Sorry, Mr. Hobbs, LLC formation is not necessarily indicative of employment. The fact is I can set up an LLC and conduct little or no business.

Further, the formation of an LLC doesn't mean a new business was created; it could mean an existing C corporation or S corporation (although the differences between an S corp and an LLC are minimal)has decided to reorganize as an LLC.

I'm really unsure as to why you're flogging this story--it's an accepted fact the unemployment situation is pretty dismal. Basically, it appears you're trying to tell us it's bright and sunny outside when it's dark and raining.

Honestly, if you try to make this a campaign theme (and I hope you do)--it's going to be rejected faster than Bush's 'we found WMD' claims.

Not all economists agree with you that the Employer Survey is accurate.

As for the unemployment situation, the current unemployment rate is considered very close to what economists call "full employment."

And please spare me the crap about the unemployment rate is only falling because of discouraged workers leaving the labor force

Here are the facts: The labor force grew by 1 million in 2003 from 145.9 million in January to 146.9 million in December. It doesn't grow by people leaving the workforce.

The Household Survey clearly shows a rapid rise in employment that is not being caught by the Employer Survey, which surveys large employers. This can only be explained by a surge in small-biz employment, self-employment and business start-ups. LLC formation surging across the country is an indicator that is the case.

"Sorry, Mr. Hobbs, LLC formation is not necessarily indicative of employment. The fact is I can set up an LLC and conduct little or no business."

So, Jade, what discount factor should we apply? Unless it's 100%, those extra LLC's represent employment of SOMEONE!

Could you continue to miss the point if I impale you on it?

SDN: An LLC doesn't mean anyone's actually employed and receiving a paycheck. You or I could set up an LLC with a par membership (LLC-speak for 'stock') value of zero.

And the fact is some number of these LLCs represent existing corporations or business entities that have decided to reorganize as an LLC. That means there is no actual gain in employment.

JadeGold, once again your intellectual dishonesty is on display. You completely missed the point of SDN's post: that unless EVERY SINGLE LLC that has been set up was a conversion of an exsiting business enterprise, then there has been SOME gain in employment.

Since you are charging that these LLC formations are from conversions of existing enterprises, then the burden of proof is on you: show just how many existing enterprises have been converted to LLCs. And show just how many LLCs are generating no income. Until you can show us that none of the LLCs have generated new employment, then you can't make the charge that the formation of LLCs is meaningless.

I don't expect you to capitulate on this point.

Not all economists agree with you that the Employer Survey is accurate.

True. There are also economists who believe 'supply side' economics work as well.

The point remains, however, that the vast majority of economists do agree the Payroll survey is more accurate. Both in the public and private sectors.

As for the unemployment situation, the current unemployment rate is considered very close to what economists call "full employment."

I don't believe you understand 'full employment' to make this statement.

And please spare me the crap about the unemployment rate is only falling because of discouraged workers leaving the labor force

Again, every reputable economist knnows this to be true.

Ah I get it:

1. The unemployment rate falls, so the Left claims the stat doesn't mean anything (but of course they'll fixate on the number if it ticks up a tiny bit come June when lots of college kids go out to look for a summer job).

2. The Household Survey shows a surging tide of small-business and self-employment, so the Left claims the stat doesn't mean anything (but of course if it falls sharply, they'll blame Bush).

3. Stats from a growing number of states show a rise in formation of LLCs - exactly the kind of business formation you would see if there indeed was a surge in entreprenurial self-employment and small-biz start-ups. And not just a small rise in LLC filings, but a HUGE rise in them - so the Left again claims the stat doesn't mean anthing because some LLCs are existing businesses changing their designation. Well, yeah. But that's always been true. And in fact it would be more likely to be the case a few years ago when LLCs first became possible. But LLCs have been an option for a DECADE now, so you would think that most existing businesses have already made that switch.

You would think that because you're smart, and not determined like JadeGold to deny every single indicator of a strengthening entrepreneur/small-business-based economy.

And why is JG so determined to ignore the evidence of a strengthening entrepreneur/small-business-based economy? Because that is exactly the kind of economic recovery that Bush said we'd get if we passed his tax cuts, parts of which were specifically designed to encourage/enable/incentivize small businesses and entrepreneurs to expand and hire.

The LLC stats and the Household Survey indicate it is working.

Of the 44 LLC returns I have on my client list, none were created from a conversion from an S corporation, etc. Depreciation recapture income, legal fees, etc make such conversions foolish in most cases.

A parallel indicator of smallbiz economic vitality is the number of Federal Identification Numbers (FEIN's) issued by the Internal Revenue Service. Since offering an online filing option for FEIN applications, the IRS states that over 498,000 such numbers were issued in the last nine months of 2003.

My CPA practice is growing as a direct result of the economic recovery for small business.

Just what kinds of goods and services are such people providing? I know of several people who have recently opted for self-employment because they can't find decent jobs. They are in the landscaping business (mowing lawns) or doing odd jobs that larger contractors won't bother with.

Mr. Hobbs:

1. No, the unemployment rate didn't fall--by either survey in February. The fact is the unemployment rate is tied to the payroll survey. You apparently don't like that fact but it doesn't make it any less of a fact.

