California is at it again. It released its employment and jobs reports today, in parallel with the national reports released by the Bureau of Labor Statistics. What a doozie.
The national reports indicated that 175,000 jobs had been created around the country in January, though the unemployment rate ticked up to 6.7%. Be that as it may, in California the opposite happened: the unemployment rate ticked down to 8.1% in January from 8.3% in December, but the state, despite gorgeous weather, lost 31,600 jobs.
Is the California boom already over?
Governor Jerry Brown just declared that he’d run for reelection. “I like working,” he explained. He’d ride to victory on his economic success record of having turned a gaping budget sinkhole fiasco into what is now called a “surplus.” As asset prices from homes to startups rocketed into the stratosphere, inflated by the trillions the Fed has been dumping on the land, newly printed billionaires and multimillionaires started paying capital gains taxes on their miracles – and tax revenues jumped. A good thing because we don’t want to constantly deal with IOUs the government issues when it runs out of real money [read…. California MUST Have Magnificent, Endless Bubbles in Housing, Stocks, And IPOs – Or Go Broke Again].
But this boom in California is a boom in certain coastal areas. The rest is struggling. The unemployment rate in San Francisco County was 5.3% in January. In Los Angeles County it was 9.0%. And in Colusa County (on I-5 about an hour north of Sacramento), it was 25.9%.
So, every month, the California Employment Development Department (EDD) conducts a survey of about 42,000 employers to measure the jobs in the economy. This survey, EDD points out, is much larger than the Federal survey of households in California that is used as basis for the Federal unemployment rate. And being such a large survey, the EDD payroll report should produce reliable results. You would think.
It found that in January, there were 15.292 million wage and salary jobs in the state, down 31,600 from December, seasonally adjusted. This was a slap in the face of Gov. Brown’s economic miracle, it seems, though there were still 319,500 more jobs this January than a year ago.
The losers? Construction, trade, transportation and utilities, information, leisure and hospitality, and government. In total, they shed 46,500 jobs. New claims for unemployment insurance in January, at 73,040, were nearly flat with December, but up from 68,907 a year ago. So was January a turning point? Is the California boom already turning into a bust before it could spread further inland?
Turns out, the EDD actually doesn’t have a clue about the number of jobs in January. It was just guessing. Pulling numbers out of thin air. Just like the BLS and all the other statistical agencies around the world. Like them, the EDD releases credible-looking, detailed reports about how many jobs were created or lost in a month, knowing that the numbers were hogwash.
The gigantic revisions prove it. In today’s report, the EDD also claimed that there had been 15.323 million jobs in December 2013. But in the original report a month ago, it had found only 14.767 million jobs. Over the course of a month, it had gathered up an additional 556,000 jobs!
It wasn’t just one month that had gone awry. The number of jobs in December 2012 was originally pegged at 14.398 million, only to get revised up a month later by 127,000 jobs. For January 2013, the number of jobs was revised up by 446,000!
OK, I get it. These are estimates based on surveys. Anything can happen. I get that. Incomplete data was statistically adjusted, filtered, twisted, and rectified. And since the original estimate, more data accumulated. In some months, the original estimate is revised only minimally. But in others, the revisions for California alone are several times larger than the total number of jobs created nationwide.
So how do you know if the California economy gained or lost 30,000 jobs from one month to the next when the total job count is off by half a million? You don’t! And the geniuses at the EDD don’t either. Sure we want these reports. They give us something to mull over, the media something to palaver about, and the markets a reason to rally. After enough revisions, they might even paint a fairly accurate picture of how many jobs had been created, well, many months ago. And the unemployment rate – that 6.7% nationwide and 8.1% in California – will never be an accurate rendition of reality on the ground because it wasn’t designed to be. It was designed to nudge an unemployment debacle into the best possible light.
But these monthly numbers, whether they’re conjured up by the EDD or the BLS, and however erroneous they may be, play a key role in decision making. If they’re positive, they’re hyped by politicians and central bankers and are used for years to come as affirmation of inane policies and drunken money-printing binges. And if they’re crummy, despite all efforts to beautify them, they’re blamed on the weather or something.