Wait...On Second Thought...Jobs? Its Much Worse!

With the unemployment rate at 10.2% things look quite dire.
The U-6 Report is at 17.6% things looks very bleak.

http://tradersutra.blogspot.com/2009/11/order-it-up.html

http://tradersutra.blogspot.com/2009/11/classic-mark-up-brings-pain-to-main.html

But wait, they are actually much worse.

According to the Bureau Of Labor Statistics, payrolls fell at a 188,000 a month rate over the last three months. But their own household survey says employment fell at a 589,000 a month rate. So then why the discrepancy?

1-The BLS alerted the masses that payrolls were overestimated in the twelve months ending March by 824,000. The source of this error was the birth/death model. BLS used “plug” numbers for the number of births and deaths. These “plug” numbers were wrong. They led to estimated positive contributions to employment that were too high. Most of the error (675,000 out of a total 824,000 jobs) occurred in the first quarter of this year. The birth/death model was adding significantly to payrolls when all other payrolls were falling. In reality the contribution from net births and deaths was in fact negative.

2- The faulty birth/death model is still being used for the months after March of this year. The implication was that the faulty birth/death model would continue to overstate payrolls and understate the payroll job losses in the months since March.

So the BLS is still doing the same modeling! For the last three months they are assuming net birth/deaths have added 18,000 jobs a week. Last year over the same period they assumed it added 17,000 a week, the year before 18,000 a week, and the year before smack in the middle of the economic boom 18,000 a week.

They know that the model is pure fallacy, but hey it underestimates the underlying problems. So its all good.

Therefore, reality probably lies somewhere between the payroll survey monthly rate of job loss of 188,000 and the noisy household survey rate of job loss of almost 589,000. So somewhere around 300,000 job losses. That is why the unemployment rate rose a stunning .4 to 10.2%.

I have written about the household surveys in the past.

http://tradersutra.blogspot.com/2009/09/labor-day-not-good-times.html

http://tradersutra.blogspot.com/2009/09/reality-tv-americas-worst-financial.html