The Fraud That Was Friday's Jobless Report

The author of this article believes that the Labor Department's statistics are horribly inaccurate. The government has recently reported that 163,000 jobs were created last month and the unemployment rate rose .1% to 8.3%. The initial reaction to the jobs report was positive, but the author believes that will change in the weeks to come.

John Crudele
Last Updated: 1:34 AM, August 4, 2012
NY Post

It’s cheatin’ time in Washington. I’ve long believed the Labor Department’s monthly employment statistics are horribly inaccurate. So bad, in fact, that they are hardly worth compiling.

But I never thought the numbers were fudged — until now.

The government reported yesterday that 163,000 jobs were created in July and that the unemployment rate rose by 0.1 percentage points to 8.3 percent.

Those 163,000 new jobs beat the experts’ estimates by a lot even though the July growth was still so moderate that it would barely absorb the number of new workers trying to enter the labor market for the first time.

The rise in the unemployment rate — the dark spot in the report — was explained away in the Labor Department’s press release as “essentially unchanged.”

Wall Street went orgasmic over the report and the Dow Jones industrial average rose 217.29 points — to its highest level in three months.

While Wall Street’s first reaction to the job report was very positive, that’ll change in the weeks ahead.

Why? Because the strength of the report probably eliminated any chance that Ben Bernanke’s Federal Reserve would begin a new money- printing operation, known as quantitative easing, before the presidential election.

As I mentioned in a recent column, the Fed didn’t know what the employment numbers would be when its policy makers met earlier this past week. Now that Labor has reported 163,000 new jobs, the chance of another QE is slim.

Still, by all indications the economy has been slowing recently. QE, in its first and second incarnation, proved to be ineffective in creating economic growth. But QE did cause stock prices to rise nicely and this policy has become a favorite of Wall Street because of that.

So the financial markets can now kiss QE3 goodbye! That realization will hit the stock market in the near future.

But screw Wall Street.

What really matters to you and me is that the economy is creating jobs again, right?

As I’ve explained before, Labor each month guesses at the number of jobs that it thinks are being created by newly formed companies that it really can’t prove actually exist. This is called the birth/death model, in case you want to impress your cocktail-party friends.

So far this year, 400,000 of these phantom jobs have been added to Labor’s count.

July is not a big month for these phantom jobs. In fact, Labor usually subtracts phantom jobs in July — but not this year.

Yesterday’s report included the addition of 52,000 phantom jobs. In July 2010, by comparison, Labor subtracted 18,000 jobs because small, invisible companies were dying and killing jobs.

In July 2011, Labor subtracted 38,000 jobs. On average, 20,000 phantom jobs are subtracted in July.

This year, the economy is now officially growing much more slowly than it was last summer and Labor suddenly adds 52,000 jobs to the July count that it can’t prove exist.

Let me put this into a different perspective: When the economy was still booming in the summer of 2007, Labor subtracted 57,000 phantom jobs.

Could the fact that this is an election year have anything to do with this remarkable discrepancy?

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