Friday, October 02, 2009

Jobless situation could be worse than reported:

Bloomberg: U.S. Job Losses May Be Even Larger, Model Breaks Down
The U.S. economic slump earlier this year was so severe it short-circuited the government’s model for calculating payrolls, raising the risk that today’s jobs report may be too optimistic.

About 824,000 more jobs may be subtracted from the payroll count for the 12 months through last March when the figures are officially revised early next year, a Labor Department report showed today. The revision would be the biggest since at least 1991. (...)

Because the government doesn’t know if a company fails to respond because it has gone out of business or is just late, it estimates the number of companies that may have folded. By the same token, it plugs in an estimate for the formation of new businesses to account for their hiring. (...)

“In this period of steep job losses, the birth/death model didn’t work as well as it usually does,” Manning said in an interview. “To the extent that there was an overstatement in the birth/death model, that is likely to still be there.”

The model added about 184,000 jobs to the payroll total last quarter compared with a 135,000 increase in the same period in 2008, before the financial crisis deepened with the collapse of Lehman Brothers Inc.


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