Paul Craig Roberts: "The US Economy's Phantom Jobs Gains Are A Fraud"

Tyler Durden's picture

Authored by Paul Craig Roberts,

Washington can’t stop lying. Don’t be convinced by last Thursday’s job report that it is your fault if you don’t have a job. Those 288,000 jobs and 6.1% unemployment rate are more fiction than reality.

In his analysis of the June Labor Data from the Bureau of Labor Statistics, John Williams ( wrote that the 288,000 June jobs and 6.1% unemployment rate are “far removed from common experience and underlying reality.” Payrolls were overstated by “massive, hidden shifts in seasonal adjustments,” and the Birth-Death model added the usual phantom jobs.

Williams reports that “the seasonal factors are changed each and every month as part of the concurrent seasonal-adjustment process, which is tantamount to a fraud,” as the changes in the seasonal factors can inflate the jobs number. While the headline numbers always are on a new basis, the prior reporting is not revised so as to be consistent.

The monthly unemployment rates are not comparable, so one doesn’t know whether the official U.3 rate (the headline rate that the financial press reports) went up or down. Moreover, the rate does not count discouraged workers who, unable to find a job, cease looking. To be counted among the U.3 unemployed, the person must have actively looked for work during the four weeks prior to the survey. The U.3 rate automatically declines as people who have been unable to find jobs cease trying to find one and thereby cease to be counted as unemployed.

There is a second official measure of unemployment that includes people who have been discouraged for less than one year. That rate, known as U.6, is seldom reported and is double the 6.1% rate.

Since 1994 there has been no official measure than includes discouraged people who have not looked for a job for more than a year. Including all discouraged workers produces an unemployment rate that currently stands at 23.1%, almost four times the rate that the financial press reports.

What you can take away from this is the opposite of what the presstitute media would have you believe. The measured rate of unemployment can decline simply because large numbers of the unemployed become discouraged workers, cease looking for work, and cease to be counted in the U.3 and U.6 measures of the unemployment rate.

The decline in the employment-population ratio from 63% prior to the 2008 downturn to 59% today reflects the growth in discouraged workers. Indeed, the ratio has not recovered its previous level during the alleged recovery, an indication that the recovery is an illusion created by the understated measure of inflation that is used to deflate nominal GDP growth.

Another indication that there has been no recovery is that Sentier Research’s index of real median household income continued to decline for two years after the alleged recovery began in June 2009. There has been a slight upturn in real median household income since June 2011, but income remains far below the pre-recession level.

The Birth-Death model adds an average of 62,000 jobs to the reported payroll jobs numbers each month. This arbitrary boost to the payroll jobs numbers is in addition to the Bureau of Labor Statistics’ underlying assumption that unreported jobs lost to business failures are matched by unreported new jobs from new business startups, an assumption that does not well fit an economy that fell into recession and is unable to recover.

John Williams concludes that in current BLS reporting, “the aggregate average overstatement of employment change easily exceeds 200,000 jobs per month.”

In other words, the economy did not gain 288,000 new jobs last month. But let’s assume the economy did gain 288,000 jobs and exam where the claimed jobs are reported to be.

Of the alleged 288,000 new jobs, 16,000, or 5.5 percent are in manufacturing, which is not very promising for engineers and blue collar workers. Growth in goods producing jobs has almost disappeared from the US economy. As explained below, to alter this problem the government is going to change definitions in order to artificially inflate manufacturing jobs.

In June private services account for 82 percent of the supposed new jobs. The jobs are found mainly in non-tradable domestic services that pay little and cannot be exported to help to close the large US trade deficit.

Wholesale and retail trade account for 55,300 jobs. Do you believe sales are this strong when retailers are closing stores and when shopping malls are closing?

Insurance (most likely the paperwork of Obamacare) contributed 8,500 jobs.

As so few can purchase homes, “real estate rental and leasing” contributed 8,500 jobs.

Professional and business services contributed 67,000 jobs, but 57% of these jobs were in employment services, temporary help services, and services to buildings and dwellings.

That old standby, education and health services, accounted for 33,700 jobs consisting mainly of ambulatory health care services jobs and social assistance jobs of which three-quarters are in child day care services.

The other old standby, waitresses and bartenders, gave us 32,800 jobs, and amusements, gambling, and recreation gave us 3,500 jobs.

Local government, principally education, gave us 22,000 jobs.

So, where are the jobs for university graduates? They are practically non-existent. Think of all the MBAs, but June had only 2,300 jobs for management of companies and enterprises.

