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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (71221)	10/6/2006 4:59:44 PM
From: YanivBA	Read Replies (1) \| Respond to of 110194

Have you seen this Mish? What do you make of it? How reliable are the tax records from the unemployment insurance program? U.S. Finds 810,000 More Jobs, Helping Explain Data Discrepancy By Carlos Torres bloomberg.com Oct. 6 (Bloomberg) -- The U.S. Labor Department found employers hired almost a million more workers in the year to March than previously estimated, bringing job gains more in line with what households had been saying all along. About 810,000 more jobs will be added to the payroll count when the figures are officially revised next February, the department estimated today. The proposed revision, the biggest since Labor started adjusting the numbers in 1991, would mean the economy created 2.6 million jobs from April 2005 through March instead of the 1.8 million now on the books. The revision will go a long way toward solving the mystery of why households, in a separate Labor survey, were saying job gains during that period were much larger. Confirmation that employment was stronger may help explain why consumers haven't buckled when faced with record fuel prices and a decline in the housing market. ``It explains the strength in incomes that we've seen and it explains why the unemployment rate has come down to a five- year low,' said Conrad DeQuadros, a senior economist at Bear Stearns Cos. in New York. ``There is some support to this economic expansion.' The jobless rate unexpectedly fell to 4.6 percent last month, matching the rate in May and June as the lowest since 2001, today's report also showed. The Labor Department every month asks about 400,000 businesses and government agencies to report on payroll levels. That report covers about one-third of all non-farm workers. Household Survey Labor also separately polls about 60,000 households to calculate the unemployment rate and the size and demographic makeup of the labor force. The household survey, usually considered less reliable because of its smaller sample size, showed a 2.5 million increase in hiring in the 12 months ended in March. The payroll revision ``lends additional credence to the signal that the household survey had been sending - that the job market was very tight,' said Stephen Stanley, chief economist at RBS Greenwich Capital in Greenwich, Connecticut. ``It explains why consumers have stayed so strong. It's because they've been seeing good gains in their paychecks.' Once a year, the Labor Department revises its payroll figures after combing through tax records from the unemployment insurance program that covers practically all businesses. Those records are only available after a lag, explaining why it takes over a year to make the tabulations. Lack of Response The Labor Department said it is looking into why the expected revision this time around is three times larger than the average over the last decade. Part of the investigation involves determining whether the firms that are doing much of the hiring aren't responding to their survey, said Kirk Mueller, chief of national benchmarking and special projects at the Bureau of Labor Statistics in Washington. Another possibility is that the department's method of determining the formation and demise of businesses, called the birth/death model, may be faulty, he said. Because it takes several years to appear on the government's radar screen, the Labor Department plugs in an estimate for the formation of new businesses to account for their hiring. By the same token, it also doesn't know if a lack of response is because a company has gone out of business or is just late. Therefore the government also estimates the number of companies that may have folded. `Lost keys' ``We haven't seen anything yet that has shown any particular thing to be a problem,' Mueller said in an interview. It's unclear how long the investigation will take, he said. ``It's sort of looking for lost keys. You stop looking when you find them.' The divergence between the two employment surveys continued last month. The household survey showed a 271,000 gain in employment for September while payrolls were up a smaller-than- expected 51,000. Because the revisions suggest the poll of households may be capturing employment gains better than the payroll survey, the job market may be stronger than it looks, economists said. The 10-year Treasury note fell the most since June and the dollar rose as the job report and revisions suggested the economy can withstand the decline in the housing industry. The numbers also diminished speculation that the Federal Reserve will reduce interest rates in coming months. ``The household data, which now looks very similar to what the revised payroll data look like, is still showing big job gains,' said Bear Stearns's DeQuadros. ``So maybe the economy is not weak enough to give the Fed room to cut rates. We don't see any reason why the Fed would want to cut rates.'