The US employment picture is not as rosy as official statistics claim, according to Union Bank of Switzerland economists. In a May 10 note to clients UBS economists wrote:
As we suggested in yesterday’s Comments, Friday’s non-farm payroll numbers got swallowed up by the on-going worries about Greece. But, the “jump” of 290,000 new jobs was a big topic on the weekend talk shows. There was a lot of “we’ve turned the corner” portrayals.
Longtime readers know I’ve thought some of the improvement in the data was “suspect” (to be kind). For the last eight weeks, Initial Unemployment Claims have averaged 450,000 per week. So, over the last four weeks, 1.8 million people were laid off. How does that fit in with the claim that 290,000 new jobs were created? The obvious answer is that it doesn’t.
So, let’s drill down into the payroll numbers to see what’s going on. The CES Birth/Death adjustment added 188,000 of those jobs. Birth/Death does not refer to people but to businesses. The BLS guesses how many new companies opened versus how many closed their doors. The BLS then uses that guess to guess again how many jobs those business created or lost.
Another 66,000 of the new jobs came from census hiring. Those are temporary jobs and those folks will be laid off later in the year. Speaking of temporary, another 26,000 of the new jobs were non-census temporary. Let’s recap. A guess produced 188,000 of the jobs, 66,000 were census and 26,000 were temporary. Thus, it seems 280,000 of the 290,000 “new jobs” were either temporary or the result of guesswork.