Think of the struggle to get into law and medical schools. There’s no job payoff. June had jobs for 1,200 in legal services, which includes receptionists and para-legals. Where are all the law school graduates finding jobs?

Offices of physicians (mainly people who fill out the mandated paperwork and comply with all the regulations, which have multiplied under ObamaCare) hired 4,000 people. Outpatient care centers hired 700 people. Nursing care facilities hired 2,400 people. So where are the jobs for the medical school graduates?

Aside from all the exaggerations in the jobs numbers of which has informed us, just taking the jobs as reported, what kind of economy do these jobs indicate: a superpower whose pretensions are to exercise hegemony over the world or an economy in which opportunities are disappearing and incomes are falling?

Do you think that this jobs picture would be the same if the government in Washington cared about you instead of the mega-rich?

Some interesting numbers can be calculated from table A.9 in the BLS press release. John Williams advises that the BLS is inconsistent in the methods it uses to tabulate the data in table A.9 and that the data is also afflicted by seasonal adjustment problems. However, as the unemployment rate and payroll jobs are reported regardless of their problems, we can also report the BLS finding that in June 523,000 full-time jobs disappeared and 800,000 part time jobs appeared.

Here, perhaps, we have yet another downside of the misnamed Obama “Affordable Care Act.” Employers are terminating full-time employment and replacing the jobs with part-time employment in order to come in under the 50-person full time employment that makes employers responsible for fringe benefits such as health care.

Americans are already experiencing difficulties making ends meet, despite the alleged “recovery.” If yet another half million Americans have been forced onto part-time pay with consequent loss of health care and other benefits, consumer demand is further compressed, with the consequence, unless hidden by statistical trickery, of a 2nd quarter negative GDP and thus officially the reappearance of recession.

What will the government do if a recession cannot be hidden? If years of unprecedented money printing and Keynesian fiscal deficits have not brought recovery, what will bring recovery? How far down will US living standards fall for the 99% in order that the 1% can become ever more mega-rich while Washington wastes our diminishing substance exercising hegemony over the world?

Just as Washington lied to you about Saddam Hussein’s weapons of mass destruction, Assad’s use of chemical weapons, Russian invasion of Ukraine, Waco, and any number of false flag or nonexistent attacks such as Tonkin Gulf, Washington lies to you about jobs and economic recovery. Don’t believe the spin that you are unemployed because you are shiftless and prefer government handouts to work. The government does not want you to know that you are unemployed because the corporations offshored American jobs to foreigners and because economic policy only serves the oversized banks and the one percent.

Just as the jobs and inflation numbers are rigged and the financial markets are rigged, the corrupt Obama regime is now planning to rig US manufacturing and trade statistics in order to bury all evidence of offshoring’s adverse impact on our economy.

The federal governments Economic Classification Policy Committee has come up with a proposal to redefine fact as fantasy in order to hide offshoring’s contribution to the US trade deficit, artificially inflate the number of US manufacturing jobs, and redefine foreign-made manufactured products as US manufactured products. For example, Apple iPhones made in China and sold in Europe would be reported as a US export of manufactured goods. Read Ben Beachy’s important report on this blatant statistical fraud in CounterPunch’s July 4th weekend edition:

China will not agree that the Apple brand name means that the phones are not Chinese production. If the Obama regime succeeds with this fraud, the iPhones would be counted twice, once by China and once by the US, and the double-counting would exaggerate world GDP.

For years I have exposed the absurd claim that offshoring is merely the operation of free trade, and I have exposed the incompetent studies by such as Michael Porter at Harvard and Matthew Slaughter at Dartmouth that claimed to prove that the US was benefitting from offshoring its manufacturing. My book published in 2012 in Germany and in 2013 in the US, The Failure of Laissez Faire Capitalism and Economic Dissolution of the West, proves that offshoring has dismantled the ladders of upward mobility that made the US an opportunity society and is responsible for the decline in US economic growth. The lost jobs and decline in the middle class has contributed to the rise in income inequality, the destruction of tax base for cities and states, and loss of population in America’s once great manufacturing centers.

For the most part economists have turned a blind eye. Economists serve the globalists. It pays them well.

The corruption in present-day America is total. Psychologists and anthropologists serve war and torture. Economists serve globalism and US financial hegemony. Physicists and chemists serve the war industries. Physicists and computer geeks serve NSA. The media serves the government and the corporations. The political parties serve the six powerful private interest groups that rule the country.

No one serves truth and liberty.

I predict that within ten years truth and liberty will be forbidden words uttered only by “domestic extremists” who are a threat that must be exterminated without due process of law.

