The unemployment rate fell by 0.4 percentage point to 9.0 percent in January, while nonfarm payroll employment changed little (+36,000), the U.S. Bureau of Labor Statistics reported today. Employment rose in manufacturing and in retail trade but was down in construction and in transportation and warehousing. Employment in most other major industries changed little over the month.(We like the Courier font the original report uses, BTW.)
Sounds good, right? Unemployment at 9.0%—down 0.4% from the month before. The economy recovering, right?
Ding-dong!—wrong! It’s called “Lying With Statistics”.
Basically, the BLS made three moves with the employment statistics: They reduced the number of people who could be counted as unemployed; they back-revised 2010 data, so as to count even fewer people among the unemployed; and they inflated the model they use to guesstimate new job creation.
Hence, even though there was a minuscule job growth of only +36,000 new jobs in the month of January, the headline blare is that unemployment went down 0.4%, to 9.0%.
So everybody happy!-happy!-happy! Right?
Hmm . . . everybody except the unemployed.
GL wrote:
ReplyDelete"Basically, the BLS made three moves with the employment statistics: They reduced the number of people who could be counted as unemployed; they back-revised 2010 data, so as to count even fewer people among the unemployed; and they inflated the model they use to guesstimate new job creation."
The moves you describe are common place when working with data. As more reliable data comes in, it is appropriate to adjust. Back-revising is a normal function of statistical modeling.
This suggests that BLS was over-reporting the unemployment rate in the last part of 2010. The actual U3 rate had been slowly dropping as the economy picked up.
A 0.4% improvement? Not a chance - the change was probably close to 0.0% (either way). The revision will be reported at some point in the future. The government has been known to go back 3 years to make adjustments to the GDP! The third move that you point to is just what it says, a "guesstimate". The initial report of any economic statistic is going to be wrong more often than not.
All that said, I have some very negative comments about government statistics.
I don't doubt for one second that government agencies are under heavy pressure to "fudge" their reports (and sometimes outright lie).
U6 is a far more useful measure of unemployment than U3. U6 paints a dismal picture of employment in our country with the number closer to 20% than 9%.
The U3 model (9.0% as of Feb 4, 2011) is only useful as a way analyze changes over time - you wouldn't want the methodology of a model to be constantly changing, else any analysis over time would mean nothing.
*** U3 SHOULD BE IGNORED by everyone except economists that make recommendations about how to invest. ***
U6 IS THE RIGHT NUMBER TO CONSIDER for the rest of us. The MSM (main stream media) always reports U3 in their headlines. If they mention U6 at all, it is buried.
The CPI (consumer price index) is another example. Again, CPI SHOULD BE IGNORED by everyone except economists that make recommendations about how to invest.
Me happy? No. Sad - sad - sad.
-Dave in MO