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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Les H who wrote (108625)	3/9/2008 2:20:43 PM
From: Les H	Read Replies (1) \| Respond to of 306849

The BS from the BLS The BLS non-farms payroll report showed a loss of 63,000 jobs, which was considerably different than the positive 25,000 that the consensus expected. But the news is in the revisions. This month's report now shows 196,000 fewer jobs in the last three months than was originally predicted. But I predict that by next year the number for this February will be worse, for two reasons. One, the BLS estimates that 135,000 jobs were created in their birth/death model. Remember, this is the "fudge factor" number to take care of jobs created by new and small businesses that are not part of the establishment survey. Because it is based on past performance, it tends to understate growth in employment when the economy is recovering from a recession, and overestimate it when the economy is going into a recession. That 135,000 number includes an estimate of 9,000 new construction jobs and 10,000 new jobs in the financial world. It is far more likely these were negative numbers. Job loss will probably be revised to down over 100,000 by this time next year. Remember, this is a survey of businesses. Once a year they look at actual data and revise the numbers from their original estimates. We will see the next annual revision March 11. It is likely to show further declines in employment in the last half of the year. But the BLS data is lagging. For instance, California does their own estimate of employment in their state. The data is basically one month "fresher" when it is released. Let's take the estimate for the Riverside-San Bernadino area of California. The BLS estimated that there were 32,400 new jobs in December in the area. But California, with more thorough methodology, saw job losses totaling 10,100. BLS estimates 56,000 more total jobs than California does in that one area alone. The data is even more stark in the major metropolitan areas. Now, this will all get resolved over time with revisions, but it does distort the current data. (Thanks to John Burns Real Estate Consulting for giving me that data.) 2,500,000 "Lost Jobs" and Counting The reality is that there were probably closer to 2,500,000 "lost jobs" in February. How so? The Liscio Report notes that: "Net changes in total employment over time are a function of gross job losses and gains. For example, in 2006, there was a net gain of 1.7 million jobs in the private sector, according to the BED program. (This number differs from the establishment survey.) But that net gain came from a gross gain of 30.8 million jobs, and gross losses of 29.1 million jobs. That's quite a furious pace of turnover under a rather placid surface." If we take those losses for the year of 29.1 million and divide by 12 months, something like 2.5 million jobs were lost in an average month in 2006 (while 2.6 million jobs were found). The Liscio Report goes on to show that total job turnover in the US was a remarkable 13.2% of the total labor market last year. But also, volatility is actually down from 15% in 2000. This demonstrates a remarkably robust employment marketplace, in which roughly 2.5 million people will change jobs in any given month. Granted, it is harder to find a job now than a year ago, but it helps to keep in mind that a lot of people are finding new jobs every month, even in a slowing economy. The economy is simply slowing down. It will not come to a halt. As an aside, the unemployment rate dropped by 0.1%. How can it drop if we lost jobs? Basically, because the unemployment rate is estimated from a survey called the household survey. They literally call hundreds of thousands of homes and ask if anyone is working or looking for work. If you are not looking for work, then you are not counted as unemployed. This month the household survey showed a drop of 255,000 jobs (quite the difference from the headline survey); but an even larger number of people, 450,000, are not looking for a job, presumably because they do not expect to find one. So, even though fewer people are working, the data shows the unemployment rate falling. Go figure. investorsinsight.com