Friday, February 4, 2011

Is There Something Wrong With the BLS Employment Model?

The following is pure conjecture. I have do data to support my central thesis.

A commenter recently posted this observation:
Is there something wrong with the BLS methodology?

I wouldnd't say this except for the fact that its data now seems to be providing what are outliers to other data, even other data related to employment.

The other thing to consider is that the BLS really didn't pick up the move into recession jobs wise in 2008. Years later, those numbers have in some cases been massively revised downward.
Let me make two observations.

1.) The recession of 2008 was incredibly severe. According to the latest data, the economy lost over 8 million jobs. There was a period when the economy was shedding over 600,000 jobs/month. This could throw off any statistical gathering service.

2.) Starting sometime over the last 12 months, we have the great wave of baby boom retirements beginning. This will greatly alter the employment data in God knows how many ways, along with the underlying assumptions of employment data collection.

I bring this up because of an email conversation I had today where all the participants explored the idea the BLS is simply trying to figure out what is going on right now and not having any answers regarding the employment situation. In addition, there is the question of whether or not the standard BLS methodology is out of sync with the current economic situation.

This does not mean that the employment situation is better than reported. For all we know, if the above situation is accurate, the employment situation could be worse. But the last few employment reports have been downright from a variety of angles.

Ultimately, we don't know if the above statement is accurate or not, so please do not take it as anything but an open question to which we will probably never have an answer. However, given the severe shocks to the economy over the last 2-3 years and the underlying changing dynamic of the labor force, we may also be dealing with a time when the numbers almost seem completely and totally random (i.e. they have no underlying logic/sense to them).