October 9, 2006

Labor Department: Bush Economic Boom Generates Big Job Growth

The Wall Street Journal takes note of something the mainstream media largely ignored: the Labor Department has revised upward - by 810,000 - the number of new jobs created in the 12 months ending March 2006 after reconciling data in two different employment surveys. Essentially, the WSJ says, the Labor Department has finally admitted what some people - including me - have been saying for quite awhile: The "establishment survey," which surveys employment trends at large companies, undercounts true job growth, while the "household survey" does a much better job at capturing the big surge in self-employed entrepreneurs like, well, like me.

Essentially, the number of people reported having jobs, as tracked by the government's "household survey" was rising much faster than the number of people that large employers tracked by the government's "establishment survey" reported having on their payrolls.

Two years ago I collected data on the formation of limited-liability companies from 27 of the 50 states, and found that, almost without exception, LLC formation was surging. LLCs are a favorite form of business incorporation for the self-employed and small-business entrepreneurs. I and other bloggers like Jeff Cornwall speculated then that the establishment survey was undercounting the true growth of the Bush Boom economy. The Labor Department has now, essentially, confirmed that. Here's a piece of the WSJ's article...

The Labor Department released its September jobs report on Friday, and some wags are calling it the "whoops" report. The "whoops" is a reference to the upward revision of 810,000 previously undetected jobs that Labor now says were created in the U.S. economy in the 12 months through March 2006.

So instead of 5.8 million new jobs over the past three years, the U.S. economy has created 6.6 million. That's a lot more than a rounding error, more than the number of workers in the entire state of New Hampshire. What's going on here?

Our hypothesis has been that, due to the changing nature of the U.S. economy, the Labor Department's business establishment survey has been undercounting job creation from small businesses and self-employed entrepreneurs. That job growth has been better captured in Labor's companion household survey, which reported 271,000 new jobs in September after 250,000 new jobs in August, and a very healthy total of 2.54 million new jobs in the past year.

The household survey is what is used to determine the unemployment rate, which fell in September to 4.6%, the lowest level in five years. The establishment survey, meanwhile, is used to announce the monthly "new jobs" numbers. Every year the Labor Department revises its job estimates from the previous year, in essence reconciling the figures from the two surveys, and the missing 810,000 jobs was the result through March 2006.

I blame the Bush tax cuts.

So does the WSJ, which notes that the boom in employment started in August of 2003, "roughly coincident with the economy's growth acceleration in the wake of the Bush Administration's 2003 tax cuts on dividends, capital gains and in the top marginal income rate on the highest earners."

If the president was a Democrat, this would be front-page news in every daily in America.