not that simple because the government’s estimations are “the worst in modern economic history.” Williams says unemployment numbers are “openly misleading” and virtually “worthless.”

In an interview yesterday from his San Francisco office, Williams told me when it comes to calculating unemployment numbers, the BLS is “flying blind.” He admitted, “It is hard to put an exact number on the actual job losses last month, but we likely lost jobs – not gained them.” He added, “The job losses could be as high as 30,000 for last month.”

This recession is the deepest and longest in modern history and the worst economy since the Great Depression. Williams told me the reason job figures are so far off is modern BLS calculations have never been tested in this kind of severe downturn. One reason the unemployment numbers are so misleading is the Birth-Death Model – meaning the birth and death of companies, not people. In simple terms, the Birth Death Model overestimates jobs that are created by startup companies and often does not subtract jobs when companies go out of business. So, what the government is giving us are giant distortions in employment and unemployment. According to Williams, unemployment is not trending down, but the economy sure is.

A couple of recent stories support Williams’ analysis. Gallup released a story last week that showed unemployment rose and did not fall below 9% as the government recently reported. The story said, “Unemployment, as measured by Gallup without seasonal adjustment, hit 10.3% in February – up from 9.8% at the end of January. The U.S. unemployment rate is now essentially the same as the 10.4% at the end of February 2010.” (Click here for the complete Gallup story.) Bloomberg also reported last week that more layoffs are coming–not more hiring. The Bloomberg story said, “Employers in the U.S. announced more job cuts in February than in the same month last year, led by a surge at government agencies. Planned firings increased 20 percent to 50,702 last month from February 2010, the first year-over-year gain since May 2009, according to a report today from Chicago-based Challenger, Gray & Christmas Inc. Announcements at federal, state and local government offices almost tripled from last year.” (Click here for the complete Bloomberg story.)

According to Shadowstats.com, unemployment is 22.1% if calculated the way BLS did it before 1994. True unemployment and under-employment has been stuck above 22% for months. Shadowstats.com contends that before this so-called Great Recession is over, it will go as high as 35%. By then, we won’t be calling this the Great Recession but the Greatest Depression.


One Response

  1. […] here to read the rest: Flying Blind « Vince's Economic Blog  Mail this postSHARETHIS.addEntry({ title: "Flying Blind « Vince's Economic Blog", url: […]

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