I don’t cite the New York Post as a source very often. I doubt I’ve done so more than four times in the last decade including this time. But John Crudele’s analysis of the recent employment situation report is so apt I really feel I must:
First off, a gain of 223,000 jobs is just OK, not great. And that figure included a guesstimate — before seasonal adjustments — that 213,000 jobs were created by newly formed companies that Labor can’t prove really exist. Without that assumption, which comes from something called the birth/death model, the April jobs report would have been worse than March.
Do any of those 213,000 phantom jobs really exist? Considering the fact that bankruptcies soared during the first three months of this year and that this trend probably continued into April, you have to wonder if Labor should have been subtracting jobs for the “death†part of the birth/death model, instead of adding them for newborn companies.
Labor reduces the assumptions for these jobs in May and June, so its thumb won’t be pressed as hard on the scale in the short term.
March’s job growth was revised lower, from 126,000 jobs to 85,000.It was reasonable to expect a big rebound in April after the March disappointment, but that didn’t happen.
The March/April average of 154,000 jobs — even with the phantom birth/death jobs added in — is a big dropoff from the pace of employment growth last year.
Only a few parts of the economy showed job growth: Construction was up 45,000 jobs; health care, 45,200; restaurants, 26,000; and professional and business services, 62,000. The manufacturing sector of the economy showed very little improvement.
I’ll start out with the last part of that first. I consider job growth in healthcare a failure rather than a success for the simple reason that at least sixty cents out of every dollar spent on healthcare comes from government subsidies. Medicare, Medicaid, and the 1,001 other ways that healthcare is subsidized. Not only can we not have a healthy economy on the basis of subsidies, most of the money spent on healthcare goes to the highest income earners in the sector. That’s true in most sectors but it’s particularly true in healthcare—that’s obvious from the large number of highly compensated professionals in the sector and the low wages paid to the people who empty bedpans, sweep up the halls, and take care of the elderly. It’s a contributing factor to income inequality just as the growth of the finance sector is. Depending more on healthcare jobs is a Bad Thing. It’s the cat and rat farm I’ve written about here before.
Second, how many of those “professional and business service” jobs were temps without benefits? And how many are paid below the prevailing wages for those jobs? My guess would be most of them. That means that wages are being pushed down.
Finally, do you think that the estimated 26,000 people newly employed by restaurants were anything but minimum wage employees? What’s actually happening in our economy is two things. People coming into the labor market for the first time are getting jobs with low wages (regardless of their educational levels) and the longterm unemployed are staying that way. That is no success and painting it as such is a cruel fantasy.
Going back to the top of that quote. The “establishment survey” is not a survey. It is a sample to which various fudge factors are added. How large are the fudge factors? If of 223,000 jobs reported as having been created 213,000 are a result of the fudge factor, that means that 95% of the reported jobs are extrapolated, interpolated, and otherwise made up.
Where other than in economics is that high a fudge factor not laughed out of the building? If engineers applied fudge factors of that magnitude, every appliance in your home would be melting down or exploding on a regular basis, a lot more bridges and buildings would be falling down, and you’d need to dig yourself a shelter to avoid the airplanes falling out of the sky. At least I would—I’m on the O’Hare flight path. A rocket sent to re-supply the space station would be as likely to hit Paris as it was to reach its objective.
Is it any wonder that the economy melts down or explodes on a regular basis?
In trying to give specific numbers regarding a complex adaptive system the analysis becomes largely useless. Looking at wage pressure is a more reliable method of determining the state of employment growth amd that had been flat for six years.
It’s not just the specificity that I’m worried about, Ben. It’s the directionality.
When your adjustments are a lot bigger than the changes you’re trying to measure, you can’t determine whether the real underlying phenemona are improving, deteriorating, staying the same, or too noisy to tell. That’s a problem for policy. It suggests they’d apply the same policy regardless which is unsettling.
Reality, it’s a bitch:
When Minimum-Wage Hikes Hit a San Francisco Comic-Book Store
The moral of the story is that cities are big governments, too. Big governments don’t like small businesses; they like big businesses. But big businesses have been cutting back on employment for 30 years. Subsidizing big businesses while imposing costs on small businesses is subsidizing unemployment.
The best part was the quote from the owner:
His normal response to evil capitalists would be that the higher paid worker would be a better worker, blah, blah, blah, but in his case, he cannot escape reality. There is no blah, blah, blah. He needs a good fiction writer to pen him a happy ending.
He may have found it, but what about all the other small businesses in San Francisco. With the water shortage, it will probably resolve itself.
Reminded of a quote from a David Lean movie:
“Who but they! Who but they!”