Market Talk

Amid all the wailing about sovereign debt downgrades and such, you may have missed yesterday’s jobless numbers from the Bureau of Labor Statistics. No, you didn’t miss the monthly jobs report, or  even the weekly initial claims. What you missed (if you did miss it,) was the Job Openings and Labor Turnover Survey. Or, the JOLTS report.

The BLS reported there were 2.5 million job openings in October, with the opening rate at 1.9%, a level that has held steady since March. That means hiring has not picked up at any pace since the stock-market rally – and the purported recovery – began, and the ratio of more than six unemployed for every job opening remains steady.

So even if you buy into Friday’s jobs report, the fact remains that hiring has not picked up, which is confirmed by the fact that long-term unemployment continues to rise.

And if you don’t buy into Friday’s report, well, you’re not alone. Like I wrote Friday, I’m skeptical. And certainly Fed Chairman Ben Bernanke didn’t think it was strong enough to get him to even hint that he might lift interest rates off the floor. And other folks are still deconstructing it.

Frank Veneroso of Veneroso Associates, who initially called the November jobs report “super strong,” is rethinking that position today. He was initially impressed by the increase in the work week and the upward revisions to prior months. But “after thinking about this for several days, I realize I may have overstated the implications for recovery strength.”

“My concern today that I was premature in heralding significant employment improvement last Friday is fed by some of the recent concurrent economic data.” He cites several competing reports, the NFIB report, the ISM services report, the JOLTS report, and withholding tax data, which all paint a weaker picture than the BLS report.

“The withholding income tax data does not lie because tax withholding is automatic. The payroll survey lies because the birth/death model contribution is a ‘plug number’ based on a past employment picture that looks nothing like employment in this recession, which is the worst in three generations.”

Gluskin Sheff’s David Rosenberg takes note  note of a little known (I’d never heard of it) calculation the BLS does, the “adjusted” household survey, which tries to reconcile the establishment and household surveys. According to that figure, the nation lost 109,000 jobs in November.

“This may well be the nugget that everyone missed because the Household Survey does a much better job at picking up what is happening in the small business sector,” Rosenberg wrote.

And the error may come from the bureau’s calculations about new business creation, which results in the relatively notorious “birth/death adjustment.”Jeffrey Miller at A Dash of Insight explores the methodology behind the monthly jobs report, and comes to this conclusion: the methodology missed some important trends.

The BLS, essentially, guesses at job creation, extrapolating from job destruction. The “residual,” as Miller calls it, is the birth/death adjustment. “For many years this residual was stable,” he writes. “The most recent test against the state data indicated a significant error, showing that the BLS estimates have been wrong for nearly a year, especially since 1Q09.”

“Something important happened at the start of the year – probably the loss of credit available to new businesses,” he says. “The strong historical relationship used by the BLS finally broke down.  Without a good estimate of job creation, the BLS monthly change is suspect.”