Playing Old Maid

By Frederick Sheehan

When my youngest sister was four-years-old, we taught her how to play Old Maid. She learned quickly but played the game like – a four-year-old. When she was dealt the Old Maid, her little thumb would push it a couple of inches above the others in her hand. She did this with a giggle since her maneuver was tricking us (in her 4-year-old mind) into taking the Old Maid. She succeeded; someone would remove it from her hand so that she could say: "Ha, Ha, you have the Old Maid!"

Today, the Bureau of Labor Statistics (BLS) has a four-year-old mind. This morning, June 3, 2011, it released its monthly Employment Situation Report. The very first words were: "Non-farm employment changed little (+54,000) in May…" Nowhere in the 38-page report does the BLS state that the addition of 54,000 jobs was actually a loss of 152,000 jobs.

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The BLS invented 206,000 jobs. The Bureau has constructed an equation called the "Net Birth/Death Model." Its purpose is to count "Business births." That is, new jobs in new businesses net the number of lost jobs in "Business deaths": companies that went out of business.

This figure plays a large role in how Americans are told to think about the economy. CNBC did not look beyond the first sentence this morning when it announced The Number: +54,000. It did not mention the 206,000 net birth-death jobs. The Wall Street talking heads who were then interviewed were also ignorant. Last month, on May 6, 2011, the BLS April Employment Situation Report opened: "Non-farm payroll employment rose by 244,000 in April…" The +175,000 net birth/death jobs were not mentioned by Bubble TV and maybe not by any other major media outlet.

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There are those who say the net birth/death (NBD) figure is a sophisticated calculation. No doubt it is; but is it accurate? If it is, why does the BLS never mention that NBD jobs were added when it manufactured The Number? Why does it so diligently hide it?

The initiative for the NBD calculation addressed a real problem. The BLS is not equipped to include "business births" in its monthly Employment Situation Report. It makes sense to adjust The Number, but the BLS, like most of Washington, is detached from the economy.

In June 2011, it is ridiculous to conclude the U.S. economy is adding more jobs than it is losing. Yesterday, on June 2, 2011, the National Federation of Independent Business (NFIB), a trade group of smaller businesses, released its latest survey results. (I have found the direction of the trend in the monthly NFIB survey offers a good indication of the direction of the economy.)

Some of the highlights from the June 2, 2011, NFIB release:

"Chief economist for the National Federation of Independent Business (NFIB) William C. Dunkelberg, issued the following statement on May job numbers, based on NFIB’s monthly economic survey:

"After solid job gains early in the year, progress has slowed to a trickle. The two NFIB indicators-job openings and hiring plans-that predict the unemployment rate both fell, suggesting that the rate itself will rise.

"Meaningful job creation on Main Street has collapsed.

"With one in four owners still reporting ‘weak sales’ as their  No. 1 business problem, there is little need to add employees, especially with the uncertainty about future labor costs arising from new regulation and legislation."

The Bureau of Labor Statistics pushes the Old Maid above the other cards in its hand each month. It takes five seconds to type "net birth death" into the BLS website’s search engine and read this month’s NBD number. Yet, it is not mentioned by the media or by Wall Street talking heads. The Bureau of Labor Statistics has every reason to look at America and proclaim: "Ha, Ha, you have the Old Maid!"

Frederick Sheehan writes a blog at www.aucontrarian.com

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2 Comments
  1. mjscpa says

    It is incorrect to add the Birth/Death figures to the seasonally adjusted jobs figure.  See CalculatedRisk.com for a repeated explanation: http://www.calculatedriskblog.com/2011/06/birthdeath-model-and-unemployment-by.html

  2. mjscpa says

    It is incorrect to add the Birth/Death figures to the seasonally adjusted jobs figure.  See CalculatedRisk.com for a repeated explanation: http://www.calculatedriskblog.com/2011/06/birthdeath-model-and-unemployment-by.html

  3. mjscpa says

    It is incorrect to add the Birth/Death figures to the seasonally adjusted jobs figure.  See a repeated explanation of why this is wrong at CalculatedRisk: http://www.calculatedriskblog.com/2011/06/birthdeath-model-and-unemployment-by.html

  4. mjscpa says

    It is incorrect to add the Birth/Death figures to the seasonally adjusted jobs figure.  See a repeated explanation of why this is wrong at CalculatedRisk: http://www.calculatedriskblog.com/2011/06/birthdeath-model-and-unemployment-by.html

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