Monday, October 15, 2012

Unemployment Numbers Mask The Truth

 CNBC's Kelly Evans did some digging and found that one state's numbers were way off the expected tally. Either they didn't make the proper seasonal adjustment or that seasonal adjustment didn't actually happen. Later on, Business Insider's Henry Blodget got word from a source that California was the culprit, because it didn't include all of its claims when it submitted its numbers—not out of malice, but because they probably got overwhelmed and simply couldn't process them all in time for the reporting deadline. Those claims will still be counted eventually, either in a future report or in a revision to this report that will come in a few weeks.

With only weeks till the presidential election this left a sizable number of people thinking something fishy is going on. With a number that looks suspiciously positive for the president once again we find some conservatives refusing to believe the numbers are legitimate. But why are these statistics so questionable? The Labor Department will be the first to admit that there is considerable subjectivity in their reports. In fact, there's so much subjectivity that it is standard practice to change the numbers in the months that follow, as new, more concrete data is fed into the statistics. It is wiser to regard the report as a preliminary estimate, rather than a hard finding.

 There are three kinds of lies in the world. Lies, damn lies, and statistics, as the saying goes. Statistics now show that the unemployment rate plunged to 7.8 percent in September, its lowest level since Barack Obama took office in 2009. In part this was because the Bureau of Labor Statistics made big revisions to previous months, showing huge increases in the number of jobs being created. Total employment from the "household survey" showed an increase of 873,000 jobs last month, the biggest one-month jump since June of 1983.

Is America better off than four years ago? Things look significantly worse when one includes those shut out of the labor market, they are included in the number known as the U-6. The U-6 is, “Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force.”  I know it sounds redundant, but that’s the Bureau of Labor Statistics definition. Thus we see a 14.7% U-6 rate for September. It was also 14.8% in May.  In all, for 2012, the U-6 has fluttered between 14.5% and 15.1%. In January 2009, when President Obama took office the rate was 14.2%

The spread between the U-3 and U-6 numbers have drastically increased by 50%. Of course, if you listen to the Obama camp, they're proud of the 7.8 figure and are trumpeting it at every opportunity as a sign that Obama's policies are finally paying off. Interesting, because that 7.8 percent number in any other year would be considered a source of shame for most presidents. The methods used to get this number include attempting to contact some 60,000 people, most by phone, and some by visit, to ask if they are working. The definition of who is and isn't working is fairly broad, Jack Welch explained in his op ed, a woman who is babysitting for a week to earn bus fare is counted as working. Welch says he believes the economy is improving, however he notes that the growth is very slow. 

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