The "Birth/Death" number (or how the payroll books are cooked).

When the Bureau of Labor Statistics (BLS) puts out its jobs report, a number of things go into the number that’s reported. One is an assumption that some businesses are started and that some existing companies go out of business. This is referred to as the “Birth/Death” assumption. When a modest number of jobs are created, the assumptions (guesses) on the part of the BLS can have a major impact.

From Cashin's Comments:

The BLS “Birth/Death” model has a structural bias to “add” jobs to the number. In February’s number, the model added 112,000 jobs. For March it added 117,000. Friday’s number benefitted from an add of 175,000 out of 244,000 reported.

The BLS knows the B/D tends to overstate jobs and each January they subtract a portion of the overstatement. In January of 2009, they thought the overstatement was 356,000. In 2010, it was 427,000 and this year it was 339,000.

That’s why the non-farm payroll number should always be taken with a grain of salt that you could carry around in a wheelbarrow. Friday’s number could use a little bit of that seasoning.

As is true with most statistics, what they hide is often more important than what they reveal.