Self-Employed Hours

Via Yves Smith, we learn that:

Labor Department statistics… show that the hours worked by the self-employed fell at a 15.5% annualized rate in the third quarter of 207, the steepest drop in 15 years. The subprime crisis may be the big culprit, since construction workers and mortgage brokers are often in the ranks of the self-employed.

Note that the findings of the BLS Household Survey conflict with the oft-commented-upon monthly employment report, which in 2007 kept showing rising employment among small businesses via its “birth-death model”, which is basically a statistical plug.

Regular readers may recall I’ve had comments about the birth-death model before. My comments noted that according to the BLS website, there is an ARIMA (Autoregressive Integrated Moving Average) model underlying the whole thing. An ARIMA model has three components – (autoregressive (AR), integrated (I or “differenced”), and moving average(MA)). If you pick these terms the right way (or unscrupulously – depending on how you interpret the world) you can literally produce any result you want. Since the BLS’ website doesn’t tell us what their AR, I, or MA terms are or the process by which they’re derived, and since this administration has a tendency to, ahem, lean on its experts, there’s no reason to trust anything that comes out of the birth-death model, especially if it doesn’t match what you’re observing in the real world. As I’ve noted time and again, its clear that unemployment has been understated for a while.

Its anecdotal – I’m self-employed and my hours dropped in 2007 too. For seven years, I’ve depended exclusively on repeat business and business that sought me out, doing no marketing whatsoever (I’ve never been comfortable marketing myself), but I’ve started looking for ways to expand my clientèle.

But forget me… hours worked by the self-employed fell, huh? I expect this guy to tell us its a pleasant surprise that the self-employed are now secure enough to begin enjoying more leisure, this one to blame Democrats taking over Congress, and these guys to explain that our problems began when people started to realize that GW won’t be President for much longer and St. Ronald is still dead.