Friday, January 9, 2009

Unemployment Way Worse than 7.2% Due to Birth / Death Adjustment

The Birth Death Model once again overstates employment. In other words, things are a lot worse than the 7.2% rate presented to us. Per The Big Picture:

Since 2003, the B/D adjustment has been part and parcel to BLS' Current Employment Statistics (CES) program, the official measure of US employment. In brief, the Birth Death adjustment imagines (hypothesizes) how many jobs were created by companies too new and/or too small to participate or be found by CES. The model attempts to create what is perceived as a BLS error at the start of any recovery, when many new jobs are created but missed by BLS.

Does anyone think small businesses have really added 53,000 jobs to the financial sector over the past 12 months (and 18,000 last month)? Get ready for a severe reaction next month when it snaps back (the annual correction to the B/D figure is made in January's release - coming in February).

Source: BLS


  1. Hi Jake,

    Your analysis is right on track because you will notice that the ADP report from earlier this week showed that small and medium-sized businesses are where the bulk of their calculated job losses came.

    Obviously, this means that these estimates are going to be revised sharply upward when the real data on smaller companies is in and the Birth/Death model is no longer needed.

  2. agree. the adjustment for B/D typically comes in january. i wonder if that figure will reflect all those losses or just a portion.

  3. On a somewhat related note, I read another article today that indicated: "Under President Lyndon Johnson, the government decided individuals who had stopped looking for work for more than a year were no longer part of the labor force. This dramatically decreased the jobless rate reported by the government." The article: < > argues that this change makes any comparison of today to the Great Depression "apples to oranges".

  4. In honest opinion, I believe Googling:-

    "Chris Martenson"

    and completing the

    "Crash Course"

    will confirm the present and future state of employment over the coming months.