Headline: Official Jobs Numbers Grossly Understate Real Horror

Source: John Crudele, The New York Post, 10 Apr 2001

URL: http://www.nypostonline.com/business/28327.htm

The loss of 86,000 jobs in March was startling to America. But here's the part that's even more shocking - the number of jobs that disappeared from our economy last month was actually much larger.

Here's the official line. The Labor Department announced last Friday that 86,000 jobs disappeared last month and that the nation's unemployment rate rose 0.1 to 4.3 percent. That was, we were told by the government, the biggest decline in jobs since 129,000 positions were eliminated in November of 1991.

Could that 86,000 number actually be correct? Didn't dozens of companies publicly announce job cuts last month that amounted to well over 86,000? And aren't there probably thousands of other companies - those that don't issue press releases - that cut back on the number of workers?

I'll tell you the punch line of this column right now: The government's employment numbers for March are nonsense. There were probably more than 220,000 jobs lost in March.

What the government didn't tell people on Friday was that - even as its computers estimate a loss of 86,000 positions - it was still adding 145,000 ficticious jobs to its tally. Why? Because Washington assumes companies that it didn't reach in the survey are adding people to their workforce. Without those additional 145,000 jobs, the loss of positions in March would have been 231,000.

But the situation could actually be even worse than that. As I said, the 140,000 bias-factor jobs are added because Washington assumes small companies around the country that aren't surveyed are adding jobs. Now that the economy is slowing rapidly, perhaps those same invisible companies are laying off workers.

What if the bias factor should be negative? What if 140,000 jobs were cut by these invisible small companies instead of added? Then the numbers would really add up. There would then be the 86,000 jobs that were officially reported lost. Plus, you wouldn't have the additional 140,000 jobs that the government assumes were created. And you'd have the 140,000 jobs that were cut by small companies out of the government's statistical reach.

What's that: 86,000, plus 140,000, plus another 140,000. If you calculate the figures the less politically beneficial way you'd come up with a loss of 366,000 jobs in March alone.

Is my figure accurate? It certainly feels right. And my guess about what small companies are doing is as good as the government's.

There's more. The unemployment rate only rose 0.1 percent. And the 4.3 percent rate is still amazingly low and a small rise is certainly nothing to worry about. That 4.3 percent, however, doesn't include people who are out of work and who have become too discouraged to keep looking for a job. If discouraged workers are counted as unemployed, the nation's jobless rate jumps to 7.6 percent.

If you've been out of work for a year and have given up looking you don't even show up in the 7.6 percent figure. If those long-term discouraged workers are counted, the nation's unemployment rate jumps to nearly 10 percent.

So is the real unemployment figure 4.3 percent or 10 percent? Is the economy just softening or is it turning to mush?

There's another government statistic that crosschecks the numbers I mentioned above. Each month the Labor Department surveys households to determine who is working. This survey shows a lot more weakness than the one that questions companies. In February this poll showed a loss of 184,000 jobs. And in March, households reported losing another 35,000. That's a total of 219,000 jobs lost in the past two months.

That sounds more realistic, doesn't it?

One columnist recently said the mood on Main Street was a lot brighter than on Wall Street. That's garbage. Americans are scared for a reason. And any politician who fails to "feel the pain" is destined to end up no better than his father.

-- Andre Weltman (aweltman@state.pa.us), April 10, 2001

Answers

Jobberwocky

by Yvette Kantrow Posted 06:30 PM EST, Apr-5-2001

Wall Street goes vague over layoffs For most of Corporate America, announcing layoffs is a straightforward, sober affair. The nation's economy weakens, Wall Street calls for cost cutting and in one fell swoop industrial giants such as DuPont, Procter & Gamble and Whirlpool unveil plans to eliminate what amounts to thousands upon thousands of jobs. But in investment banking circa 2001, layoff announcements do not have that same seamless quality. Fearful that they will be criticized for cutting too deeply at the first sign of a downturn, the firms have remained mostly mum, even as headhunters and other analysts predict no Wall Street house will escape unscathed. So the media has stepped in, supplying in recent weeks a steady stream of mostly anonymously sourced stories on mostly modest banker layoffs. And almost without exception, these somewhat vague reports have been followed by even vaguer statements from the firms themselves, struggling to put their spins on the job-loss situation.

So Merrill Lynch & Co. declines to comment directly on a March 30 New York Post report that the firm will "ax 150 investment bankers" but tells Dow Jones Newswires that it will continue the "process of selectively reallocating resources." And Salomon Smith Barney executives tell journalists that the firm's "head count will be higher at the end of the year than it is now," after The New York Times Web site reported Tuesday that Citigroup would lay off "at least a few hundred" people in its investment banking and trading divisions.

But the strangest reaction to a Wall Street layoff story came this week after The Wall Street Journal reported Wednesday that Morgan Stanley "is considering laying off as many as 1,000 brokers, or 7% of its brokerage force, as part of a plan to slash nearly $1 billion in costs." Sourced to a person familiar with the matter, The Journal story said the job cuts could reach 1,500, with additional layoffs coming from investment banking, trading and research.

The market reaction to the piece was swift, and Morgan's stock sank 10% early in the day. By noon, the headlines began to appear: "Morgan Stanley: No Plans to Cut Brokers," Reuters screamed at 12:13 p.m. Like other Web sites and wires, Reuters quoted a Morgan Stanley spokesman who said the firm "has no plans to decrease the number of its individual investor group financial advisers." CBS.Marketwatch.com attributed the statement to Brett Galloway—the same Morgan flack who declined to comment in The Journal's Wednesday story.

Despite Morgan Stanley's statements, the firm's stock closed down nearly 8% Wednesday, giving The Journal a perfect news peg to run Thursday a story that basically amounts to a non-denial-denial of Morgan Stanley's non-denial-denial. Leading with the stock drop that its own story had caused, the paper quickly revealed more information about its source for the layoff piece. "The Journal story was based on several interviews with a senior Morgan Stanley executive who was familiar with the cost-cutting plans," it said. "This executive said Morgan Stanley was cutting 1,500 employees and volunteered that these cuts could include as many as 1,000 brokers."

The piece went on to quote a Morgan spokesman denying broker layoffs but adding, somewhat cryptically, that the firm "can't say how many brokers may leave because of market conditions." The paper also quoted the spokesman as saying that he is "not commenting on but not denying" cost-cutting plans that could include 500 job cuts in investment banking, trading and research.

Reading the story, it's unclear what the upside was for Morgan Stanley to so publicly and vehemently react to The Journal's report that it is considering broker layoffs. After all, in today's bearish environment, there's probably not a firm on The Street that isn't investigating all sorts of ways to cut costs. And there's probably not an investor in a Wall Street firm that doesn't expect cuts as the market downturn continues.

http://www.thedeal.com/cgi-bin/gx.cgi/AppLogic+FTContentServer? pagename=FutureTense/Apps/Xcelerate/Render&c=TDDArticle&cid=TDDVSVQ66L C&preview=true

-- Martin Thompson (mthom1927@aol.com), April 10, 2001.

How can Canada have a 8.5% unemployment but the US has a 4%.

-- David Williams (DAVIDWILL@prodigy.net), April 10, 2001.