This article first appeared at The McAlvany Intelligence Advisor on Monday, May 5, 2014:
Perhaps the most famous quote regarding statistics comes from Mark Twain: “There are three kinds of lies: lies, damned lies and statistics.” The only trouble is that Mark Twain said it didn't originate with him: he got it from British Prime Minister Benjamin Disraeli. But historians haven't been able to find that phrase in any of Disraeli's writings!
How appropriate is that? One cannot even validate a quote about statistics to prove that the Bureau of Labor Statistics (BLS) is so widely off the mark as to approach deliberate deception. Said the BLS in its report on “The Employment Situation – April 2014”:
Total nonfarm payroll employment rose by 288,000, and the unemployment rate fell by 0.4 percentage point to 6.3 percent in April…
But then, under Household Data, the BLS reported that the number of jobs in that survey, declined by 73,000! How is that possible? In a footnote the BLS explains:
Monthly establishment survey estimates include an adjustment to account for the net employment change generated by business births and deaths.
The adjustment comes from an econometric model that forecasts the monthly net jobs impact of business births and deaths based on the actual past values of the net impact that can be observed with a lag from the Quarterly census of Employment and Wages.
The establishment survey uses modeling rather than sampling for this purpose…. (emphases added)
In other words, the Establishment Survey is based on estimates and models instead of actually counting.
But that didn't keep Jason Furman, the head of Obama's Council on Economic Advisors, from taking credit for the numbers that exceeded estimates, and then blaming Congress for not doing even more:
The President continues to emphasize that more can and should be done to support the recovery, including acting on his own executive authority to expand economic opportunity, as well as pushing Congress for additional investments in infrastructure, education, and research, an increase in the minimum wage, and a reinstatement of extended unemployment insurance benefits.
In contrast, Peter Schiff, head of Euro Pacific Capital, weighed in with some of the real reasons the numbers from the BLS were phony:
In April, almost a million Americans left the labor force in one month. I think that's the largest exodus from the labor force since they began keeping the statistics.
Better than 80 percent of them potentially were just made up by the government because over 240,000 of the jobs were the result of the birth-death assumptions where the government simply assumes that new businesses were created in April and that they hired people.
And those jobs created, giving the BLS the benefit of the doubt, weren't real jobs, according to Schiff:
They're mostly in low-paying service sector jobs, part-time jobs, temporary jobs.
They're not legitimate jobs where you can support a family, pay a mortgage. They're not indicative of a growing economy but of a weakening economy.
A close look at the BLS report reveals that Schiff is correct. Ninety-two million Americans remain out of the work force, while the labor force participation rate actually declined by 0.4 percent. If the economy were healthy, these numbers would be reversing, with businesses offering jobs and workers taking them. Wages would be higher, too, to attract the needed workers. But in the last twelve months, adjusting for inflation, the average wage is stagnant.
Real jobs, like those in manufacturing and housing, have stayed flat. According to the BLS, construction jobs, for example, have increased by only 189,000 over the last twelve months, averaging a scant 15,000 per month.
One of the best ways to determine what's really happening in the job market is to ask those actually in the job market, or trying to be. Rasmussen's latest polls show that 49 percent of consumers think the U.S. is still in recession, while its employment index dropped in the month of April instead of jumping to reach new highs.
Over the past year the US population rose by 2.3 million while the labor force rose by only 62,000. People dropping out of the work force – some 806,000 according to the BLS – account for the decrease in the unemployment rate. Mish Shedlock of Global Economic Trend Analysis looked askance at the BLS report:
The official unemployment rate is 6.3%. However, if you start counting all the people who want a job but gave up, all the people with part-time jobs who 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 12.3%.
Both numbers would be way higher still, were it not for millions dropping out of the labor force over the past few years.
There are numerous factors keeping people out of the work force, including those who have stopped looking for work, or retired because they can't find work, or those going back to school hoping additional education will help them find work, or those staying in school longer hoping opportunities will improve in the future. And of course, there are those who have figured out a way to defraud the government in one or more of the 80 government programs designed to help people out of work.
Shedlock concluded: “All things considered, this is not a good report.”
Nathan Mehrens of Americans for Limited Government also saw through the statistical smokescreen issued by the BLS:
The unemployment rate dropped by 0.4 percent, but that is owed almost entirely to 1 million people leaving the labor force. 73,000 jobs were lost, according to the Bureau's household survey.
This is not a good report. We're not creating jobs, and the only reason the rate dropped is because so many people gave up looking for work.
This coupled with weak first quarter growth calls into question continued stimulus policies by the federal reserve, and Obama's regulatory stranglehold on job creators.
Another governmental statistical agency, the National Bureau of Economic Research (NBER) claims that the great recession began in December 2007 and ended just 18 months later, in June 2009. And yet, nearly five years later, unemployment, labor participation, and wages have failed to reflect any significant rebound. Nevertheless the White House and its economic sycophants are proving at least one other famous quote about statistics. Wrote Hans Kuhn:
Politicians use statistics like drunkards use lampposts: not for illumination, but for support.
Mish Shedlock: Nonfarm Payrolls +288,000, Unemployment Rate Drops to 6.3%; Household Survey Employment -73,000, Labor Force -806,000
Bureau of Labor Statistics: THE EMPLOYMENT SITUATION —APRIL 2014
CBS: Report: More Than 92 Million Americans Remain Out Of Labor Force
Americans for Limited Government: 1 million leave labor force as economy sheds 73,000 jobs
Peter Schiff: Largest Exodus from Workforce Since Stats Were Kept
Newsmax: 800,000 Leave Workforce as White House Touts Jobless Drop
Rasmussen Consumer Index: 49% of Consumers Think U.S. is in a Recession
Rasmussen Employment Index: Rasmussen Employment Index Drops Slightly in April from Six-Year High