Financial Crisis: The Pretense of Knowledge


The government, once again, is relying on human nature to push their political agenda. That the sheeple will predictably react to another artificially induced panic and demand that their legislators immediately support the democrat stimulus package which consists of little more than special interest pork and an expansion in union power over the government and private industry.


Capture2-6-2009-2.00.01 PM

According to the Associated Press …

“The Labor Department's report, released Friday, showed the terrible toll the drawn-out recession is having on workers and companies. It also puts even more pressure on Congress and President Barack Obama's administration to revive the economy through a stimulus package and a revamped financial bailout plan, both of which are nearing completion.”

“Obama decried as ‘inexcusable and irresponsible’ the delay of his economic recovery legislation in Congress with an estimated 3.6 million Americans losing their jobs since the recession began in December 2007. About half of them have lost jobs in only the past three months.”

Obama acknowledged the $900-billion-plus stimulus plan was not perfect and pledged to work with lawmakers to refine the measure, which he called ‘absolutely necessary.’ <Source>

But can you even believe the government’s statistics?

As Mark Twain famously said, “There are lies, damn lies and statistics.” Or more popularly: “the devil is in the details.” So what are we to believe about a “number” which can be wildly inaccurate?   

U.S. Bureau of Labor StatisticsBureau of Labor Statistics

Current Employment Statistics - CES (National)

CES Net Birth/Death Model

  • In 2008, the CES sample includes about 150,000 businesses and government agencies drawn from a sampling frame of Unemployment Insurance tax accounts which cover approximately 390,000 individual worksites. The active CES sample includes approximately one-third of all nonfarm payroll workers. The sample-based estimates are adjusted each month by a statistical model designed to reduce a primary source of non-sampling error which is the inability of the sample to capture, on a timely basis, employment growth generated by new business formations.
  • There is an unavoidable lag between an establishment opening for business and its appearing on the sample frame and being available for sampling. Because new firm births generate a portion of employment growth each month, non-sampling methods must be used to estimate this growth.
  • Earlier research indicated that while both the business birth and death portions of total employment are generally significant, the net contribution is relatively small and stable. To account for this net birth/death portion of total employment, BLS uses an estimation procedure with two components: the first component excludes employment losses from business deaths from sample-based estimation in order to offset the missing employment gains from business births. This is incorporated into the sample-based estimate procedure by simply not reflecting sample units going out of business, but imputing to them the same trend as the other firms in the sample. This step accounts for most of the net birth/death employment.
  • The second component is an ARIMA time series model designed to estimate the residual net birth/death employment not accounted for by the imputation. The historical time series used to create and test the ARIMA model was derived from the UI universe micro level database, and reflects the actual residual net of births and deaths over the past five years.
  • The net birth/death model component figures are unique to each month and exhibit a seasonal pattern that can result in negative adjustments in some months. These models do not attempt to correct for any other potential error sources in the CES estimates such as sampling error or design limitations.
  • Note that the net birth/death figures are not seasonally adjusted, and are applied to the not seasonally adjusted monthly employment estimates to derive the final CES employment estimates.

So where is the media?

Most of the mainstream media appears to be in the tank for Obama and his liberal democrat administration; and therefore loath to bring up questions of methodology relating to the numbers in the headlines.

Some are both knowledgeable and brave …

Consider John Crudele at the New York Post who observes:

“I have written often about how the Labor Department uses assumptions that it calls the Birth/Death Model.”

“The Birth/Death model is the government's guess as to the number of new companies being formed or going out of business in each month of the year.”

“And, guess what? The Labor Department assumes that there is a net gain in new companies in each and every month - except January.”

“In fact, government statisticians subtract an enormous number of jobs out of their total count each January.”

So before you panic …

So before you rush off to call your elected officials, perhaps you should consider the message: “it’s only an estimate, why the panic?” And you might add, “What’s up with all the special interest pork and unionism that will do little or nothing to stabilize housing prices, remove the leverage from our financial institutions, stimulate our economy – and create the mass of jobs that you guys are claiming will be created by these pork barrel projects?”

Just another manipulative technique of the political elite …

Yes, jobs are being lost. People are hurting. But it is also true that companies are downsizing to preserve the employment and performance bonuses of top executives. Not to mention that any number of jobs in the financial sector were created by an artificial lending boom caused by the almost continual re-financing of toxic mortgages.

So before you panic or buy-in to what is being reported, take a deep breath and ask yourself “what are the politicos up to now?”

-- steve

“The object in life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane.”              -- Marcus Aurelius

Reference Links:

CES Net Birth/Death Model


“Nullius in verba.”-- take nobody's word for it!

“Beware of false knowledge; it is more dangerous than ignorance.”-- George Bernard Shaw

“Progressive, liberal, Socialist, Marxist, Democratic Socialist -- they are all COMMUNISTS.”

“The key to fighting the craziness of the progressives is to hold them responsible for their actions, not their intentions.” – OCS

"The object in life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane." -- Marcus Aurelius

“A people that elect corrupt politicians, imposters, thieves, and traitors are not victims... but accomplices” -- George Orwell

“Fere libenter homines id quod volunt credunt." (The people gladly believe what they wish to.) ~Julius Caesar

“Describing the problem is quite different from knowing the solution. Except in politics." ~ OCS