The Birth/Death Model Scam

American Scofflaw

Narrow unemployment is now at 7.6%, while the broader measure of underemployment is a whopping 13.9%. and still rising....U-6 is the true measure of employment ...the one trotted out by the media is crap.

by John Crudele

The Birth/Death model is the government's guess as to the number of new companies being formed or going out of business in each month of the year.

And, guess what? The Labor Department assumes that there is a net gain in new companies in each and every month - except January.

In fact, government statisticians subtract an enormous number of jobs out of their total count each January.

Remember what I said about the decline of 17,000 jobs in January 2008 - the number shocked the experts and caused a series of job cuts that hasn't ended yet.

Well, the Labor Department subtracted 378,000 jobs from the nation's total payrolls that month because of its Birth/Death model.

Did all those companies die? Probably not; that's just the assumptions that the government long ago decided to make.

The same pessimistic assumptions are made every January. In January 2007, a total of 179,000 jobs were deducted by the Birth/Death model; 193,000 were subtracted in the first month of 2006; 280,000 came off the total in January '05 and a whopping 321,000 in January 2004.

Bottom line: There is no reason to believe the Labor Department won't make the same dour Birth/Death assumptions in tomorrow's count.

That's why the January employment report has a good chance of being worse than expected - worse than horrible. And that is also the reason you should treat the announcement with a deep sense of skepticism.

Other reports on the job market show a worsening over the past few months.

So there's no reason to expect the Labor Department to announce any miracles tomorrow. But if the number is a disaster, at least you now know why.