Image Source: PexelsThe BLS BED report provides further confirmation the BLS Birth/Death jobs model is seriously screwed up.
Data from BLS, chart by MishPlease consider the very lagging BLS Business Employment Dynamics report for the second quarter of 2022.The BED report analyzes net job creation from new business and firms going out of business.
Key BED Statistics
BED Statistics by Firm Size
Small businesses are struggling like mad. This is something the ADP reports also show.
Establishment Births and Deaths
Although the BED data on net jobs and the number of new businesses is through 2024 Q2, the number of closing businesses is only through 2023 Q3.However, the important number is employment and that is through June of 2024.
Birth-Death ModelThe lead chart shows that it is very rare for there to be net losses due to the birth and death of businesses.Prior to covid, the trend of business openings and closings were similar. Now they wildly differ.This is important because the BLS monthly jobs report includes a factor called the Birth-Death Model in which the BLS estimates the numbers of jobs created by the birth and death of businesses.I have many times stated the monthly jobs reports are bogus due to sampling errors and birth-death assumptions.
BLS Survey Response Rates
Survey Response Rates from the BLS, Chart by Mish
Response Rate Notes
The pathetic response rate for nonfarm payrolls is 43.3 percent down from 60.0 percent pre-CovidThe pathetic response rate for JOLTS is 33.4 percent down from 58.4 percent pre-Covid.
Response Rates and Survival Bias Issues
BLS Sample Sizes
The above numbers from CES FAQOf that 27 percent, the response rate is 43 percent with serious survival bias issues detailed above.
BED Net vs Nonfarm Payrolls
BED vs Nonfarm Payroll Quarterly ChangeAs noted, nonfarm payrolls (CES) represent all jobs whereas BED is only net business creation.However, the relationship between BED and CES was stable pre-covid and now is anything but stable.For five straight quarters, nonfarm payrolls wildly exceeded net BEDS jobs.
Birth-Death Model Jobs
Does anyone believe we added 653,000 jobs in the second quarter of 2024 due to net business creation?Before you answer, please note those are unadjusted numbers. The BLS takes those unadjusted numbers adds them to unadjusted CES numbers then seasonally adjusts the mess for its monthly jobs report.Q: What is the seasonally-adjusted birth-death number?
A: I don’t know, you don’t know, and not even the BLS knows.Seriously, the BLS itself has no idea and that is what they have told me on multiple occasions.It is wrong to subtract unadjusted numbers from smoothed and massaged adjusted numbers.The Birth-Death numbers for 2024 Q2 were 363,000 in April, 231,000 in May, and 59,000 in June making the quarterly total 653,000 jobs.653,000 jobs seems like a lot, and it is, but relative to total nonfarm payrolls of nearly 160 million its not that great.
December 2024 Example
I tried working with unadjusted birth-death numbers vs unadjusted BEDS but got similar wild-looking results.
BEDs vs Birth-Death Unadjusted Numbers
Seasonally-Adjusted BEDs vs Unadjusted BEDS
Four Things We Know
I hope you appreciate just how messed up this is.I believe that why we have such a discrepancy between Gross Domestic Product (GDP) and Gross Domestic Income (GDI), numbers that should match but don’t.
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Unfortunately, we will not have GDI numbers for two more months and it will be 5 months before we have a revised 2024 Q4 GDI.September 5, 2024: Small Businesses Reducing Workers for the Last Four Months
ADP data shows small businesses with 1-49 workers have been reducing workers for four months. Those with 20-49 workers have shed workers for 7 straight months.
It’s been a while since I updated my ADP charts and will do so in February. But note that CES confirms ADP. In the second quarter of 2024, firms with 1 to 49 employees had a net employment loss of 259,000.Small businesses are struggling.And among other errors, it’s highly likely the BLS is oversampling large businesses or getting whacked hard on survival bias in its surveys.More By This Author:Gold Hits New Record High, Dear Jerome Powell, Is Everything Under Control?Seven Charts Show Tariffs Would Harm The US Auto IndustryWhat Are The Odds The Fed Follows Trump’s Demand For Lower Interest Rates?
