John Ransom

"Employers added more than 200,000 jobs in April for the third straight month, the biggest hiring spree in five years," reports the official news oganization for the Obama Adminstration, the Associated Press. "But the unemployment rate ticked up to 9 percent."

"The Labor Department reported Friday that the economy added 244,000 jobs last month. Private employers shrugged off high gas prices and created 268,000 jobs- the most since February 2006."

Here's the problem with these numbers:

The BLS estimates birth and death of private companies and consequent jobs created by them. These numbers have no basis in fact. They are just numbers pulled out of the air.

As IBT notes  "For those of you keeping track at home, the birth death adjustment was 175K, a quite massive figure."

Our friend Mike Shedlock says  "In recent years Birth/Death methodology has been so screwed up and there have been so many revisions that it has been painful to watch."  

As the two charts below show, the BLS over-estimated these jobs in 2010. The first chart is the orginal estimate. 



Birth Death Model Revisions 2010 (as reported February)


Last May, the BLS reported a birth/death number of 215k jobs. Later that was revised to 192k. That's a big discrepancy.

Having said that I am told that's it not quite correct to just subtract out the birth/death jobs.

Instead there are other indicators that are relevant here and they are not good.

The biggest one is unemployment. Some are saying that the uptick to 9 precent is good because it implies more people are looking for work. You have to be looking for work to be considered unemployed.

But as IBT points out the numbers participating in the job market have not risen.

"The labor force participation rate remained stuck at 64.2%, hence the increase in the unemployment rate to 9% from 8.8% is interesting.  Usually you'd expect in recovery for more people to flood back into the job market seeking work, which is why the unemployment rate rising would not necessarily be a bad thing.  However that was not the case in April.  A more typical 66-67% labor force participation rate would add a few % to the unemployment rate."

Shedlock concludes:

"The official unemployment rate is 9.9%. However, if you start counting all the people that want a job but gave up, all the people with part-time jobs that want a full-time job, all the people who dropped off the unemployment rolls because their unemployment benefits ran out, etc., you get a closer picture of what the unemployment rate is. That number is ....much higher at 15.9 percent."


John Ransom

John Ransom is the Finance Editor for Townhall Finance.