Richard Benson, How the Government Creates Jobs

How the Government Creates Jobs

Since 9/11, 60 percent of job creation has related almost directly to the housing boom and consumer spending, generated from home equity extraction through mortgage refinance. Remember, the Federal Reserve cut interest rates to one percent and kicked off the greatest housing bubble of all time. The housing boom created an America with over 1,200,000 real estate agents, and hundreds of thousands of jobs in the mortgage and home construction industry.

On the surface, the job market looks sound and Wall Street bulls take every opportunity to reinforce this belief whenever low initial unemployment claims are announced. But common sense tells me there is something brewing below the surface and this housing bust will have an even bigger impact on our economy, than previously suggested, by reducing employment and consumer spending, in a big way.

(The officially reported governmental statistics fail to note that a very high percentage of new jobs created in the past few years were commission-only jobs, or jobs with independent contractor status. Workers categorized as independent contractors are not eligible for unemployment benefits. This means all of the real estate agents who haven't made a sale, along with the mortgage bankers who no longer have a company to bring their loans to, will not be filing for unemployment, even though they haven't made a dime. The Department of Labor Statistics, however, continues to view these unemployed and vastly under-employed workers as holding full- time jobs.)

The latest employment data from the payroll survey showed it added 88,000 workers. However, the household survey - a broader measure - showed a loss of almost 500,000 jobs. According to the household survey, over 360,000 workers simply dropped out of the labor force in April. So, if you want to believe the Wall Street touts, please go right ahead and put your rose-colored glasses back on and tune into that movie with the happy Hollywood ending. If, on the other hand, you think like me and believe there is an economic storm brewing, please read on.

Our government "prints up jobs out of thin air" the same way the Federal Reserve prints up money. To manufacture jobs, The Bureau of Labor Statistics uses their very own Net Birth/Death computer model (see CES Net Birth/Death Model for job creation at www.bls.gov). The idea behind the model is simple: Because small firms are always failing and starting up and it takes a few months for them to report on the payroll survey, an estimate is needed for the new jobs created. So, back when the economy was recovering, the Net Birth/Death Computer Model added jobs that had very likely been created. Their methodology goes like this:

- The Net Birth/Death model first creates jobs on a non-seasonally adjusted basis;

- The computer-generated jobs are then added to the jobs actually reported by the payroll survey for the month;

- The new total is then seasonally adjusted which creates the reported monthly unemployment number announced to the public. It's only much later that ongoing payroll surveys confirm or rebut the estimated job creation.

I realize the above may sound confusing, but it's actually meant to. This is economic propaganda created by our very own government! This false creation of jobs is not that much different from the over-stated earnings created by the executives at Enron that brought the company down.