The Labor Department created 469,000 new jobs last month — out of thin air.
How’d the Labor Department come up with that figure?
By changing a definition of one segment of jobs. In other words, if you can’t create actual jobs, shuffle things around until it looks like you created jobs.
This is going to be very complicated to explain, so please stay with me, or I’ll run my fingernails across the blackboard to get your attention. (If you are from the Dry Erase generation, please ask someone older what I mean.)
This story starts at a section of the Labor Department called the Quarterly Census of Employment and Wages, or QCEW for short.
Each year the Labor Department does a survey of state tax records to see whether or not its estimates of job growth seem accurate. The survey isn’t very up-to-date; it is supposed to determine the accuracy of figures released as of March 31.
On Sept. 26, the Department issued its report, which is called a preliminary benchmark revision.
Early next year the Department will put out the final benchmark revision, and we will know with more certainty what real job growth was from March 2012 to March 2013.
Okay, back to the preliminary benchmark revision put out on Sept. 26.
In a press release that wasn’t widely distributed, the Labor Department revealed that it believed it had undercounted — by 469,000 — the number of jobs created from March 2012 to March 2013.
That’s not a huge number in the big picture since it is only 0.3 percent of the workforce. But politicians are always happier when there are positive trends in employment.
The department was up front about all this — if you understand bureaucracies and monitor press releases religiously.
The Sept. 26 release said: “This (preliminary benchmark) revision is impacted by a large non-economic code change in the QCEW that moves approximately 469,000 in employment from private households, which is out-of-scope for (the Current Employment Statistics) to the education and health care services industry, which is in scope.”
Got that? Well, of course you don’t.
So let me translate and show you how this magic trick works.
One group of numbers crunchers at the Labor Department — the QCEW — decided that people who work in private homes as gardeners, cooks, butlers and maids were being included in the wrong category.
Why did they decide this? Who knows!
Previously, these workers had been included as employees in private households. From now on they will be considered providers of non-medical home-based services and be considered part of the education and health services industry.
Get it? Out of one group and into another. No big deal. In fact, this part of the trick didn’t produce any new workers since the people who were employed in homes were simply being shuffled from one category to another.
Ah! Here’s where it really gets tricky.
The QCEW folks then took their redefinitions and passed them on to their brethren down the hall. Those are the folks who produce the monthly Current Employment Statistic (CES) jobs report. (That’s the report not coming out Friday because of the shutdown.)
It turns out that the CES people never had a category that counted people who worked in private households. So those 469,000 people whose jobs have been reclassified look like new employees to the CES folks who create the monthly survey we all follow so closely.
The bottom line is this: It will look like the economy suddenly gained a large number of jobs in the last March-to-March year. Without the reclassification of those household workers there would have been a downward revision in the September survey.
The changes I just explained will only have a slightly positive effect on each month’s figures, including the September job numbers that will be released when/if the government gets back to work.
As you also probably heard, the Labor Department isn’t going to release the September jobs report tomorrow because of the shutdown.
No government = No paperwork = A disappointed Wall Street.
So, what would have been the statistically honest thing to do? The Labor Department should have gone back in time and revised all its annual job reports so that people who work in people’s homes are retroactively counted as being in their new classification.
And for the next few months it should put an asterisk next to the job growth figure, showing — in simple terms — that there isn’t an apple-to-apples comparison.
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A report from payroll giant ADP on Wednesday showed that a disappointing 166,000 jobs were created in the economy’s private sector during September. Wall Street had been expecting 180,000.
I’ll say it again: I think the government’s report on job growth in September is going to be awful.