2. Again, no respectable economist agrees with you. Even Robert Barro--an ultraconservative and bigtime Bush supporter---says this week in the WSJ:

One tempting hypothesis is that the household numbers look better because of a large expansion of the self-employed -- illustrated perhaps by the growth of full-time retailers on eBay.

ever, this explanation is a non-starter, because the self-employment numbers in the household survey have not risen that much. In fact, the reported number of self-employed was smaller as a ratio to household employment at the start of 2004 than it was in the mid-1990s. In any event, when the BLS considers self-employment and other measurable differences between the two surveys, they explain only 200,000 to 400,000 of the extra three million jobs in the household survey.

ther hypothesis that does not work is that the payroll survey substantially undercounts the recent growth of employment in new firms. When the BLS used unemployment-insurance records through March 2003 to update the payroll survey for new-firm growth, this adjustment did not help to explain the mysterious gap between the household and payroll numbers.

3. You fail to answer the fundamental questions: why does Alan Greenspan, the DoL, the CBO, and Wall Street believe the payroll survey is more accurate? Is it a big conspiracy?

JadeGold, take time out from franticly denying W's brilliant economy to read this study on the Payroll vs. Household surveys. Note that the Payroll survey ALWAYS corrects retroactively to agree with the Household survey. It seems some pretty respectable economists DO agree with Mr. Hobbs.

Why do Alan Greenspan et al stick with the Payroll survey? Probably for the same reason I like a manual transmission better than an automatic.

Jade could miss the point if impaled on it. Q.E.D.

The fact is the unemployment rate is tied to the payroll survey.

Jade, that's factually incorrect. Check the BLS reports at http://www.bls.gov/

http://www.bls.gov/news.release/empsit.tn.htm says "The unemployment rate is the number unemployed as a percent of the labor force." You'll find that under the "Household Survey" heading.

ps--Greenspan et al use the payroll data because they've always used it. Better to use the same broken yardstick all the time than to switch between two broken yardsticks all the time.

BTW, there is plenty to disagree about WRT the household survey (BLS discounts it heavily with population hits all the time), but what cannot be argued is that the household survey is showing a larger increase than can be explained away by simple trending. It's currently showing .5 million more jobs than it should.

From Steve Antler

we find a link to the Reconciliation of household and payroll employment surveys.

http://www.bls.gov/cps/ces_cps_trends.pdf

Here's what I found:

(1)The sample-size 'problem' with the Household survey is due not necessarily to the number of respondents, but to knowledge of the size of the entire group (workforce/population) at the time the data is presented. Anyone with knowledge of how sampling rate errors are determined knows this. Population adjustments are made to the household survey yearly and applied to Jan of the following year in one lump sum. This makes it difficult to make month-by-month comparisons. BLS has created a research series that applies these population controls to monthly data.

(2)The Payroll survey double-counts some jobs (people who leave one job and start another during the same pay period). This does not occur with the Household survey. This reconciliation adds the equivalent of double-counted jobs to the Household survey.

(3) The Payroll survey counts only nonfarm wage and salary jobs. The reconciliation REMOVES ALL nonfarm wage and salary jobs from the Household survey.

More detail in the report.

Results:

Household Survey Dec 93........................ 130,187 (in thousands)
Payroll Survey Dec 93....................... 130,043 (in thousands)

Pretty darned close if you ask me.

Now add back the employment from:
agriculture and related employment
nonagricultural self employed
unpaid family and private household workers
workers on unpaid leave

And subtract out
nonagricultural wage and salary multiple jobholders that were put in for the reconciliation

you get:

Household Survey Dec 93..................... 138,070 (in thousands)

How much of that 8 MILLION figure is self-employment? I've heard anywhere from 3-5 million.

Eat your heart out!

And, oh, BTW, the Household survey IS where the unemployment rate comes from. In Box 1 (How the household and payroll surveys compare) under "Major outputs" we get

Payroll Survey: Employment, hours, and earnings with significant industry and geographic detail

Household Survey: Labor force, employment, unemployment, and associated RATES with significant demographic detail.

Prove it.

Have Bush campaign on the theme that employment is actually pretty good--it's just that Alan Greenspan, the CBO, the DoL, and all those dunces on Wall Street are using the wrong reports. Make sure Georgie explains about all those LLCs.

I'm sure it will resonate in those manufacturing states.

JadeGold, you're right that the president should not campaign on the Household Survey and the LLC data. But it will be a good idea if his surrogates and supporters push that theme in the press and the blogosphere, which is what I'm doing.

Also, it's worth considering that if the Household Survey is more right than you and others give it credit for, that would mean there are fewer people out of work and, therefore, fewer to be mad at Bush for the state of the economy.

I happen to the think the Household Survey is more right than its detractors do. I happen to think this economic recovery is a small-business-led, self-employment-led, entrepreneur-led recovery rather than a Big Employer-led recovery. And if I'm right, Bush is going to win by a surprising margin.

By the way, your slams above of people who say they are "self-employed" was rather rude. I was "self-employed" for most of the 1990s, and made a good living at it. My claim that I was "self-employed" was not a verbal dodge or a game of denial. It was fact, and it was reasonably lucrative fact. Interestingly, at the very time I was making several thousand a month as a freelancer, I would have been counted as one of those people who had been "unemployed," but later "stopped looking for a job" because I was, allegedly, "discouraged" by the lack of jobs.

"(3) The Payroll survey counts only nonfarm wage and salary jobs. The reconciliation REMOVES ALL nonfarm wage and salary jobs from the Household survey."

That should read REMOVES ALL BUT nonfarm wage and salary jobs.

JadeGold:
I love you handle because it fits your lamenting “it's an accepted fact the unemployment situation is pretty dismal.” Only a shortsighted lefty desperate to retake the Whitehouse could call a sub 6 unemployment rate “dismal.” We should call you JadedGold.

I formed an LLC in September and plan to be employing three people by Q2 2005. Promise me you won’t apply.