There was a job boom in the US economy in April that was as phony as any Hollywood explosion.
The Labor Department announced Friday morning that a healthy 288,000 new jobs were created in April and that the unemployment rate declined by a stellar 0.4 percentage points, to 6.3 percent.
Wall Street had been expecting a gain of 200,000 and the jobless rate to fall to 6.6 percent.
If you read Thursday’s column, you already know that I predicted growth would be better than the Street was anticipating. That’s because the Labor Department adds a load of phantom jobs in April.
The government tries to estimate the number of new companies it thinks sprouted up during the month based on something called the birth/death model. The 288,000 figure included 234,000 of these phantom jobs.
Before you start doing the math and come up with the wrong answer, I have to explain that those 234,000 phantom jobs are added to the top-line — that is, the total number of jobs in the country.
The 234,000 number goes through a seasonal adjustment formula before it contributes to the headline figure of 288,000. In other words, not all the phantom jobs make it into the total that will have politicians foolishly oohing and aahing and other papers writing misleading headlines.
But the phantom jobs’ effect is so strong in April — and in May and June — that it sharply skews the job figures higher.
So I’ll make my predictions for May and June’s numbers right now: There will be better job growth that the “experts” are predicting and Washington will be beaming.
That joy will end in the summer when the Labor Department pulls back on the birth/death model and phantom jobs slow to a trickle.
This is good news for the Federal Reserve, which needs a stronger-looking economy to extricate itself from its disastrous quantitative easing money-printing policy. By the time the employment picture worsens in the summer, Fed Chairman Janet Yellen will have most of the QE monkey off her back.
The true effect of these phantom jobs can be seen in one particular line in Friday’s employment report. The Labor Department claims that 75,000 of the new jobs fell into the “Professional and Business Service” category. That’s the exact number of phantom jobs added to that sector under the birth/death model.
All of what I just mentioned comes out of the so-called Establishment Survey, which is a monthly poll of businesses.
There’s the second monthly survey conducted for Labor by the Census Bureau that calculates the nation’s unemployment rate — which achieved an eye-popping decline. This is variously called the Household Survey or the Current Population Survey.
My readers already know that I’m investigating the use of falsified data in this survey. On Thursday, the inspector general for the Commerce Department, which oversees the Census Bureau, found that data in this survey was flawed. There’s also an ongoing investigation by the House Oversight Committee that I’m sure will find even worse.
So what did the April jobless survey reveal? The Labor Department didn’t put this figure in the press release (of course), but if you dig deeply enough (try Table A), you’ll see that during its interview of households, Census determined that there was a loss of 73,000 jobs in the US in April.
A loss — not a gain.
What happened to the 288,000 gain?
“That happens a lot,” says the guy at Labor who was answering media questions. “It’s a different survey.”
Okay, it’s a different survey, but it’s the same country, the same economy. Shouldn’t the numbers at least be moving a little bit in the same direction?!
There’s something else. That gigantic drop in the unemployment rate was entirely the result of 806,000 people telling surveyors that they were no longer looking for jobs.
You have to ask yourself, if the job market really did boom in April, why did so many people suddenly decide to stop looking for work?
Maybe they all hit the lottery.