Are More or Less People Unemployed?
Posted by Doug Rice on Fri, Feb 05, 2010 @ 12:18 PM
Determining the number of unemployed appears to be rocket science.
Secretary of Labor Hilda Solis (I'd bet $20 you didn't know her name before right now) announced today's unemployment rate by saying, "This past January, the economy lost 20,000 jobs, and the unemployment rate dropped to 9.7 percent."
Not being a rocket scientist myself, I find it odd that we lost all those jobs, but the unemployment rate is falling. If we lost jobs, should the unemployment rate be rising?
Must be that new math.
What's more confusing is why none of the major news services bothers to explain this phenomenon. I guess they aren't rocket scientist either. You probably already knew that.
What they appear to be saying is that while 20,000 jobs were lost, more jobs were gained, so unemployment fell.
But that raises the question of why not report the net number so it makes sense?
But wait. There's more.
The report said, "The change in total nonfarm payroll employment for November was revised from 4,000 to 64,000, and the change for December was revised from -85,000 to -150,000." So, as is always the case, the numbers reported today are subject to revision tomorrow
Doesn't that make the numbers far less meaningful?
But better still is their comment on how they get revised. "Monthly revisions result from additional sample reports and the monthly recalculation of seasonal factors. The annual benchmark process also contributed to these revisions."
Recalculation and the annual benchmark process? Now that must take an actual rocket scientist.
Two reasons of the many reasons why this is important.
One. Investors are looking for signs of improvement in the jobs situation because not only does that mean people will spend more which will improve the economy, but people with jobs will relax about losing them and spend more too. If we have conflicting data, we can't assess the situation and a confused mind always says no.
Two. If they are propping up the numbers to make the situation sound better than it is relying on future revisions to go unnoticed, then eventually that will come back to bite. A jobs bill, a midterm election, an angry and disappointed public provides motive for spin. But spin is short term. Eventually the spin hits the fan and someone has to clean it up. It's better to know than not to know, so clarity should rein.
Oh, yea. One more reason. Some people are really hurting right now and statistical spin doesn't make their lives better. It just pisses them off.
So why not just ask, "Are you working or not?", and add up the responses of yes or no?
A rocket scientist would say that it's more complex than that. Then they would provide reams of data that show that only through complex multivariate analysis can one solve the issue of are more or less people working.
Of course, it was rocket scientists spent millions of dollars to develop a pen to write in zero gravity when all they really needed to do was use a pencil.