America has left us. We now have the tyranny of the Orwellian state that rules, not by the ballot box and Constitution, but by force and propaganda.

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One And Only's picture

What's so fucking hard about this.

Take the number of people living in the US that are of legal age to work and subtract all people not working (any reason).

That's the unemployment rate. Can someone provide to me this number?

TahoeBilly2012's picture

Everyone will have a job for the coming WW3. You just need to have flexible skills.

One And Only's picture

You're either feeding into the ponzi scheme or taking out from it. This is the only number I need to gauge the health of the economy.

Shocker's picture

No Comment needed

Layoff / Business Closing List:


max2205's picture

If it's not a war crime, then they could care less.

They spin....that's it

jbvtme's picture

doesn't look good. next you'll be crying that the cotton thread count on the bed sheets in the detention center will be less than 200 ...

graneros's picture

Great article by PCR. That's it in a nutshell nothing more need be said.

stoneworker's picture

I think he should run for president....I would donate to his campaign.

rubiconsolutions's picture

"If it's not a war crime, then they could care less."

Even if it's a war crime they couldn't care less. Ask Madeleine Albright when she told CBS nonchalantly that the deaths of 500,000 Iraqi children was "worth it". 

Winston Churchill's picture

Or Hitlary "we came,we saw,we killed".

These fucker better hope they die soon.The new Nuremburg trials will

follow the dollars' collapse.

Squid Viscous's picture

my sister in law makes $47 an hour working from home on the interwebs, so don't say there's no good jobs out there! she just has to suck mystery cock a few times a day...

oddjob's picture

Lizard Albright = repugnant fascist hag

Keyser's picture

Can someone provide to me this number?


There are 247,000,000 working age Americans...

There are 92,000,000 either under-employed or unemployed...

The total unemployment rate based on these numbers is 37.24%

homonohumanus's picture

I had some fun going through some data for my country (France) and mostly we face the same oddities...

For my department, I found official data for the number of active people and the number of unemployed people.

I calculated the percentage myself and I found 16%, the government.... 10.1%


Now I wonder about that number 247 millions, it sounds a bit high to me.


Here we are lying on that too, the country is ~65 millions, here is the age distribution:

MOst are done with their studies in the early 20 and retirement happen ~65 now, yet looking at the picture above and looking at the official figure for active population (28 millions), I feel like we are facing another massive lie...

I wish we have French shadowstat, I've the extremely oppressing feeling that in fact France could have the worse accountability of the western Europe. People here live in a fantasy world, one of different flavor as the one most US people are bathed into, but yet the level of illusion and manipulation is every bit as hight, I would actually say higher.

At least in US I feel a survival instinct even within those completely mislead wrt the real state of the country (be it economical, politic, etc.).

Dr. Engali's picture

That "job" thanks to WWIII will last all of 30 minutes, from launch to incineration.

Cattender's picture

the Propaganda is deepening comrades..

Coke and Hookers's picture

The labor force participation rate in the US is currently somewhere between 50% and 62% (who the fuck knows what the real number is?). A modern country with close to "full employment" where almost everybody who wants to work / can work can get a job has a rate of about 80% (the 20% are people who work at home, disabled people plus the unemployable pond scum of society such as artists and drug addicts). The difference between the participation rate and 80% is the approximate unemployment rate. The unemployment rate of ca 25% for the US matches this more or less. My theory is that you can't run a northern European style "welfare state" with "free" healthcare and stuff like that with a participation rate lower than 75% or so. If we assume that's correct it doesn't take a genious to see what the situation is in the US. I also believe that the US is incapable of reaching 80% because a larger part of the employment pool is basically unemployable than in northern Europe. All you have to do is take a walk is certain areas in virtually any American city and look around. What you see are a lot of people no employer in his right mind would ever hire.

Make_Mine_A_Double's picture

+1 - LOL what you say is true.

If I had to coin a number for 'real unemployment' in USSA I'd mark it at 25-30% percent. That would not include the transitional float either.

And yes, a very large component of this are now completely unemployable dregs.  

Oldwood's picture

But this is key;

"A modern country with close to "full employment" where almost everybody who wants to work"

How many actually want to work? I mean really work, not just show up with a diploma or just their lunch?

Wealth is productivity. people working for the government or otherwise sitting on their ass all day producing little, are not contributing to societies productivity. You are either a net producer or net consumer and we can see which is winning out right now. This is the "cost" of these leftist policies. Not dollars, but productivity, and this is concealed with debt and redistribution.

