Thursday, December 10, 2009

The Death Month is Coming: A Crushing Unemployment Number Is Due Out February 4, 2010

January is the death month as far as the Bureau of Labor Statistics is concerned. In January, in their bizarre data models, they kill off thousands of jobs. This January, they could knock off more than 800,000 jobs. Will the BLS figure out a way to fudge this huge negative January unemployment number that is scheduled to be released February 4, 2010? Here's John Crudele with the scoop on what's going on:
The Labor Department is hurrying to correct inaccuracies in its monthly employment statistics that could cause the Obama administration big problems early next year.

Those corrections, however, will probably also eliminate the inevitable -- and unsubstantiated -- employment gains that come during springtime.

We now know that the job gains reported by Washington this past spring were an illusion.

Early in 2010 the Labor Department will subtract about 824,000 jobs from its official count in what is called a "benchmark revision" to more accurately reflect the jobs that weren't created this past spring.

I've already warned readers about the employment report for January that will be released on Feb. 4. And I've said this figure will be a disaster unless someone intervenes to correct the statistical aberration that will occur.

The Labor Department apparently now understands. And it appears ready to step in.

Here's the crux of the issue:

Each month the Labor Department guesses at the number of jobs being created by companies which it thinks -- but can't prove -- are newly formed. The department calls this the birth/death model.

Last April, for instance, the government estimated that new companies created 226,000 jobs. In May, the guess was 220,000 and in June 185,000.

Even in the depths of winter, the government added 134,000 jobs during February that turned out to be non-existent.

Those estimates are mainly the reason why the Labor Department now needs to revise downward by 824,000 the number of jobs it believes exist.

But the real problem for the Obama administration -- and the financial markets -- is the January figure that will be released in early February.

January is the only month in which the birth/death model shifts to the "death" side.

For whatever reason the model suddenly thinks that more companies are quietly going out of business than are being formed outside the view of Labor Department surveyors.

And there is no reason to believe the "death" side of the model is any more accurate than the "birth" side.
Read more here.

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