Saturday, May 9, 2009

April Job Loss Numbers

So did you catch April's job numbers from Stats Can?

After most economists and observers were predicting another 53,000 jobs lost, Stats Can reported the following stunning job GAINS!

"Employment grew by 36,000 in April, the result of an increase in self-employment. Despite this increase, overall employment has fallen by 321,000 since the peak in October 2008. The unemployment rate was unchanged at 8.0% in April, remaining at its highest level in seven years, with the growth in employment coinciding with an increase in the labour force."

On the strength of this news the TSX jumped over 270 points and the Canadian dollar surged ahead over a cent and a half.

What great news for the economy, right?

Well... not so fast. You know how all those statistical survey's say they are accurate to within 2 or 3 points four out of five times? And the fifth time they are way, way off?

Whisperer will bet you that this is one of those surveys: way, way off.

Here's why.

First of all, everyone - and I mean everyone - was floored by these results. Secondly, things get awfuly fishy when you examine those results a little closer.

"Statistics Canada said 35,900 positions were added during the month, driven by an increase in self-employment... The biggest employment gains were in Quebec, up 22,000, and British Columbia, up 17,000."

17,000 jobs gained in British Columbia??? BC, the province which has been recording closure after closure, gained 17,000 jobs? What manner of new math is this?

"Quebec's employment increase of 22,000 in April was accompanied by a slight rise in the unemployment rate to 8.4%, the result of more people in the labour force. Since last October, employment in Quebec has declined 0.8%, less than the 1.9% drop at the national level."

"In British Columbia, employment rose by 17,000 in April. The unemployment rate remained at 7.4%, as there were more people in the labour force. Despite April's gains, employment has declined by 52,000 (-2.2%) since October 2008."

Wait a minute and hold the phone, here! Quebec's unemployment rate went up? BC's rate of unemployment did not change? So how is there an increase in jobs???

Explore the data a little further and you discover that most of the jobs were 'created' in the self employed sector, 9 out of 10 jobs created. And the people that filled these jobs were phantom workers (those workers who were previously not counted as unemployed).

And how do they get these numbers? Well, on page 53 of the report it says, "the statistics contained in this report are based on information obtained through a sample survey of 53,000 representative households across the country."

So they phoned up 53,000 homes (presumeably 5,000 in BC and 5,000 in Quebec) and they find that the same number of people are out of work in BC and more people are out of work in Quebec than last month... but 36,000 jobs were gained across the country because a whole bunch of people said they were now working for themselves at home.


And what are they doing? Collecting pop cans for the deposit?

Trade is still down -23% year over year (YOY). Manufacturing is doing better, but it is still down -6% YOY and only comprises 7% of the employment. If you look at Table 6-1, page 50, both employment participation and employment rates are down for the lower mainland.

And the same number of people who were unemployed in BC in March are still unemployed. And in Quebec, even more people are unemployed. Yet the 36,000 job gain came from these two provinces.


Clearly this is that 1/5 survey that is skewed and non-representative of reality.

Funny how it comes at a time when politicians are desperate to nuture and protect what they see are precious 'green shoots' of improvement in the economy.

And the 15-second soundbyte on the news is all it takes for the market to zoom upward.

Now you know why markets collapse they way they do, months down the road, when investors suddenly 'discover' stock gains aren't really based on sound fundamentals after all.



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