02/04/10 Stockholm, Sweden – Of all the activities the US government undertakes, it’s the misleading ones that seem to occur most consistently. Revisions are always a good example, and one of the ugliest this week, well… at least tomorrow, will be the Friday jobs report. It’s expected to show a staggering 824,000 additional job losses between April and March of 2008, the largest such revision in nearly two decades.
How is this possible? Well, the error comes by way of a statistical shortcut the Bureau of Labor Statistics relies upon called the “birth/death model.” It takes for granted that the number of jobs lost at companies shutting down is roughly equal to the number of jobs being added at brand-new startups. How this assumption could possibly hold true in a steep economic downturn is anyone’s guess.
Via Bloomberg Multimedia, here’s a perfectly unreasonable-looking extrapolation:
The discrepancy shown above is only for a time period ending the first half of 2009. Despite the model’s shortcomings, nothing about it seems to have been tweaked between then and now. So, we shouldn’t be surprised if another 990,000 jobs are in the cards to vanish from the second half of 2009. See Bloomberg’s fun-to-use, detailed, and interactive content in its explanation of how, thanks to this model, 824,000 jobs are disappearing tomorrow… and perhaps more in the future.
Rocky Vega
Rocky Vega is publisher of Agora Financial International, where he advances the growth of Agora Financial publishing enterprises outside of the US. Previously, he was publisher of The Daily Reckoning, and founding publisher of both UrbanTurf and RFID Update -- which he ran from Brazil, Chile, and Puerto Rico -- as well as associate publisher of FierceFinance. Rocky has an honors MS from the Stockholm School of Economics and an honors BA from Harvard University, where he served on the board of directors for Let’s Go Publications, Harvard Student Agencies, and The Harvard Advocate.
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looks like someone at bls needs to get out his handy dandy curve fitting calculator and stop graphing b/d as y=x and try y = -x^2….or something to that effect…
Possible typo? I think the data revision covers April 2008 to March 2009.