Never One Roach's picture

"Working makes my head hurt...."

HamRove's picture

Yeah but but but but......

That number sucks. 

6.8% unemployment sounds SOOOOO much better.

Like a warm hand messaging you into a deep trance state..........


Peanut Butter Engineer's picture

And unknownly you just let that warm hand molested you.

Jumbotron's picture

"What's so fucking hard about this.

Take the number of people living in the US that are of legal age to work and subtract all people not working (any reason).

That's the unemployment rate. Can someone provide to me this number?"


About 37% unemployment

drendebe10's picture

All this on the watch of the incompetent, corrupt, arrogant, narcissistic illegal indonesian kenyan alien muslim sociopathic liar and chief and all its progressive democrap tax and spend minions...   WTF - wake the frack up you frackin sheeple..... 

starman's picture

Any of you heard of L1A and H- 1 B work visas?

Most US firms hire Indians from India to do a Americans job for 1/3 less! 

So while there are jobs it ain't for you  American worker.

pods's picture

I'm in the sciences, I've heard.


Squid Viscous's picture

Ever been on the a.m. rush train from Metropark NJ, holy Gandhi hell,I was the only non-Indian on the whole fucking train, no exaggeration, and if I had to do that every work day I would blow my brains out first...not so much the gunjis, but the awful hellishness in general - then have to fight your way out of Penn Station, and then fight your way home again in 8-10 hours, then get up and do it again... the American Dream

pelican's picture

Not to mention they often have no college loans the US serfs have

Gavrikon's picture

And they attended that fake Indian Insitute of Technology.

And GOd, what about the stench?

samsara's picture

Thanks Tylers,

Another Great writer of our times that you have picked up on.

The_Ungrateful_Yid's picture

You don't fucking say.

ThroxxOfVron's picture

God bless You, Marla Singer, who ever and where ever You are.

Once upon a time Fight Club had a muse...

chunga's picture

Damn straight.

The weapons grade spin on jobs, djia, fraud, etc. is more bogus by the day.

Like Marla said back in '09 "A drowning institution grasps at anything that floats."

Boozer's picture

Marla can write!  I thought she showed up in the comments a couple years ago when I

first found ZH after reading Dark she still around?

Didn't she host/dj a Friday jam way back?  My dumb ass got here late.

Dr. Engali's picture

The solution is simple. We should import millions of immigrants to fill all of those vacant jobs and grow our eCONomy. Problem solved.

pods's picture

If ya can't bring amerika to the third world fast enough, simply bring the third world to 'merika.

I hope they brought us some bananas?

I have as much empathy for these kids as anyone, after all I realize that it was a tin pot dictator we put in signing debt deals we sponsored that didn't lead to economic progress that we predicted that caused 90% of this shit.


centerline's picture

Maybe, just maybe we could telegraph something somehow that would make it seem that if countless immigrants jumped the border that there would likely not be any reprocussions...  hmmm...

any ideas?

youngman's picture

Those illegals are all going to get a lawyer...which means a bunch of a secretary or two ..for the two and from the courts...gas and autos and of course..medical of course..just think of all the jobs we shoot holes in our own boat....

silverisgold's picture

And one ring the rule them all: Lies!


pods's picture

Washington doesn't have to stop lying. A large enough percentage of the population wants to believe whatever shit is fed them.

They are lying FOR their benefit. 

We are approaching a water landing at a 45 degee angle at 500 knots and look around you. Faces as calm as Hindu cows.


CitizenPete's picture

Finally released:  


Corbett Report presents: 

Century of Enslavement: The History of The Federal Reserve

socalbeach's picture

Just a matter of time until they start counting people who mow their own lawns, change their oil, grow their own food, or cook their own meals, as employed.  And since if you do the work yourself as opposed to hiring someone, GDP wouldn't be as large, they will boost GDP for all the work you do for yourself or family. 

hidingfromhelis's picture

When this day comes, make sure you claim that on your IRS forms and pay the appropriate taxes.  /sarc

Pure Evil's picture

That's extremely hard to do if you live in a discarded refridgerator box under an interstate bridge down by the river.

If it makes you feel better you can paint a van with wheels on your box so it looks like you're living in a van down by the river.

MidwestJester's picture

I think we are closer to the point where you are counted as a terrorist if you do these things as they do subtract from GDP (how dare you?!?)

Bioscale's picture

The political parties serve the six powerful private interest groups that rule the country.

What or who are these 6 groups? The most important information in the text and there are no further details? Fuck.