Jobs report made of real jobs or “vapor jobs?” • Fred Johnson, columnist
The 1,500 jobs that Baxter International is hiring for their new plant in Stanton Springs are real jobs. The 163,000 jobs added in the July Jobs Report released by the Bureau of Labor Statistics are not real jobs. I call them vapor jobs because they do not exist. The BLS surveys industry to count the number of jobs added for the month and then they apply a Seasonal Adjustment and a Birth Death Adjustment. The adjustments are there to account for things such as Christmas hiring, teachers off for the summer and population growth. So basically, they take real jobs numbers and then add “finagle factors.”
For the July jobs report, the finagle factors are extremely high. This July, they added 377,000 Seasonal Adjustment jobs. This was the largest adjustment in the past decade. The Birth Death adjustment added another 52,000 jobs. This adjustment was also unusually high because the last Birth Death adjustment was only 5,000. All in all, a total of 429,000 “vapor jobs” were added to the actual jobs to achieve 163,000 jobs added. Take away the vapor jobs and we are left with a loss of 266,000 real jobs in July.
The Household Survey also measures jobs by surveying households. They simply count the jobs added or lost with no finagle factors applied. Their July jobs report shows that the economy lost 195,000 jobs in July. That report makes sense because we saw the unemployment rate rise in July which indicates that jobs were actually lost. Alan Krueger, chairman of President Obama’s Council of Economic advisors, insists the unemployment rate hadn't really risen; that it is just a rounding error.
So here we have the situation in an election year where the critical issue is jobs and we have government bureaucrats adding hundreds of thousands of adjustments to the jobs report to turn job losses into job gains.
An unfortunate thing is that the stock market responds to these reports. The Dow rallied 217 points the day the July Jobs Report was released. Can you imaging the market response if the report showed 266,000 jobs lost in July?
Sooner or later the actual state of the economy will become apparent and we could see a market correction.
Printed in the August 9, 2012