AMERICA’S JOB WONDER IS PURE STATISTICS

A new statistical method helps enormously in creating new jobs. Experts speak of “marketing” for the US economy

By Marcus Gatzke

[This article originally published in: Netzeitung.de, June 4, 2004 is translated from the German on the World Wide Web,  http://www.netzeitung.de/wirtschaft/wirtschaftspolitik/289434.html.]

In the last months, US president George W. Bush could breathe deeply again in looking at labor market statistics. At least a great problem in the election campaign is not intensifying. The latest statistics on newly created jobs even point to a clear improvement in the US labor market. The danger of a so-called “jobless recovery” – an upswing that doesn’t create any jobs – doesn’t seem confirmed.

But is the American labor market really on the road to recovery? More than two million jobs were lost under president Bush. Granted the president had little influence on this. The exploded speculative bubble on the international capital markets plunged the economy into a recession. The terrorist attacks of September 11, 2001 and the accounting scandals in different US corporations did the rest to shake the trust of consumers and businesses in the American economy.

AMERICA’S JOB WONDER IS PURE STATISTICS

While Bush had little responsibility in the job misery, he could be responsible for the apparent upswing on the labor market. “What are they smoking at the labor department?” asked John Crudele, columnist at the “New York Post”.

The American Department of Labor recently introduced a new statistical method. The new jobs created through independence or in small- and medium-sized firms will be tabulated with the so-called Net-Birth/Death-Model. In the past these new independent positions – also known in Germany under the term personal companies (I inc.)- were not recorded. However the number of arising jobs cannot be simply estimated statistically since experts of the department used no genuine data. Thus 270,000 of the total 288,000 jobs in April arose only on account of the new statistical method.

QUALITY, NOT QUANTITY

“The department assumes that jobs arise among independent persons but has no evidence or proof”, Carsten Fritsch, economist at the commerce bank, criticizes the officials. How many jobs were actually created and how many were merely “phantom jobs” are open, the expert added.

“The quality of the increased jobs should be emphasized, not only the quantity.” The newly created jobs in March were mostly part-time jobs.

ECONOMIC GROWTH COULD ALSO BE EXAGGERATED

No concrete data underlies the statistics, said Folker Hellmeyer, chief analyst at the Bremen regional bank. The estimates are only based on surveys. In addition, twelve season factors in labor market data should be considered, Hellmeyer underlined. Four are usually included.

That economic data from the US is only quantitative and no longer qualitative is problematic in the opinion of the experts. The economic growth in the US could also be exaggerated according to an article in the economic magazine “Economist”. The magazine refers to calculations of the Goldman-Sachs economist Jan Hatzuis.

EVERYTHING IS ONLY MARKETING

Analyst Hellmeyer goes even further. “The new statistical methods only help marketing to keep the high deficits in the US financable.” The data does not reflect reality in the US. A comparison with the situation in the Euro-zone or even in Germany is “like a comparison of pineapples and egg yolks”.

The American economy grew officially around 4.4 percent in the first quarter according to the first estimates. The German economy grew 1.5 percent on an annual basis. Still America at present wrestles with a so-called double deficit. The American economy suffers with an exponentially increasing balance of payments deficit along with a massive budget deficit.

After 2009 the deficit in the budget measured by the gross domestic product (GDP) could be more than ten percent. Even the very optimistic predictions of the Bush administration start from that estimate. Germany had a deficit last year of less than four percent and violated the European stability- and growth pact.