Underlying issues in rancid job market
Last Updated: 7:42 AM, January 31, 2010
Posted: 1:07 AM, January 31, 2010
DEAR JOHN... THE ANSWER MAN
Dear John: Keep letting people know the real deal in the job market. The size of the labor force has been on a longterm decline as the number of people who have been falling into the “No Longer In Labor Force” category grows. These are people who have given up and exhausted all unemployment benefits. Since October 2009 alone, 1.169 million people are no longer counted.
The mathematical effect on the unemployment rate makes things “appear” to be getting better, or in December’s case, not getting much worse. If a larger percentage of unemployed are removed from the total workforce count, the unemployment percentage goes down. What do you think? T.H.
Dear T.H.: I’m running this letter because I wanted someone else to explain what I have been trying to do for years.
On Friday the government will report its employment figures for January and, unless someone tinkers with the data, I believe the figures will be awful. Aside from what you explained so well — that people are dropping off the unemployed list and, therefore, are keeping the jobless rate down — there are other big problems.
For one thing, there’s what they call a benchmark revision coming that will remove about 840,000 jobs from the employment rolls. It’s not like any one of these 840,000 is getting fired. It’s simply that the government thought that between April 2008 and March 2009 there were 840,000 more jobs in the economy than there really were.
This won’t affect the number you’ll see in the headlines on Saturday. In fact, most newspapers probably won’t even realize that this very important adjustment is being made.
But the headline number, the job losses for the month, will be affected by something that the Labor Department calls the birth/death model. This attempts to calculate the number of jobs being created by newly formed companies that can’t be reached in the monthly survey and — this is the most important — the companies that are quietly going out of business.
The January figure being released Friday is the only “death” month, meaning the government assumes companies have quietly ceased to exist. And this could result in a massive downward revision to the headline number of job losses.
Since this January adjustment is as wrong as the upward ones made in the 11 other months (which caused the 840,000 revision that’ll be made Friday) I believe Washington needs to correct for the upcoming error. But I don’t think the Labor Department will. So hang onto your seat — Friday’s figure could be a shocker.
Send your questions to Dear John, The N.Y. Post, 1211 Ave. of the Americas, N.Y., N.Y., 10036, or john.crudele@nypost. com.
