The myth of "5 million new jobs created".

JohnnyRingo

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Sun Apr-16-06 12:11 PM
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The myth of "5 million new jobs created".

George buxh is out pleading for his tax cuts to be made permanent. In doing so he's touting that "5.1 million jobs were created in the past 3 years".
Amid all the news of plant closings, outsourcing, and layoffs that seems unlikely at best, so a closer look into how they collect that data is warranted.

When Buxh took office, the hemorrhage of jobs became immediately apparent. At first they sent their foot soldiers out into the media to proclaim the mantra of "Clinton/Gore Recession", even though a recession is officially two months in succession of negative growth. That was March and April of 2001, the gray band below:

Tax cut after tax cut followed with little of the promised results of any increased hiring. For awhile they blamed 9/11, but something else had to be done, so in 2003 he changed the way we count the employed:

Since WWII employment has been calculated by what's known as "The Establishment Survey" (also known as the "Payroll Survey").
Buxh noticed that another method was tracking much better. That method is known as "The Household Survey".

Whats the difference?
Here's the official reason for switching: (establishment survey on left)

And here are the results of the different formula :

And the resulting numbers:

This chart shows that the administration picked up jobs just by switching methods in 2003!

Now... let's see why the household survey looks so much more optimistic:

http://www.epinet.org/content.cfm/briefingpapers_bp148
The payroll survey samples 400,000 business establishments. This represents an average of 40 million jobs each month; in September 2003, 40.5 million jobs were sampled (Getz 2003). In contrast, the household survey samples only 60,000 households, representing fewer than 70,000 workers. In September 2003, employment estimates were based on a sample of 67,804 workers. Thus, the payroll survey sample covers 600 times as many workers as the household survey.

The payroll survey employment estimates are benchmarked to the unemployment insurance tax records. This yearly process anchors the payroll employment numbers to the comprehensive count of all nonfarm payroll employment. The household survey, on the other hand, is benchmarked only once a decade to the decennial census, resulting in a less precise employment measurement than the payroll survey.

Large revisions and misreporting are also less likely for the payroll than for the household employment numbers. In recent years, the household survey has undergone far more extensive revisions than the payroll survey, particularly with respect to population estimates. In January 2003, an additional 576,000 jobs were added.

The household survey's smaller sample size contributes to the increased variability in its employment estimates. Figure 1 displays the employment estimates for the household survey and the payroll survey. The household survey is extremely volatile, indicating its inadequacy for analysis of month-to-month employment trends.

Statistical agencies use the payroll survey for measuring employment trends and for other analysis of economic conditions. For instance, the Bureau of Economic Analysis (BEA) uses employment, hours, and wages from the payroll survey to estimate gross domestic product (GDP) for service industries, and the BLS relies on payroll employment and hours (supplemented with self-employment from the household survey) to estimate productivity. The strengths of the household survey are in measurements that the payroll survey is not set up to do, such as the unemployment rate, self-employment, the employment-to-population ratio, occupations, and breakdowns by demographic. While the household survey is useful for measuring this type of economic information, the payroll survey is a much better tool for measuring employment levels and trends.

In conclusion, George W Buxh created 5 million jobs the same way Merlin created gold from lead.
He waved his hands about, distracted with a puff of smoke...then did a switch.