Thursday, July 2, 2009

Birth / Death Model Has Added 800,000 Jobs

Per The Big Picture (bold mine):
Birth Death Adjustment: A major modification to the NFP measure is the Birth Death adjustment. Changes to the BD were proposed in 2001, and implemented a few years later. This attempts to capture early improvements in employment at the start of a recovery was the goal. The trade off is it wildly overstates strength at the end of a cycle. For example, in 2007, approximately 75% of reported new jobs were due to this adjusatment. In 2008, the BD adjustment inexplicably showed lots of job creation in construction and finance.
How wildly? Well according to the Birth / Death model, small businesses have added 800,000 jobs over the past 12 months... right.

Source: BLS