Mainstream Media Misunderstands Job Loss Data

We have tried to demonstrate the gap between perception and data. The big story for the mainstream media sources is always negative. Who is interested in something that says the government has a plan that might work?

We have found an innovative way to make the point.

Misunderstanding Job Losses

One of the key problems facing the market is the wide gap in understanding between those who really study data and the journalists writing about it. The journalists are all keyed to their ratings. Often they cite the pop-economist bloggers who know little more than they do, but who also have high readership levels.

In this mutual admiration society the facts can easily get lost. Here is an example.

Dan Gross, writing for Slate, is a good journalist with some helpful economic insight. In his recent article, 'This Isn't Your Grandfather's Recession', he analyzes opinion about the stimulus package.

He is making a point about why the average person might be more negative about the economy than a Harvard Professor. He writes as follows:

The typical worker—white-collar, blue-collar, no-collar—doesn't have anything like tenure or a guaranteed job. In fact, she may be working at a company that has just laid off 10 percent of its work force and may soon lay off more. She may be one of the 3.6 million people who has lost a job in the last year.

Regular readers of our site should be able to spot the error in this analysis. We seem to be the only Internet source talking about the actual facts of labor dynamics.

How many people do you really think have "lost a job" in the past year?

The Facts

If Dan Gross got closer to the data, his point would be even stronger. The 3.6 million job loss is a net figure. The actual dynamics of employment show many more job losses, and also job creation.

People perceive losses, and these get plenty of publicity. There has never been a time when gross job losses were 3.6 million, even in good times. In our economy, job losses are at an annual rate of something like 30 million. These are all widely publicized in layoff announcements. Job gains, mostly through new business formation, are at a run rate of 26 million. The negative perception, which actually makes Gross's point stronger, comes from the gross job losses. We hear little about new job formation.

Readers and pundits alike would do well to look at some data, taken from the recent BLS Job Opening and Labor Turnover (JOLT) analysis:

• At the end of December, there were 2.7 million job openings in the United States. While most might be surprised, thinking this number is large, it is actually very small.
• The hire rate is 2.9% -- also a small number.
• Separations are at a 3.7% rate -- a large number. That is the problem.
• Voluntary separations were 1.5%, a series low. Readers may wonder why anyone would be quitting a job, but it always happens for many personal reasons.

Here is a summary:

Although job openings were essentially unchanged from November to December, the number of job openings has trended downward for 18 months. At 2.7 million in December, monthly openings were down 1.4 million, or 35 percent, since the starting point of the downward trend in July 2007. The job openings rate was 1.9 percent in December, a new series low.

Our Take

Anyone who does not follow the dynamics of the labor market is only telling part of the story. This is important.

The net job loss understates the perceived impact. It also overstates the actual impact, since the job creation is ignored. Most people react to actual gross job loss and layoff announcements. The new jobs get no publicity.

Comments

[2braincells:]

Maybe people are factoring in what the future outlooks appears to be... there's a negative perception there... that's a problem.

You don't need a weathervane to tell which way the wind blows.

Feb 17 08:30 AM

[shootpar2001:]

First let's update their name;

They are the "Old Stream Media".
Both literally and figuretively, they braodcast on an old medium and are the last to any real breaking news. The "Old" media also have old tired ideologies about the world, news vs. facts, etc.
If I want the facts behind a story, I go to the web; using various sources.
If I were to post half the crap that comes from the "old" media mantra; I would rightly crucified for not presenting facts to back me up.
So, pass the word; They are "Old Stream Media".

Feb 17 10:21 AM

[pearl2k:]

Agreed. And maybe we're all a little jaded by the fact that our former president wanted to reclassify fast food jobs as manufacturing jobs.

I don't think those formerly employed in domestic auto manufacturing, domestic programming, domestic call centers, etc. have a problem interpreting the complexities of a dynamic labor market. Neither do recently unemployed real estate agents, financial service workers, construction workers etc. I think mainstream media and the public are well aware of which way the wind is blowing.


On Feb 17 08:30 AM 2braincells wrote:

> Maybe people are factoring in what the future outlooks appears to
> be... there's a negative perception there... that's a problem.

>
>
> You don't need a weathervane to tell which way the wind blows.

Feb 17 12:21 PM

[Doug Roberts:]

Hi Jeff -
So the net from this article is that there are lots of separations. And this differs from the mainstream media in what way? Lots of people losing their jobs.

I read the JOLTS data too. It just confirms that lots of people are losing their jobs.

And, yes, I do know people who have lost their jobs.

Doug

Feb 17 04:08 PM

[Hmm?!:]

Doug,

There should be more monthly data than just the last 2 months of 2009 to show trending, but the point appears to be.........job losses are actually levelling, the issue is coming from lack of new job creation.

A lack of new job openings is creating the gap between layoffs and new hiring.

No one is talking population demographics. We are generating all this new debt and unpaid pension obligations with no larger population in the future to carry the load or cover up bad behavior.

If slower population growth were a factor then Japan should have already had a real estate and banking meltdown and then no growth well before us........Oh yeah they did. But then Europe should also be experiencing........Oh Yeah they are! However, I am not saying America does not have extra issues around very unethical behavior. An extra penalty to pay.

On Feb 17 04:08 PM Doug Roberts wrote:

> Hi Jeff -
> So the net from this article is that there are lots of separations.
> And this differs from the mainstream media in what way? Lots of people
> losing their jobs.
>
> I read the JOLTS data too. It just confirms that lots of people are
> losing their jobs.
>
> And, yes, I do know people who have lost their jobs.
>
> Doug

Feb 18 02:00 AM