Sunday, February 07, 2010

Unemployment: Taking Off The Rose-Colored Glasses

The Wall Street Journal touted the reduction in unemployment from 10% to 9.7% in an article entitled, "Signs Of Hope As Jobless Rate Dips."

Sounds good to me.

But as a perpetual cynic, especially when it comes to anything the government tells me, I looked into the numbers and the truth isn't nearly so easy or pretty, but here it is anyway:

- 20,000 jobs were eliminated last month.

- Revisions to last year's data found far more jobs were lost over the 12 months than previously predicted.

- One reason the unemployment rate improved is the post-Christmas seasonal adjustment; without seasonal adjustments the rate would have risen to 10.6%, not fallen to 9.7%.

- The primary reason the unemployment rate dropped is because it excluded from the "unemployed" those who are so despondent that they have stopped looking for work. Yep, the rate also went down because the total population seeking work dropped more than unemployment itself. The way the U.S. Bureau of Labor Statistics figures it, if you are not “actively seeking work” for 4 weeks, you disappear. You simply don't exist.

- 1.1 million discouraged workers were not counted as unemployed because they are not currently looking for work, mostly because they believe no jobs are available for them, and another 1.5 million people are not unemployed, not because they found work but because they did not search for work in the last 4 weeks. They disappear, too.

- There are now 2.5 million people without a job but want one, yet are not counted as unemployed.

Another way to look at the "hopeful" government numbers?

1. Removing the seasonal adjustment pushes the real unemployment rate to 10.6%.
2. Including the discouraged workers sends it to 11.2%.
3. Including the ones who haven’t looked for four weeks sends it to 12%.
4. Throwing in the underemployed sends it to 18%.

The view of a cynic? Or just a realist who never trusts government numbers?

I suggest you not put on your party hats yet . . .


Anonymous Bob Furge said...

After 30+ years in Human Resources, I completely agree with the way the numbers are calculated and what they show (as well as what they don't show.)

Yes, stated unemployment is 9.7% and the ewL number taking everything into account is more like 18%.

Now consider in the last Depression, the highest the stated unemployment number got to was something like 18% while in actuality, eceonomists believe the true number was more like 40-45%.

The public should look more deeply into the numbers. It will be a long time before "Good times are here again."

5:12 PM  
Blogger John Gallagher said...

Jim, Clearly, our government is wearing rose-colored glasses. When the effect of hiring census workers (nearly 1 million) is thrown into the first quarter numbers, the media will feast on that as well.

7:04 PM  
Anonymous Richard A.F. Nelson said...

In order for me to believe Government supplied data/hype, I'd have to forget the following: Our government let a stone cold terrorist enter the country on an AIRPLANE, again . . . So, trust what they say? No thanks.

It's funny though, as soon as I saw that piece of information 'above the fold' as they say, I knew it was merely an attempt to puff up the candidacy arguments of those seeking re-lection, as if believing your own hype wasn't a fools play to begin with.

7:31 PM  

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