Rethinking the 'Strong Jobs Recovery' Scenario

There is some debate on how accurate the birth/death adjustment is. Morgan Stanley's analysts have found it to be (mostly) reliable; John Williams of Shadow Government Statistics thinks it significantly overstates job creation.

I fall somewhere between the two. Given all the effort that goes into actually counting establishment jobs vs. merely estimating them, one would expect that this projection would be a relatively small number of the total new-job count. A modest estimate of new jobs created would be acceptable as a reasonable adjustment to the true data collection.

But that's not what we see when we take a look at the data closely: Of the 4.4 million new jobs from the March 2003 low until present, the birth/death estimate accounts for 1,639,000. That is an extremely significant 36.7% of new jobs.

By any measure, that's a hefty estimated adjustment to an actual data-based number. It is not particularly credible to me to have a statistical projection be more than a third of a measured data series. To be blunt, it is a game-changing "adjustment."

To get an idea of how big this is, imagine how your performance might be enhanced by goosing it more than a third: This would raise the output from so-so to spectacular. A mediocre baseball hitter (.250) becomes an MVP (.392); an average bowler (200) rolls a perfect game; meanwhile, a weekend duffer who shoots an 88 becomes club champ with a 56.

Nice statistical work, if you can get it.

Our last measure is not quantitative, as the prior three issues have been. It is qualitative:

As I've noted previously, the jobs recovery compares rather poorly with prior post-World War II recessions and their aftermaths. We've seen that the jobs created are unusually dependent upon the real estate complex. We also know that the private sector jobs created have, on average, paid less and have had weaker benefits than the jobs they've replaced. And we also see there has been an unusually large number of government jobs created. Overall, the jobs quality during this recovery is mediocre.

Not Up to Snuff Job growth in the current recovery is weak by post-World War II standards

Source: Barry Ritholtz